In the matter of Mobius Distilling Pty Ltd (in liq)

[2025] NSWSC 539

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Mobius Distilling Pty Ltd (in liq) [2025] NSWSC 539

Hearing dates:

1 – 4 April 2025; 30 April 2025

Date of orders:

28 May 2025

Decision date:

28 May 2025

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Parties to bring in short minutes of order to give effect to judgment

Catchwords:

CONTRACT – whether binding agreement as to process for sale of shares established - quantification of loss of opportunity for sale of shares at higher price.

OPPRESSION — Members’ rights and remedies — whether oppression established — whether buy-out order available where company in liquidation

Legislation Cited:

- Conveyancing Act 1919 (NSW) s 66G

- Copyright Act 1968 (Cth) s 202

- Corporations Act 2001 (Cth), ss 53, 180-182, 232-233

- Evidence Act 2005 (NSW), ss 136, 140

Cases Cited:

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

- Ausko Cooperation Pty Ltd v Junapa Pty Ltd (2021) 20 BPR 41,523; [2021] NSWSC 615

- Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

- Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18

- Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622

- Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34

- Campbell v Backoffice Investments Pty Ltd (2008) 66 NSWLR 359; [2008] NSWCA 95

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

- Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54

- Concrete Pty Limited v Parramatta Design & Developments Pty Limited (2006) 229 CLR 577; [2006] HCA 55

- Driver v Botanical Water Technologies Pty Ltd [2024] NSWSC 1409

- Eastland Technology Australia Pty Ltd v Whisson (2005) 223 ALR 123; [2005] WASCA 144

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

- Fine Industrial Commodities Ltd v Powling (1954) 71 RPC 253

- Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293

- GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631

- Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551

- Geltch v MacDonald & Ors [2007] NSWSC 1000

- Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145

- Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46

- K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603

- Malec v JC Hutton Pty Ltd (No 2) (1990) 169 CLR 638

- Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72

- McCrohan v Harith [2010] NSWCA 67

- Meehan v Jones (1982) 149 CLR 571

- MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451

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

- Nurisvan Investment Ltd v Anyoption Holdings Limited [2017] VSCA 141

- Oates v Consolidated Capital Services Ltd [2009] NSWCA 183

- Pavlovic v Universal Music Australia Pty Limited (2015) 90 NSWLR 605; [2015] NSWCA 313

- Queensgate Place Ltd v Solid Star Ltd & Ors (No 2) [2024] EWHC 1816

- Re 1derful Pty Ltd [2024] NSWSC 1414

- Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547

- Re Bailey Roberts Group Pty Ltd (in liq) [2025] NSWSC 227

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

- Re Gerringong Storage Pty Ltd [2025] NSWSC 302

- Re Global Mortgage Equity Corporation Pty Ltd (2013) 97 ACSR 30; [2013] NSWSC 1586

- Re Gunyahweh Pty Ltd [2023] NSWSC 1133

- Re Imperium Projects Pty Ltd [2017] NSWSC 141

- Re Scientific Management Associates Pty Ltd (2019) 141 ACSR 115; [2019] NSWSC 1643

- Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149

- Sangha v Baxter [2009] NSWCA 78

- Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

- Strategic Management Australia AFL Pty Ltd v Precision Sports & Entertainment Group Pty Ltd (No 3) [2017] VSC 35

- 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

- Troulis v Vamvoukakis [1998] NSWCA 237

- Ubertini v Saeco (No 4) (2014) 98 ACSR 138; [2014] VSC 47

- United Group Rail Services Ltd v Rail Corp (NSW) (2009) 74 NSWLR 618; [2009] NSWCA 177

- United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514; [2003] NSWSC 910

- University of Western Australia v Gray (No 20) (2008) 246 ALR 603; [2008] FCA 498

- University of Western Australia v Gray (2009) 259 ALR 224; [2009] FCAFC 116

- Varma v Varma [2010] NSWSC 786

- Victoria University of Technology v Wilson (2004) 60 IPR 392; [2004] VSC 33

- Via Servis Ltd; Skala v Via Servis Ltd [2014] EWHC 3069 (Ch)

- Watson v Foxman (1995) 49 NSWLR 315

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

- Webb v Stanfield [1991] 1 Qd R 593; (1990) 2 ACSR 283

- Wenham v Ella (1972) 127 CLR 454

Category:

Principal judgment

Parties:

Alexander David Hardie (First Plaintiff)
Carrie Bonnie Hardie (Second Plaintiff)
Philip Leonard Crossley (First Defendant)
Mobius Distilling Company Pty Ltd (in liq) (Second Defendant)

Representation:

Counsel:
Mr H Atkin (Plaintiffs)
Mr T Cleary (Defendants)

Solicitors:
Lancaster Law & Mediation (Plaintiffs)
JHK Legal (Defendants)

File Number(s):

2023/281174

Judgment

Nature of the application and background facts

1. The Plaintiffs, Mr Alexander Hardie and his sister, Ms Carrie Hardie, bring claims for breach of contract and oppression against Mr Philip Crossley, although they also join the company that is the subject of the proceedings, Mobius Distilling Pty Ltd (in liq) (“Mobius”) as party to the proceedings.

2. By way of background, Mr Hardie incorporated Mobius on 7 March 2016 and, until about 10 April 2024, it operated a distillery business. Mr Hardie has been a director of Mobius since 24 March 2017, and 50% of the issued shares in Mobius were held jointly by Mr Hardie and Ms Hardie and 50% of the issued shares were held by Jamaphle Pty Ltd (“Jamaphle”), of which Mr Crossley has at all relevant times been the sole director and shareholder (Points of Claim (“POC”) [1]-[3]); Points of Defence (“POD”) [1]-[3]). It appears that Mr and Ms Hardie held their shares in Mobius as trustees for the Hardie Family Trust, on the terms of a discretionary trust deed dated 2 March 2016 (Ex P10). Mr Crossley was appointed as a director of Mobius, with Mr Hardie, from 15 February 2018 and, in early 2018, Mobius commenced distilling operations. The parties’ relationship deteriorated; Mobius was ultimately placed in insolvency administration in the circumstances that I address below; and interests associated with Mr Crossley acquired and now conduct its business.
   I address the nature of the claims and the relief sought by the Plaintiffs below.

Affidavit evidence

3. I first turn to the affidavit evidence and cross-examination. 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.”

4. I have here drawn on my summary of the applicable principles in K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603 at [40]ff, Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547 at [49]ff and Re 1derful Pty Ltd [2024] NSWSC 1414 at [7]ff. I have also borne in mind the cautionary observations of Basten JA (Handley JA agreeing) in Sangha v Baxter [2009] NSWCA 78 at [155], applied by Nixon J in Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293 at [42], that:

“Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.

Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, R v Collins [2007] NSWCA 122 at [44].”

5. The Plaintiffs read several affidavits of Mr Hardie in support of the application, although significant parts of those affidavits were not admissible and were not read or, by agreement of the parties, were read subject to limiting orders under s 136 of the Evidence Act 2005 (NSW) (“Evidence Act”).

6. By his affidavit dated 4 September 2023, Mr Hardie outlined the circumstances in which Mobius was incorporated; noted that Mr Crossley became a director of Mobius and shares in Mobius were allotted to Jamaphle; and referred to his and Mr Crossley’s respective responsibilities in respect of Mobius’ business. He referred to a breakdown in the working relationship between Mr Crossley and himself between November 2021 and May 2022 and to criticisms that Mr Crossley had made of Mr Hardie’s work in relation to sales and marketing.

7. Mr Hardie also addressed a meeting on 14 November 2022 where Mr Crossley suggested a reduction of the Plaintiffs’ interest in Mobius from 50% to 10% (Hardie 4.9.23 [37]), to which I return below. He addressed the circumstances in which Mr Crossley appointed new accountants for Mobius (Hardie 4.9.23 [47]) and referred to Mr Hardie’s then taking “mental health leave” from Mobius (Hardie 4.9.23 [48]) and to his subsequent resignation as an employee of Mobius on 1 June 2022 (Hardie 4.9.23 [51]; Ex P4, CB 171). Mr Hardie’s evidence (Hardie 4.9.23 [53]-[54]), led without objection, was that after he resigned as an employee, Mr Crossley further excluded him from Mobius’ management and had since “operated the Company and made unilateral decisions in a manner that ought to have been made by both directors” and he gave examples of decisions taken by Mr Crossley without consulting him.

8. Mr Hardie then referred to correspondence between the parties, including a letter dated 16 September 2022 from Mr Crossley’s solicitors which plainly made incomplete disclosure of Mobius’ inventory (Hardie 4.9.23 [58]ff) and addressed Mr Hardie’s estimate of the substantial market value of four barrels of alcohol added to Mobius’ inventory, purportedly on the day that letter was sent, but not disclosed in that letter (Hardie 4.9.23 [76]). Mr Hardie also referred to an unsuccessful mediation between the parties and to subsequent correspondence between the solicitors prior to the exchange of letters which Mr Hardie contends gave rise to an agreement (“Sale Agreement”) as to the sale process for Mobius. He also refers to his and his solicitors’ consultation with several valuers after that agreement was alleged to have been formed (Hardie 4.9.23 [124]).

9. Mr Hardie then referred to subsequent actions of Mr Crossley, including the issue of creditor’s statutory demands by Mr Crossley and associated parties to Mobius. Mr Hardie also referred to a subsequent directors’ meeting on 30 August 2023, which his sister, Ms Hardie, attended as his alternate director (Hardie 4.9.23 [173]). I address that meeting below. Mr Hardie also addressed several matters relevant to the assessment of Mobius’ solvency (Hardie 4.9.23 [184]ff), which is plainly a significant matter where Mr Crossley sought to justify service of the creditor’s statutory demands on the basis of his then concern as to Mobius’ solvency, rather than contending, for example, that he could justifiably have served the demands in order to bring about the winding up of an apparently solvent company.

10. By his second affidavit dated 9 April 2024, Mr Hardie referred to Mr Beattie’s appointment as voluntary administrator of Mobius, which was agreed after the commencement of these proceedings and to reports issued by Mr Beattie to creditors in the course of the voluntary administration. He also referred to an offer made by Mr Crossley to acquire Mobius’ business in the course of the voluntary administration and addressed (Hardie 9.4.24 [37]ff) Mr Crossley’s claim, advanced during the voluntary administration, that Mr Crossley “owned” several key recipes used in Mobius’ business. Mr Hardie also referred (Hardie 9.4.24 [38]) to Mr Beattie’s observation, in his supplementary report to creditors, that Mr Crossley’s claim of ownership of those recipes adversely affected the attractiveness of the business for prospective purchasers, who expected to acquire those recipes as a component of the business’s goodwill. That report was admitted without limitation and it was likely a business record of the voluntary administrator. Mr Beattie was plainly an experienced insolvency administrator and was well qualified to assess the effect of a suggestion that a company operating a distillery did not “own” the recipes for its most significant products on a sale process. I have no hesitation in accepting Mr Beattie’s view as to that adverse impact of that claim on the sale process. Mr Hardie in turn referred to his involvement in the preparation of the relevant recipes in contending those recipes were confidential information of Mobius rather than being “owned” by Mr Crossley.

11. By his third affidavit dated 18 July 2024, Mr Hardie further updated events in respect of the acquisition of Mobius’ business by Infinity IP Pty Ltd (“Infinity IP”), as to which Jamaphle was the sole shareholder and Mr Crossley was then the sole director and shareholder, although associates of Mr Crossley have since been appointed directors of Infinity IP. Mr Hardie noted that, since the sale of mobius’ business to Infinity IP, Mr Crossley had rebranded products using the business name “Eureka Distilling”, which is in turn owned by Infinity Distilling Pty Ltd (“Infinity Distilling”), of which Mr Crossley is the sole director and Infinity IP is the sole shareholder. Mr Hardie also estimated the value of barrel stock sold by Mobius to Infinity IP, in the course of the deed administration, by reference to current sale prices of Eureka Distilling products. Mr Hardie was cross-examined as to that calculation, and it did not take into account some costs of the production and bottling process. Mr Crossley makes no attempt to establish the amount of those costs which would be a matter within his knowledge.

12. By a further affidavit dated 13 December 2024, Mr Hardie responded to Mr Crossley’s evidence concerning his claim to have created the recipes used by Mobius independently of Mobius. Mr Hardie also there addressed, in greater detail, the circumstances in which he and Mr Crossley worked together to develop several products, including an apple pie liqueur which has subsequently been commercially successful. Mr Hardie also there provides a detailed response to other aspects of Mr Crossley’s evidence. It is not necessary to determine many of the specific disputes between the witnesses as to these matters to determine the proceedings. Mr Hardie also there responds to evidence led by Mr Blaxhall in his affidavit dated 7 November 2024.

13. By his affidavit dated 27 March 2025, Mr Hardie responds to a second affidavit of Mr Crossley, addressing matters including Mobius’ Xero system and its use to record costs of producing Mobius’ inventory, Mobius’ stock value, cash sales by Mobius and additional costs incurred by Mobius. He also addressed a draft document which he had prepared about the time of the meeting with Mr Crossley on 14 November 2021, which he contended addressed the possibility that Mr Crossley could become the managing director of Mobius, although his evidence was that he did not recall addressing that matter at the 14 November 2021 meeting. In cross-examination, Mr Hardie fairly acknowledged that, given his lack of recollection, he could not deny that he had addressed that matter at that meeting. Little turns upon whether Mr Hardie had accepted that Mr Crossley should be managing director of the Company, given the conclusions that I reach on other grounds below.

14. Mr Hardie was cross-examined at some length, including as to the complaints made by Mr Crossley as to his work before he took mental health leave and as to unpleaded allegations of improper personal expenditures in relatively small amounts. Mr Atkin, who appears for the Plaintiffs, submits that Mr Hardie was a careful and considered witness and that he generally gave succinct and responsive answers to questions asked and made appropriate concessions, and he submits that Mr Hardie’s downloading of records of Mobius when he resigned as employee was “of no moment” where he remained a director and there is no evidence that he had misused that information. Mr Atkin also emphasised, in closing submissions, Mr Hardie’s evidence as to the circumstances in which the recipes utilised by Mobius to produce its products were developed, although it is not necessary to decide any question of “ownership” of those recipes given the findings that I reach below. Mr Cleary, who appears for the Defendants, acknowledged that Mr Hardie was a “careful witness” and was prepared to make some concessions against interest, although he points out that there were topics where such concessions were not made, including the circumstances in which he downloaded customer information from Mobius’ customer records. I recognise that Mr Hardie was not particularly convincing in cross-examination as to the extent of information which he downloaded from Mobius’ Google Drive on ceasing employment with Mobius, but it is not necessary to determine that question in order to determine the proceedings. Mr Hardie otherwise presented as a generally honest witness although he had difficulties of recollection in some areas.

5. The Plaintiffs also read an affidavit of Ms Hardie dated 4 September 2023 which was largely directed to the directors’ meeting of Mobius which she attended on 30 August 2023. A transcript of that meeting was made, by agreement of Ms Hardie and Mr Crossley, and I will refer to that transcript in dealing with that meeting below. Ms Hardie refers to the resolution which she proposed at that meeting, authorising Mobius to seek finance for the debts claimed in the statutory demands, which Mr Crossley did not support. Ms Hardie’s evidence is that, when she asked Mr Crossley whether he would be willing to withdraw the demands that he and his associated company, Myline Brewing & Distilling Solutions Pty Ltd (“Myline”) had issued, he stated that he would not “as he had doubts about the solvency of the Company” and also referred to the directors being at “loggerheads”. I do not accept that there was any reasonable basis for his suggested doubts about the solvency of Mobius, at least if had complied with the Sale Agreement and had not caused Mr Blaxhall to demand immediate repayment of debts that he claimed were owed by Mobius. Ms Hardie was briefly cross-examined, but her evidence was in limited scope, and there seems to me to be no reason to doubt her honesty.

6. The Plaintiffs also called Mr Blight, who was associated with a potential purchaser of Mobius’ business, who gave oral evidence confirming the position set out in his email dated 8 March 2024 (Ex P11, CB 5921), which I address below. Mr Cleary put to Mr Blight, in cross-examination, that his biggest concern in not proceeding with the purchase was the then market conditions in the industry. Mr Blight repeatedly rejected that proposition, while recognising that that was one concern, combined with the existence of the proceedings and his company’s inability to obtain security as to the use of the recipes, where Mr Crossley would not commit to that matter. I have no doubt as to the truth of his evidence and the significance of lack of certainty as to access to key recipes used in Mobius’ business to a potential purchaser of that business.

7. Mr Crossley read his affidavit dated 7 November 2024, parts of which were not admissible and were not admitted. He refers to his involvement with the alcohol and distilling industry over a significant period and to the circumstances in which he was introduced to Mr Hardie in 2015 or early 2016 and became involved with Mobius. His evidence was that he produced and provided Mobius with “numerous products from recipes that [he] had created in [his] own personal time such as gins, rums and an ‘apple pie liqueur’” and I address that matter below. Mr Crossley also referred to circumstances in which Jamaphle acquired half of the shares in Mobius (Crossley 7.11.24 [30], [36]). Mr Crossley noted that, at the time the business commenced trading, neither he nor Mr Hardie received a wage from it, and he outlined his and Mr Hardie’s initial duties in the business (Crossley 7.11.24 [38]-[41]). Mr Crossley also referred to the development of a “business model” for Mobius as set out in the Business Plan dated 21 May 2018 (“Business Plan”) which I address further below. Mr Crossley’s evidence is that he commenced full-time employment with Mobius in around July 2019 and his evidence was that his relationship with Mr Hardie began to deteriorate at that time (Crossley 7.11.24 [46], [48]). He set out, at some length, his criticisms of Mr Hardie’s performance of his role with Mobius. It is not necessary to reach findings as to those criticisms where, even if they were well-founded, they would provide no answer to the findings that I reach as to Mr Crossley’s conduct below.

8. Mr Crossley in turn claims (Crossley 7.11.24 [137]-[138]), in plainly self-serving evidence, that:

“For the benefit of Mobius and the Business, I continued to press the issue of a share restructure of Mobius with [Mr Hardie] as it was no longer appropriate for [Mr Hardie] to maintain his interest despite the level of his contributions, but also for the survival of Mobius and the Business in circumstances where I did not wish to continue to fund Mobius where [Mr Hardie] would be benefiting from my contributions without contributing himself.

However, as [Mr Hardie] would not be able [sic] to agree to any restructure, he continued to reap the benefits from and be rewarded financially by Mobius, which I alone was funding and operating, and continued to support his personal lifestyle at the expense and detriment to Mobius and myself.”

19. I pause to note, although it is of limited significance to my conclusions below, that Mr Crossley’s reference to Mr Hardie being “rewarded financially” by Mobius is doubtful where Mr Hardie was not then being paid a wage for his involvement with the business and the amount of expenses he claimed was not material; and Mr Crossley’s reference to supporting Mr Hardie’s “personal lifestyle” at the expense of Mobius and Mr Crossley is insupportable, where Mr Hardie was then living in Mobius’ leased factory premises because he could not afford to rent accommodation.

20. Mr Crossley in turn refers to document he prepared on 20 April 2022, which recorded his dissatisfactions with Mr Hardie (Crossley 7.11.24 [146]), which I also address below. He also refers to an email dated 26 April 2022 which I address below.

21. Mr Crossley then refers to Mr Hardie’s having disclosed his mental health difficulties and taken leave on 5 May 2022. Mr Crossley claims (Crossley 7.11.24 [157]ff) that Mr Hardie had accessed and copied records of Mobius on the same day (Crossley 7.11.24 [157]). There is a dispute as to the extent of the records that were copied by Mr Hardie and as to whether those records extended, as Mr Crossley claims, to all of Mobius’ contacts, lists of current customers and lists of potential customers. It is also not necessary to determine that dispute, where Mr Hardie’s conduct in that respect could not displace the breach of duties on Mr Crossley’s part which I find below. Mr Crossley also refers to Mr Hardie’s resignation as an employee of the business on 1 June 2022 (Crossley 7.11.24 [163]) and to the circumstances in which he caused alleged personal expenses to be debited against Mr Hardie’s loan account (Crossley 7.11.24 [169]ff). There is a dispute as to the extent of personal expenses that were properly debited to that account, and it is plain that Mr Crossley cannot support many of the complaints as to personal expenses which he originally made against Mr Hardie. It is also not necessary to determine that dispute where the amount involved is not material and could not displace the breach of duties on Mr Crossley’s part which I find below.

22. Mr Crossley’s evidence (Crossley 7.11.24 [177]ff) is that, after Mr Hardie took leave and then resigned as an employee, Mr Crossley “took steps to progress the business towards the Business plan and Business Model that had been agreed between [Mr Hardie] and [Mr Crossley]” and he gives examples of some of the steps taken, including steps which on which Mr Hardie relies in his claim for oppression.

23. Mr Crossley’s evidence (Crossley 7.11.24 [182]ff) is that he created specified recipes personally, in his own personal time, and utilising his own personal equipment. He contends that he is the “sole owner of the exclusive intellectual property rights” to those recipes, which he says were created by him in and around 2014. Mr Crossley refers to a copy of a “recipe spreadsheet” (Ex D2, CB 1795-1798) on which he relies to establish his claim to own the relevant recipes. Mr Crossley says that (Crossley 7.11.24 [189]) that the recipe spreadsheet is dated 28 July 2014, but it is undated; the ‘28 July 2014’ reference appears in a handwritten record in Mr Crossley’s notebook which he says (Crossley 7.11.24 [197] is consistent with that spreadsheet and which I address below. Mr Crossley also says (Crossley 7.11.24 [190]), by way of bare assertion:

“At no time from the initial creation of My Recipes to [the] present did Mobius ever possess any of the equipment or capability to create test batches of any product. Consequently it is impossible for Mobius to have tested or developed any recipes. As the owner of that equipment was me, I am [a]ware that it was never used by any person, including me in [sic] any capacity linked to Mobius, to create or develop any recipes.”

24. Mr Crossley then gives further evidence, to which I give greater weight than the assertions that I noted above, which outlines the work that he undertook in respect of the development of an apple pie liqueur (Crossley 7.11.24 [192]ff) and his evidence is that he had perfected the recipe for that product by the end of 2013. He refers to an extract from a notebook in respect of the recipe for the apple pie liqueur (Ex D2, CB 1799) but that document is virtually illegible and, if it in fact records the recipe for the apple pie liqueur, it was tendered without any claim to confidentiality in these proceedings. Mr Crossley also addresses (Crossley 7.11.24 [200]ff) matters on which he relies to claim intellectual property rights in respect of citrus and black cardamon gin, a signature gin, finger lime gin and several other gins and a vodka known as “38 Special Vodka”. He says, again by way of assertion (Crossley 7.11.24 [235]) that:

“Whilst as a director of Mobius I allowed Mobius to distil and market products created from the Recipes and the [continuous Vodka filtration process]:

(a)   at no time did the intellectual property rights belong to Mobius;

(b)   at no time did I ever relinquish my exclusive intellectual property right;

(c)   at no time did I ever execute any employment agreement with Mobius that would entitle Mobius to in any way claim ownership of any recipes or goodwill which are my exclusive intellectual property, and in any event;

(d)   at no time did I ever work on creating or refining any of My Recipes while acting as an employee or officeholder of Mobius.”

25. Mr Crossley’s evidence (admitted with a limiting order under s 136 of the Evidence Act as his understanding only) (Crossley 7.11.24 [236]) was that, towards the end of 2022, it became apparent that the sales of the Business had begun to trend into a decline. That proposition was not established by evidence and, even if it were true, it was not established that, but for Mr Crossley’s conduct, there was any issue as to Mobius’ solvency.

26. Mr Crossley also gave evidence (Crossley 7.11.24 [238]) that:

“Being a relatively small and new Business which, under my management and with adherence to the Business Model had finally begun to turn a profit, I was concerned with the future and solvency of Business given that there were no indicators of interest rates reducing or the housing crisis slowing down.”

I am not persuaded that that matter, as distinct from a wish to acquire the Company’s business as cheaply as possible, was Mr Crossley’s concern. In cross-examination, Mr Crossley also sought to justify his suggested concern as to Mobius’ solvency on the basis that Mobius’ growth in revenue exposed it to liability to pay excise tax on alcohol sales. However, that liability was the product of Mobius’ success, and Mr Crossley made no apparent attempt to assess whether Mobius’ increased cashflow from its increased revenue would be sufficient to meet its tax liabilities going forward. His indifference to that matter again reflected the fact that he was not, in truth, concerned as to Mobius’ solvency but instead to acquire Mobius’ business as cheaply as possible.

27. Mr Crossley refers to a valuation that was prepared by an accounting firm in late 2022 that valued the business at a median value of $120,148.61 (Crossley 7.11.24 [247]) and to an obviously overly optimistic valuation obtained by Mr Hardie of the business as worth in excess of $9.7 million, in preparation for a mediation. It is plain enough, from the evidence to which I refer below, that Mr Crossley did not consider the valuation that he had obtained accurately reflected the market value of Mobius’ shares or the business, allowing for its prospects of future growth, although the valuation obtained by Mr Hardie also did not do so.

28. Mr Crossley’s evidence is also that, after the disparity between the parties’ valuation of the business emerged, the mediation failed and Mr Hardie asserted an entitlement to be informed of and involved in decisions relating to Mobius (I interpolate, reasonably enough where he remained a director of Mobius):

“It seemed to [Mr Crossley] at that stage it would be impossible to continue to operate a Company in which [Mr Hardie] and I were plainly at odds and could not agree on any decisions moving forward. As far as I was concerned, the relationship was irretrievable both personally and professionally, and I did not wish to stay involved in any form of business operations with [Mr Hardie].”

It was, of course, open to Mr Crossley to form that view, and seek to negotiate a purchase of Mr Hardie’s shares or a sale of his shares to Mr Hardie or (as I find below was subsequently agreed) a process for the sale of the business on market to a third party. It would also have been open to Mr Hardie or Mr Crossley to seek an order winding up the Company on the just and equitable ground. It was not open to Mr Crossley, as he did, to breach his director’s duties in order to seek to exclude the Plaintiffs from Mobius without fairly compensating them for the value of their shares in Mobius.

29. Mr Crossley then addresses (Crossley 7.11.24 [257]ff) the correspondence relating to the Sale Agreement and I address the implications of that agreement below. Mr Crossley refers to having met with an advisory firm, de Jonge Read (“DJR”) (which provides pre-insolvency services) on 2 August 2023 (Crossley 7.11.24 [264]). He does not there disclose that he had been dealing with DJR from an earlier time, and indeed from the same day on which the Sale Agreement was reached. It is not necessary to determine whether that omission reflected a genuine failure of recollection.

30. Mr Crossley’s evidence is in turn (Crossley 7.11.24 [266]) that:

“My concern with Mobius’ solvency had arisen from the fact that:

(a)   profits from the Business had dropped significantly in the present economical climate; and

(b)   Mobius had notable liabilities being significant outstanding debts to Myline, Blaxhall and I, which it was unable to pay.”

31. Mr Crossley also refers to Mobius’ profit and loss statement for the 2021 – 2022 and 2022 – 2023 financial years, neither of which indicate that it was unable to pay its debts as and when they fall due, which would require a cashflow analysis. It is plain enough Mobius’ debts to Myline, Mr Blaxhall and Mr Crossley, or indeed to Mr Hardie, were not matters that caused any difficulty for its solvency unless demands for payment were made, and Mr Crossley and Mr Blaxhall later caused those demands to be made as part of the strategy adopted by Mr Crossley, with DJR’s advice, to bring about a liquidation of Mobius from which he could acquire its business. Mr Crossley’s evidence was also that he created Infinity and Infinity IP because he “wished to continue in the industry even if [Mobius] was sold” (Crossley 7.11.24 [269]). That evidence is at best a half-truth where Mr Crossley created those companies so as to seek to acquire Mobius’ business in a liquidation, although I recognise that he may have used them for other purposes if his and DJR’s strategy for his associated companies to acquire Mobius’ business had not succeeded. Mr Crossley also leads evidence as to aspects of the administration and deed administration of Mobius and the attempts of the voluntary administrators and deed administrators to sell Mobius’ business. He refers to his having caused DJR to make an offer to acquire Mobius’ business on his behalf. His evidence in that respect is misleading in its attempt to treat his offer to acquire Mobius’ business as a separate step from those which preceded it, where those steps were all taken as part of a planned strategy to acquire that business in the insolvency administration of Mobius.

32. By a second affidavit dated 14 March 2025 Mr Crossley addressed issues as to Mobius’ inventory management; stock value; marketing and cash sales; the employment of Ms Crossley, Mr Blaxhall and others in Mobius’ business; and the amount that his associated entities paid to acquire Mobius’ business in the deed administration. Aspects of that evidence are directed to responding to allegations of wrongdoing by Mr Crossley in the day-to-day management of Mobius’ business, which seemed to me of lesser significance than the breach of his duties in respect of the insolvency administration of Mobius and the acquisition of its business.

33. Mr Atkin submits that Mr Crossley was an unsatisfactory witness, who gave evasive and non-responsive answers, which were on occasion revised in response to contemporaneous documents, and declined to explain aspects of his conduct. Mr Cleary submitted that Mr Crossley attempted to give truthful evidence in cross-examination while having a difficulty in recalling specific dates that events occurred. Regrettably, I am unable to take that view. I will address several aspects of Mr Crossley’s cross-examination in dealing with the chronology of events below. I am comfortably satisfied that Mr Crossley gave false or misleading evidence in significant parts of his affidavits and in cross-examination and was evasive in cross-examination, particularly in seeking to avoid accepting that he adopted and implemented a strategy recommended by DJR to cause the winding up of Mobius so as to acquire its assets as cheaply as possible in an insolvency administration. I will point to many examples of false, misleading or evasive evidence below, which seems to me to have undermined Mr Crossley’s credit generally, so that his evidence should not be accepted as a whole unless corroborated by contemporaneous records.

34. Mr Crossley also reads an affidavit dated 7 November 2024 of Mr Blaxhall, who was initially a contractor to Mobius, and who served one of the three creditor’s statutory demands which were intended to bring about the winding up of Mobius and then prompted the appointment of the voluntary administrator to Mobius. Mr Blaxhall addressed complaints as to Mr Hardie’s involvement in the management of the business, which seem to me to be of limited significance in the resolution of these proceedings. Mr Blaxhall plainly participated in the strategy which brought about the insolvency administration of Mobius, and it emerged in his cross-examination that he is party to an undocumented arrangement to acquire an equity interest in the companies which had later acquired Mobius’ business, which will be implemented after these proceedings are concluded. Mr Atkin submits that Mr Blaxhall had a poor recollection of events, and his evidence should be treated with caution, although he did not suggest any dishonesty on his part. I need not reach any findings as to Mr Blaxhall’s credit.

35. I will address the expert evidence led by the parties below.

The parties’ pleaded cases and chronology

36. I now turn to the parties’ pleaded cases and a chronology of events. In doing so, I have drawn on the affidavit evidence and on a helpful chronology set out in Mr Atkin’s opening submissions. I here reach findings as to disputed events to the extent that it is necessary to do so to determine the case.

37. In late 2015 or early 2016, Mr Hardie and Mr Crossley were introduced and they then met on several occasions to discuss creating a new company to open and operate an alcohol distilling business (Crossley 7.11.24 [19]-[20]). I have referred to the shareholdings in Mobius and to Mr Hardie’s and Mr Crossey’s appointment as its directors above. The Plaintiffs contend (POC [7]) that:

“From early 2018, the affairs of Mobius were conducted in the manner of a quasi-partnership, in that:

(a)    business decisions were made jointly by its two directors, Mr Hardie and Mr Crossley;

(b)    Mr Hardie and Mr Crossley each held an equal, 50%, economic interest in Mobius;

(c)    Mr Hardie and Mr Crossley each worked in the business as employees, with:

(i)    Mr Hardie having primary responsibility for sales and marketing; and

(ii)    Mr Crossley having primary responsibility for distilling operations;

(d)    Mr Hardie and Mr Crossley each lent money to Mobius from time to time to fund its operations; and

(e)    Mr Hardie and Mr Crossley each reposed trust and confidence in one another.

38. Mr Crossley admits (POD [7]) that Mr Hardie and he had different duties within the business and otherwise denies the paragraph and says that Mobius was never operated as a quasi-partnership. It is not necessary to determine that matter where that allegation is not necessary to establish a claim in oppression.

39. The Plaintiffs plead (POC [8]-[11]) that, from early 2018, Mobius, in the course of its business, developed novel recipes to distil an “apple pie liqueur”, flavoured gins, vodka, limoncello, and other spirits and liqueurs (“the recipes”); the recipes were confidential information belonging to Mobius; and Mobius used the recipes to distil and market various liqueurs and spirits, including specified products; that “[a]ll intellectual property and goodwill associated with the recipes and the products belonged to Mobius” and that Mobius won a number of prestigious awards for those products. Mr Crossley responds that he:

“admits that certain recipes were created by Mobius but denies that the recipes identified in paragraph 8 of the POC were created by Mobius, and further says that those recipes were developed by [Mr Crossley] in his personal capacity, in his own personal time, and using his own personal equipment.”

Mr Crossley otherwise denies the paragraphs, other than as to awards received by Mobius. I will address this issue below.

40. On 21 May 2018, Mr Hardie and Mr Crossley prepared the Business Plan for Mobius, which was subsequently revised on 2 September 2019. As Mr Atkin points out, the Business Plan recorded that Mr Crossley would be responsible for operations and production, while Mr Hardie would be responsible for sales and marketing (Ex D2, CB 1569) and they were jointly allocated responsibility for “accounting” and “corporate governance” (Ex D2, CB 1569). The Business Plan referred to Mobius’ products, knowledge, intellectual property and research and development, recording that:

Products/Services

Mobius Distilling Co. will be producing and marketing a range of alcoholic spirits. The company will also be looking for opportunities to leverage its technical knowledge through consulting and joint ventures with other businesses in the liquor industry. [Ex D2, CB 1627] …

Goals/objectives

The founders’ goals are to:

1.    Create a financially sustainable business

2.    Develop a portfolio of liquor brands

3.    Build local and international markets for our products

4.    Maintain an active R&D program for both products and production processes

5.    Educate our customers about our products, our company

6.    Encourage all customers to drink quality over quantity

7.    Have fun [Ex D2, CB 1629] …

New Products

While we do not intend on focusing our attention on finding the “next big thing”, both founders recognise the importance of experimenting with different styles of spirits and the techniques for creating them. With a friendly and receptive base of core customers, we will be able to release new products in small production runs under a dedicated “Experimental” banner to gain feedback and test the potential market for wider distribution. We have used this method already in pre-sale market testing and now have an initial list of products we intend to begin production of right away. Based on the very positive feedback we have received to date, we are confident these releases will be well received.

These releases will follow our “Dare to be Different” philosophy as we believe that we can develop and release new product concepts into a market that is not only receptive to new things but is constantly looking for them.

The future establishment of a tasting bar facilitates direct customer interaction to not only gain feedback but also as a channel for selling these “special releases”. By doing that Mobius can retain the full retail margin.

New Production Methods

In recent years, much research has been done into developing new techniques for enhancing flavours and aromas to distilled spirits. We maintain an active interest in these developments and will continue testing and evaluating of some of these new production methods where it is deemed cost effective and the opportunities to produce and market the resulting spirits are significant.

Intellectual Property Strategy

Mobius distilling Co. has engaged Langley O’Rourke to act as our legal advisers. In addition to more general matters, Langley O’Rourke has experience in dealing with clients in the liquor and hospitality industries and will be able to assist with matters relating to lease agreements, contracts and intellectual property protection for our company name and brands.

As branding will be a critical part of the business’s success, protection of Mobius’ IP, such as trademarking of our brands and logos is a high priority. [Ex D2, CB 1638] …

41. The Business Plan then set out Mobius’ core products, including the apple pie liqueur and gins which would be released seasonally (Ex D2, CB 1655). It then recorded:

Technological Factors

While the distilling process is well established, new research into production techniques is yielding the possibility of innovative approaches to the art as well as the science of making quality liquors. In addition, the cost of plant and equipment has fallen dramatically as China’s manufacturing capabilities have reached scale and quality. Other significant factors include sales and marketing efforts being increasingly focused towards online channels and the support systems that facilitate the digital economy such as payments infrastructure, technology driven logistics operations, supply-demand prediction tools and increasing automation of back-office tasks.

Factors which will affect the business in this area include:

●   Our own ability to develop and refine new processes and procedures [Ex D2, CB 1661]

42. The Business Plan also referred to expansion into export markets as a “longer-term goal” that would only be explored “[o]nce the business is firmly established and financially sustainable” (Ex D2, CB 1627, 1633). That condition is of particular significance given the timing of Mr Crossley’s subsequent investigation of expansion of Mobius sales into Singapore. The Business Plan also described “Loss of key staff” as a risk, and listed as a strategy for addressing that risk as being “[e]nsure that all processes and procedures are documented…” (Ex D2, CB 1644).

43. Between FY2019 and FY 2023, Mobius achieved steady and substantial growth in its trading income (Ex D2, CB 1793), with trading income of $65,605.76 in FY19; $132,722.93 in FY20; $356,682.57 in FY21; $756,716.63 in FY22; and $1,086,700.39 in FY23. I recognise, however, that Mobius made trading losses in every year, other than the year ending 30 June 2022 in which a modest profit was made, and that profit appears to have depended on at least not paying market value for Mr Crossley’s and Mr Hardie’s work. That position may, however, not be uncommon for even a successful start-up company that is seeking to grow its business.

44. I pause to note that, notwithstanding the substantial growth in Mobius’ earnings and the apparent market recognition of the quality of its products, Mr Cleary, who appears for Mr Crossley, submits that:

“the evidence does not show that the Business had some significant value – in fact, quite the opposite. The Company was only ever solvent to the extent Mr Crossley continued to financially support it, generally traded at a loss, including when Mr Hardie was actively engaged with the Company, and maintained a net asset deficiency from 2018. Tellingly, even during the trade on period of the respective administrators, further losses were incurred. This is hardly surprising given the significant contraction within the industry that Mobius traded in.”

45. There are obvious, and fundamental, difficulties with this submission. First, the value of a start-up company will, as the expert evidence recognised, often depend not on its current earnings but on its prospect of future earnings, and growing start-up companies with minimal earnings may have significant value to a purchaser who can support their growth. Second, Mr Crossley, who would be expected to know, valued Mobius at approximately $1 million in a setting where he would be expected to seek to achieve an accurate valuation (Ex P11, CB 5750), and made offers both to Mr Hardie and later to the administrators to acquire Mobius’ business at amounts that recognised it had significant value although they were much less than his own valuation of the business. Third parties also made offers to acquire the business, although their offers were plainly depressed by Mr Crossley’s claim that he, rather than Mobius, “owned” the recipes used in its business and those offers did not complete where that claim was then unresolved.

46. The Plaintiffs plead a subsequent breakdown in relationship between Mr Hardie and Mr Crossley, which it appears is common ground. It is common ground (POC [13]-[14], POD [13]-[14]) that, on 14 November 2021, Mr Crossley requested (or required) that Mr Hardie agree a restructuring of Mobius, so that Mr Crossley would hold 1,551,867 shares and Mr Hardie would hold 448,133 shares. A document titled “Mobius Restructuring” prepared by Mr Crossley (Ex P4, CB 123) listed several perceived issues with Mr Hardie’s contribution to the business, followed by the statement “That isn’t right nor fair”. Mr Crossley complained, inter alia, that he had advanced approximately $100,000 to Mobius and Mr Hardie had advanced approximately $30,000. These advances are described in document as “capital contributions”, but it is common ground that these advances were made by way of loan. Under the heading “The way forward”, Mr Crossley referred to his proposed change in the shareholding and indicated that a shareholder’s agreement would be drawn up as a matter of priority (Ex P4, CB 127). Mr Hardie did not agree to Mr Crossley’s request (or requirement) for a reallocation of the shares. Mr Hardie disputes the validity of many of those complaints but it will not be necessary to resolve them where, even if they were all justified, they would not conceivably justify Mr Crossley’s conduct which I address below.

47. It is common ground (POC [15], POD [15]) that, between November 2021 and May 2022, Mr Crossley made allegations that Mr Hardie had improperly used funds of Mobius to pay for personal expenses. On 13 April 2022, Mr Crossley sent an email to Mr Hardie entitled “personal use of Mobius funds” (Ex D2, CB 1690) which listed many transactions totalling approximately $4,700 which Mr Crossley then contended “should have been made from your [Mr Hardie’s] personal funds instead of the businesses [sic]”, including the cost of a mobile phone apparently used by Mr Hardie for business purposes and returned to Mobius when he resigned, travel expenses (Opal or Uber charges) or small expenditures at licensed venues in Sydney, which Mr Hardie contends were made while seeking to sell Mobius’ products to those venues.

48. Mr Hardie contends (POC [16]) that these allegations were “incorrect and baseless”; Mr Crossley responds (POD [16]) that he “denies that the allegations articulated at (POC [16]) were incorrect and baseless”. That denial put Mr Hardie to proof of that allegation but did not plead material facts that would permit Mr Crossley to put an affirmative claim that particular (unidentified) expenditures were wrongly made. Where Mr Crossley has not raised an affirmative claim, he cannot now put an affirmative case that he has not identified to allow the Plaintiffs a fair opportunity to meet it. In any event, it is also not necessary to determine this issue, where the amounts involved were not material in a quantitative or qualitative sense, and, even if Mr Crossley’s complaints were well-founded, they would not alone or with other matters provide any justification for his conduct that I address below.

49. The Plaintiffs in turn plead that Mr Crossley excluded Mr Hardie from the management of Mobius’ affairs and “r[a]n down the value of Mobius. The latter allegation is particularly important for their oppression claim. They plead (POC [17]), in summary, that, from about April 2022, Mr Crossley took steps to exclude Mr Hardie from the management of Mobius’ affairs and depress the ostensible value of Mobius, “for the purpose of permitting the purchase by Mr Crossley (or an entity owned and controlled by him) of either (i) Mr and Ms Hardies’ shares in Mobius, or (ii) Mobius’ business and assets.” Mr Crossley denies this claim (POD [17]) and contends that he “did not take any steps to exclude [Mr Hardie] from the management of Mobius’ affairs or depress the ostensible value of Mobius”; and that “[Mr Hardie] voluntarily chose to remove himself from taking part in the management of Mobius’ affairs.” Mr Crossley does not plead any affirmative case in response to the allegation that he ran down Mobius’ value, but his denial puts the Plaintiffs to proof of that allegation.

50. On 26 April 2022, Mr Crossley sent an email to his daughter, Eve Crossley, who worked for Mobius, and Mr Blaxhall with the subject “bit of a brain dump re global collective, export etc etc” (Ex D2, CB 1752). The email commenced as follows:

“A few ideas / thoughts in no particular order

First of all I need to resolve the Alex [Hardie] situation.

●   I am trying to meet a new accountant later this week to initiate things.

●   I’m completely ham strung [sic] until that happens.

●   There’s no point driving hard for wider distribution / more sales / more production if it’s only going to push what I have to pay him up.”

51. In his first affidavit, Mr Crossley refers to this email (Crossley 7.11.24 [147]) and claims that the email was “simply my exasperated frustration vented to the two people who were intimately aware of the situation, and to whom I frequently confided in”. Even if Mr Crossley was then “venting” any “frustration”, he plainly identified his view that there was “no point” in taking the specified actions for Mobius’ benefit, if it was only going to increase the price he would have to pay Mr Hardie to acquire his interest. Mr Crossley’s evidence in cross-examination was also that this was merely an expression of frustration and not seriously meant. I reject that evidence and find that email recorded Mr Crossley’s then unwillingness to develop the business, where doing so would increase the price to be paid to acquire Mr Hardie’s share in that business. By taking that position, Mr Crossley preferred his own interest in minimising that price to Mobius’ corporate interest.

52. On 3 May 2022, Mr Crossley met with accountants, JR Corporate Accountants Pty Ltd (“JR Corporate”), who he proposed to retain for Mobius. without informing Mr Hardie of that meeting in advance or allowing him an opportunity to attend it. On 4 May 2022 (POC [18], admitted POD [18]), Mr Crossley told Mr Hardie that he had engaged new accountants on behalf of Mobius and proposed that Mr Hardie and Ms Hardie’s shareholding be diluted to 10% of the shares in Mobius. The Plaintiffs plead (POC [19]), that “[a]t no time was Mr Crossley authorised to engage new accountants on behalf of Mobius.” It is not necessary to determine that question where, even if the accountant’s retainer was authorised, it did not properly extend to advising Mr Crossley as to the steps subsequently taken to depress the apparent earnings and value of Mobius for his and his associated companies’ benefit. Mr Crossley also then engaged JR Corporate to handle his personal accounting needs at about the same time. Mr Crossley also then sent an email to Mr Hardie with the subject “Outstanding items” (Ex D2, CB 1755), which contained a list of six “items I’ve previously asked for but not had any response”. The sixth item was “Share reallocation as per discussion way back in November.” The email concluded that “I need these to be closed out before I go to MLB next week”.

53. On 5 May 2022, Mr Hardie took mental health leave from his employment with Mobius (POC [20], POD [20]). Mr Crossley contends that “at the time [Mr Hardie] took leave he had already ceased contributing to the operation of the Company … anyway.” On the same day, Mr Crossley advised Mobius’ new accountants, J R Corporate, that:

“FYI, I’d like to get the books sorted out soon, as Alex (Hardie) today has taken a leave of absence as he’s not “coping”. I have told him to come back in a week with his view on what he wants. I’ll be informing him of my wants then. Obviously I don’t need the figures yet, as I’ll be positioning my way forward. The negotiation can begin however.” (Ex P11, CB 5737)

54. On 9 May 2022, Mr Crossley sent an email to JR Corporate describing the need to “work out a value once we get the books tidied up” with a view to buying out Mr Hardie’s interest in Mobius. In that email, Mr Crossley also suggested that:

“The barrel valuation needs to be revised to reflect the production cost NOT an estimated future value. Attached is a bunch of calculations I did last year to estimate the valuation using multiple methods as well as the cost calculations I did for the barrels. … I also added in a valuations tab to try and determine what the business might be worth by using a number of models as suggested by CBA. There are several calculations at the bottom of the P&L to assist this and to overcome some issues I see with the closing stock amounts which skew things big time.” (Ex P11, CB 5738)

That course was calculated to reduce the apparent value of Mobius’ assets in a manner that would advantage Mr Crossley if he bought out Mr Hardie’s interest in Mobius. Mr Crossley also provided further information to Mobius’ accountants and drew their attention to several matters that might be relevant to “exiting Alex [Hardie] and a payout figure”.

55. The Plaintiffs plead (POC [21]-[22]) that, on 24 May 2022, Mr Crossley caused Mobius’ accounts to be altered to reduce the amount of the loan owing by Mobius to Mr Hardie from approximately $31,026.87 to negative $3,996.77 and that alteration was unjustified. Mr Crossley denies these claims (POD [21]-[22]) and adds that “the loan owed to [Mr Crossley] was ultimately paid to him”, without addressing the quantification of that loan.

56. It is common ground (POC [23], POD [23]) that, on 1 June 2022, Mr Hardie resigned as an employee of Mobius (but not as a director of Mobius) and sent an email (Ex P4, CB 171) to Mr Crossley confirming that Mr Hardie remained a director of Mobius, as follows:

“Dear Philip,

During a meeting on 14 November 2021 and in the meeting agenda, you alleged wrongdoing and bad faith on my part in a range of different parts of the business.

I refuted, and continue to refute these allegations absolutely.

In the same meeting and on the basis of these criticisms, you proposed to dilute my shareholding to 10% and yours to the remaining 90%. This was proposed on the basis of the original loan amounts contributed into the business.

I declined this proposal then, as I do now.

In an email sent on 13 April you made further allegations of wrongdoing on my part.

I refute these allegations.

You again proposed to dilute my shareholdings to 10% by email on 4 May 2022. Again, I decline that proposal.

These circumstances have led to me feeling unvalued, untrusted, and uncomfortable in the workplace. As things stand, I do not believe it is tenable for us to continue working together. I’m writing to inform you that I will not be returning to Mobius as an employee, and that I resign my position as of today.

My director-authorised automatic payments from the company bank account will cease on Wednesday, 8th June. You will need to schedule your own salary and the rent payments for the Renwick St property after this date.

This leaves us with the question of how to proceed from here.

I am still both a director, and 50% shareholder in Mobius. Regardless of your proposals and in the absence of a Shareholder’s Agreement, under the Corporations Act 2001, a shareholder cannot force another shareholder to sell their shares simply because they are in disagreement.

The main options available to resolve a dispute between shareholders are:

●   One party purchases the shares of the other party and continues to run the business;

●   The business is sold and the proceeds split; or

●   an alternative outcome can be negotiated to the satisfaction of both parties.

I look forward to hearing your suggestions for a productive way forward.

Regards,

Alex [Hardie].”

57. The Plaintiffs plead (POC [24]) that, from 1 June 2022, “Mr Crossley excluded Mr Hardie from the management of the business and affairs of Mobius”. Mr Crossley denies (POD [24]) excluding Mr Hardie from the management and business affairs of Mobius, and says that that Mr Hardie chose to not be involved in its management and business affairs.

58. This allegation has several elements. The first is a claim that Mr Crossley purported to make business decisions on behalf of Mobius, without consulting Mr Hardie, which he was not authorised to make on Mobius’ behalf without Mr Hardie’s consent, including purporting to cause Mobius to employ new staff, including friends and family members of Mr Crossley; increase wages paid to employees; incur substantial expenses to third party consultants and suppliers, including “Blaxhall Consulting”; incur substantial travel expenses for international travel undertaken by Mr Crossley; and purchase equipment. Mr Crossley admits that he made business decisions on behalf of Mobius, without consulting Mr Hardie, but contends that these decisions were made in the ordinary course of business and did not require Mr Hardie’s consent.

59. Second, the Plaintiffs contend, and Mr Crossley denies, that Mr Crossley refused to respond to reasonable requests for information by Mr Hardie. The Plaintiffs contend that Mr Crossley removed Mr Hardie’s access to “Vinsight”, the inventory management system used by Mobius, and that Mr Crossley edited Mobius’ website so as to remove mention of Mr Hardie and to present Mr Crossley as the sole founder of Mobius; Mr Crossley admits those matters but claims that they were done on the basis that Mr Hardie “was no longer an employee of [Mobius’] business nor contributing to [Mobius] pursuant to his duties and obligations as a director.”

60. The Plaintiffs then plead (POC [25]), denied POD [25]) that Mr Crossley caused Mobius to fail to record in its accounts all inventory held by Mobius; fail to record in its accounts all sales made by Mobius; and fail to deposit to a bank account cash received from sale of its products. The Plaintiffs then plead that an agreement relating to a sale process for Mobius was reached and later breached by Mr Crossley.

61. On 16 June 2022, Mr Crossley sent an email to JR Corporate with the subject “Mobius Valuations” (Ex P11, CB 5733) which stated:

“[Mr Hardie] hasn’t yet responded to my query asking what he wants. I sent him a follow up today, but am not expecting any reply in the short term. I’m thinking he’ll want to wait to the EOFY to wrap have the whole years figures. The issues I face is I can’t proceed with ideas and plans as they will simply drive the value up and mean it’ll cost me more. This is a big constraint.

I’m therefore wanting to get ahead of the game by preparing the books so that we:

1.    Have everything in the best state we can

2.    Take action now to minimise the FY tax position

3.    Work out company valuations so I can start negotiations as I don’t believe Alex will initiate anything.

To that end, I’m compiling a COGS by product by month report as I don’t believe what Xero currently shows is correct. I hope to have it to you tomorrow.

According to That site shows 3 common methods

1.    Asset value method

2.    capitalised future earnings method

3.    earnings multiple method

What do you recommend? Is there another way? Obviously I want to pay him as little as possible. One idea is to give him some of the barrels at his valuation per barrel to make up the buyout figure thereby minimising cash outlay. Thoughts?”

62. Mr Crossley was here seeking advice from Mobius’ new accountants, who he had recently appointed and whose costs were to be paid by Mobius rather than him, as to how to minimise the amount paid to Mr Hardie to acquire his shares in Mobius or his interest in the business. An obvious way to do so, as the accountants then pointed out, was to reduce Mobius’ net earnings (I interpolate, likely contrary to its corporate interests) and Mr Crossley promptly took steps to do so.

63. Mr Crossley claimed in cross-examination (T128) that his proposition, similar to that which he previously raised with his daughter and Mr Blaxhall, that “I can’t proceed with ideas and plans as they will simply drive the value up and mean it’ll cost me more” was also merely “venting” on his part. I also do not accept that evidence, which is adverse to Mr Crossley’s credit, where he was plainly then advising of a perceived constraint on his management of the business, namely that he did not wish to improve its value in a way which would make the acquisition of Mr Hardie’s shares more expensive. Mr Crossley failed to acknowledge the conflict of duty and interest which arose from that matter when he responded to Mr Atkin’s putting that conflict to him in cross-examination, with the response “[t]hat’s not my intent” (T128). Mr Crossley also denied in cross-examination (T129) that he understood that his then suggestion that steps should be taken to minimise the FY 2022 tax position of Mobius “was very likely to involve taking steps to minimise the reported earnings of Mobius for FY 22”. Mr Crossley worked in banking before he took up his position with Mobius and I am satisfied that he well understood that matter and that denial was false.

64. On 21 June 2022, Mr Crossley sent a further email to JR Corporate (Ex P11, CB 5743) referring to the need to seek an invoice from Mr Blaxhall, who was described as a “guy who has been providing a lot of assistance to the business” so that it could be added “to the accounts payable”, which would, I interpolate, bring about a reduction of Mobius’ net earnings. On 28 June 2022, Mr Crossley recorded an invoice for $49,050 from “Blaxhall Consulting” in Mobius’ Xero account. The invoice included charges for two days per week of work over 40 weeks at a rate of $500/day, extending back into the period of the COVID-19 pandemic. Mr Crossley’s encouraging the hurried issue of this invoice was, of course, inconsistent with his then having any concern as to Mobius’ solvency.

65. By another email to Mobius’ accountants dated 28 June 2022, (Ex P11, CB 5891), Mr Crossley recorded that he had created a timesheet to account for eight weeks of overtime at $1,500 per week totalling $12,000 and asked whether it was the “best way to do it”; whether it should be a separate one-off payment; and whether he should pay himself tomorrow in that financial year. In self-serving evidence in cross-examination Mr Crossley attributed the decision to make this payment to the accountants. I reject that evidence, which further undermines his credit. This payment at once put funds in Mr Crossley’s hands, further depressed the value of Mobius and also reduced the funds available to it to respond to the statutory demands that Mr Crossley would shortly cause to be issued to Mobius. This payment was, of course, also wholly inconsistent with Mr Crossley then having any concern as to Mobius’ solvency.

66. On 31 August 2022, Mr Hardie’s then solicitor, sent a letter to Mr Crossley’s then solicitor (Ex P4, CB 179) which requested:

“Finally, to help expedite the negotiation process, we kindly request your client provide the following information to us in a timely manner:

(a)    All documentation used in the preparation of Mobius’ most recent account submitted to the ATO by JR Corporate Accountants Pty Ltd.

(b)    A full and complete current inventory for Mobius’ stock of aging spirit, as the most recent inventory shows no additions to stock since September 2021.”

67. On 16 September 2022, Mr Crossley’s solicitors responded stating “that no additional barrels have been filled and added to the inventory between September 2021 and 30 June 2022” (Ex P4, CB 183). That proposition was seriously misleading, by omission, where four barrels of alcohol of substantial value were about to be added to inventory and were in fact added to inventory on that day. It is not necessary to decide whether that correspondence was intentionally misleading on Mr Crossley’s part.

68. On 14 October 2022, Mr Hardie’s solicitors raised claims that Mr Crossley had engaged in oppressive conduct (Ex P4, CB 200) and again requested “a current inventory of aging spirits… as opposed to an inventory to the end of the Financial Year” (Ex P4, CB 207). The letter noted that Mobius had purchased barrels since September 2021 and employed distillers and that Mr Hardie had witnessed the creation and storage of rum at the Marrickville premises and proposed that an “independent inventory” be prepared (Ex P4, CB 210). On 19 October 2022, Mr Crossley’s solicitors sent an email to Mr Hardie’s solicitors which included a table compiled by a third party, Mr Papps, being the current inventory of Mobius (Ex P4, CB 212).

69. On 9 November 2022, Mr Hardie’s solicitors requested (Ex P4, CB 240-241) that his loan of $31,026.87 to Mobius be repaid, and requested that Mr Crossley abandon his claims that Mr Hardie had engaged in inappropriate expenditure of Mobius’ funds. On 14 November 2022, Mr Crossley’s solicitors in turn denied that Mr Crossley had engaged in any oppressive conduct.

70. On 3 April 2023, Mr Crossley and Mr Hardie took part in an unsuccessful mediation.

71. On 20 April 2023, Mr Hardie and Mr Crossley passed a resolution of Mobius’ board (Ex P4, CB 642) confirming its solvency as follows:

“It was RESOLVED that, in the opinion of the Directors, pursuant to Section 347A(1) of the Corporations Act 2001 with respect to the Annual Company Statement as at its review date of 7 March 2023, and having reviewed and Considered the Company’s current and projected financial position, in the Directors’ opinion the Company is solvent and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.”

72. Also on 20 April 2023, Mr Crossley’s solicitors wrote to Mr Hardie’s solicitors (Ex P4, CB 303), emphasising the risk of loss of value in Mobius’ business in a winding up as follows:

“In relation to making an application to wind up the Company, we note that the main assets of the Company is the equipment and the barrels of alcohol held. The equipment, being second-hand equipment, will not be extremely sought after and is unlikely to be purchased for anywhere near the book value of the equipment at any auction sale. The barrels of alcohol are relatively worthless to any other person apart from another distilling company that may wish to purchase them and develop a new whisky brand. Given the risk that would be associated with the purchase of barrels for another distilling company because of the unproven quality of the product and any evaporation, it is also unlikely that these will be purchased for anywhere near their production price, let alone their market value. For these reasons, we opine that winding the company up is not an outcome that will benefit either of our clients in either the short or the long term.”

73. That position was likely correct and Mr Crossley must have recognised that matter at the time he later commenced a strategy to bring the winding up of Mobius, notwithstanding he later denied having recognised that matter in his cross-examination (T196). Mr Crossley there put an offer to acquire one-sixth of the Plaintiff’s shares in the Company for $60,000, and subsequent tranches of shares for amounts which value the Plaintiffs’ shares at $230,000, although the value of that offer would need to be discounted for the time value of money in respect of later payments.

74. On 21 April 2023, Mr Hardie’s solicitors sent a letter to Mr Crossley’s solicitors (Ex P4, CB 308) which, in effect, offered to sell his shares in Mobius as follows:

“OFFER

[Mr] Hardie will accept an amount of $2.1 million for the purchase of his shares in Mobius Distilling. This figure is exclusive of his superannuation rights.

This offer remains open for a period of four weeks from today’s date, and will expire at close of business on Friday, 19th May.”

75. On 26 April 2023, Mr Hardie’s solicitors sent a further letter to Mr Crossley’s solicitors (Ex P4, CB 319) which referred to the earlier offer and said:

“However, given present circumstances, the indefinite time frame of the purchase of [Mr Hardie’s] shares in Mobius, and in the interests of:

1.    Protecting the ongoing value of his shareholding interest; and

2.    Effectively discharging his Directors’ duties to Mobius,

what follows is a list of [Mr Hardie’s] questions regarding various recent events and decisions made by your client on behalf of [Mobius]”.

That letter raised questions concerning, inter alia, the invoice dated 28 June 2023 from Blaxhall Consulting; the employment of various staff; and equipment purchases and requested a response by 3 May 2023.

76. On 4 May 2023, Mr Hardie’s solicitors sent a follow-up letter (Ex P4, CB 325-327) and raised further questions concerning actual revenue received by Mobius at off-site events; the collection of $194,267 in outstanding accounts receivable; and expenses incurred by Mr Crossley for travel to Singapore and Vietnam and requested a response by 11 May 2023. The parties’ solicitors then engaged in further correspondence concerning these matters (Ex P4, CB 329-349).

77. The Plaintiffs plead (POC [26], denied POD [26]) that, between 26 May 2023 and 15 June 2023, Mr Crossley and Mr Hardie reached the Sale Agreement, which provided for them to take steps together to have Mobius valued as a going concern and for all of the shares in Mobius to be marketed for sale on the basis of that valuation. They rely on letters dated 26 May 2023 and 15 June 2023 from Mr Hardie’s solicitors and a letter dated 6 June 2023 from Mr Crossley’s solicitors in respect of that agreement and plead (POC [26A]-[27A], denied POD [26A]-[27A]) the terms of the alleged agreement.

78. Turning now to these letters, by letter dated 26 May 2023 from Mr Hardie’s solicitors to Mr Crossley’s solicitors (Ex P4, CB 351), Mr Hardie made an offer to the effect that:

“Firstly, many thanks for our conversation today. As discussed, hopefully it leads to a more productive outcome between our clients.

Secondly, we refer to my client’s offer contained in our letter of 21st April 2023, note that as of today we have yet to receive a response, and that this offer expired on 19th May 2023.

My client would like to make a new offer, on an open basis, the terms of which we detail below.

OFFER - Alexander David Hardie as regards [Mobius]

The offer is that both parties seek to obtain an independent valuation of Mobius, with the intention of tendering the company for sale on the open market, as a going concern.

This offer is in three parts.

PART 1

Both parties agree to:

1.   Identify, agree upon and brief appropriately skilled third-party professionals to perform an independent valuation of Mobius Distilling Pty Ltd (“Mobius”) within a period of one month from the date of acceptance.

2.    That this valuation be undertaken assuming Mobius:

a.    Is operating as going concern; and

b.    Is being offered to an interested but not anxious purchaser.

PART 2

Subsequent to this valuation being received, utilising the valuation obtained in the Part 1, and over a time period no longer than three months both parties agree to:

1.    Identify, agree upon and brief an appropriately skilled business broker to identify a list of buyers willing to purchase both parties’ shares in Mobius at a price acceptable to both parties;

2.    That meanwhile and in addition to (1) both parties undertake their best efforts through their own:

o networks,

o relationships; and

o acquaintances within the industry,

to identify a list of buyers willing to purchase both parties’ shares in Mobius at a price acceptable to both parties.

PART 3

Once the list of interested buyers in the Second Part is finalised, both parties agree to:

1.    Identify and agree upon the best purchaser for Mobius; and

2.    Negotiate appropriate sale terms with the purchaser identified in (1).

3.    Constructively and without undue delay identify and execute all necessary acts, expenditures and provisions to sell their shareholding in Mobius to that party.

As always, we are open to constructive discussion about the above offer, as our goal remains a positive outcome for all parties involved.

This offer as made is non-severable and remains open for a period of two weeks, expiring at COB on Friday 9th June 2023.

We look forward to your reply.”

79. Importantly, Mr Crossley there, and in subsequent correspondence concerning the Sale Agreement, raised no concern as to Mobius’ solvency. A concern as to that matter would have been highly relevant to that proposal if it were genuinely held.

80. On the same day, Mr Hardie’s solicitors also requested Mr Crossley to explain the basis upon which he considered that he had authority to take various actions on behalf of Mobius and requesting that he consult with Mr Hardie about specified types of business decisions going forward (Ex P4, CB 354-357).

81. By letter dated 6 June 2023 from Mr Crossley’s solicitors to Mr Hardie’s solicitors (Ex P4, CB 384), Mr Crossley indicated his acceptance of Mr Hardie’s 26 May 2023 offer, provided that three further conditions were agreed by Mr Hardie, as follows:

“Re: Mobius Distilling Company Pty Ltd- Acceptance of Offer

We refer to your letter dated 26th May 2023 enclosing offer (Offer).

Again, thank you for the conversations over the past two weeks. We also hope that it leads to a productive outcome between both of our clients.

We are instructed that the Offer is accepted provided that the following is agreed:

1.    Our client’s director’s loan is paid out to him prior to the proceeds of any sale being spilt between both shareholders;

2.    The Invoice owing to [Myline] to be paid out in full prior to the proceeds of any sale being split between both shareholders; and

3.    The independent valuer is retained on behalf of [Mobius] and that your client provides a list of three valuers and our Client will choose one.

If the above is agreed, then we look forward to your client’s list of valuers for our consideration and acceptance.

Given that our client has accepted the Offer, we request that the letter served on 26 May 2023 posing certain questions to our client be recalled.”

82. That letter is properly characterised as a counter-offer where it stipulated three additional conditions, but little may turn on that.

83. On 15 June 2023, Mr Hardie’s solicitors accepted that counter-offer as follows (Ex P4, CB 386):

“Thank you for your email of 6th June 2023.

We are pleased to hear that your client accepts our offer, and confirm the following:

1.    Your client's director’s loan will be paid out prior to the proceeds of any sale are distributed between both shareholders.

2.    That the invoice to [Myline] will be paid out in full prior to the proceeds of any sale being split between both shareholders; and that

3.    We will produce a list of three valuers, alongside our thoughts about each and your client may select one.

197. I also do not accept that submission. Obviously enough, there was little that the voluntary administrators could practically do that would achieve the best possible sale price for Mobius’ shares or its business, once Mr Crossley had, in breach of duty, declined to provide them with the recipes used for Mobius’ products and there is no suggestion that the voluntary administrators had sufficient funds to resolve that matter by litigation or could reasonably have delayed the sale process to do so.

198. Mr Cleary then submits that:

“Now, the Plaintiffs wish to allege that Mr Crossley’s improper intent was to push for a fire sale in liquidation. However, once again, the facts are inconsistent with this narrative. That is, Mr Crossley:

a   Did not attempt to stand in the way of Mr Hardie causing Mobius to apply to set aside the statutory demands;

b   emailed [DJR], identifying that he did not want to put the Company into liquidation if there was some other means of resolving the issue;

c   met with Mr Beattie, who was Mr Hardie’s nominee, prior to his appointment as administrator, to take his advice on whether he ought to be administrator or liquidator; and

d   Ultimately agreed with the proposal put forward by Mr Hardie that Mr Beattie be appointed administrator, which had also been Mr Beattie’s advice;

e   Placed a bid to purchase Mobius while Mr Beattie was appointed, but was outbid;

f   Assisted each sets of administrators extensively, including continuing to run the business by himself as they requested; and g   Only after all other offers fell through, made a further offer to purchase the business for a significant amount of money which was accepted.”

199. I also cannot accept that submission. At the risk of repetition, the first four matters do not assist Mr Crossley where he used the appointment of the voluntary administrator as an alternative means to a liquidation to bring about a sale of Mobius’ business and then undermined the process by which the sale took place. The second matter is a reference to Mr Crossley’s 14 September 2023 email to DJR, which rightly recognises the risks of a liquidation-based strategy. Mr Cleary also submits that that email indicates that Mr Crossley did not have the “nefarious intent that the Plaintiffs’ attempt to paint it with”. Regrettably, I cannot accept that submission, although I would not have adopted the term “nefarious”. That letter indicates that Mr Crossley, for a time, considered the sensible approach of a negotiated sale of the business, rather than the alternative of a sale through an insolvency administration in which he was actively seeking to depress the value of the business and discourage third party purchasers. Regrettably, for all parties in these proceedings including Mr Crossley, he then chose the latter approach rather than the former, as his subsequent conduct amply demonstrates. That choice gave rise to oppression, for the reasons I have noted. The fifth, sixth and seventh matters also do not assist Mr Crossley, where they neglect the extent to which Mr Crossley’s refusal to make Mobius’ key recipes available to the voluntary administrator and deed administrators actively undermined the sale process and permitted Infinity IP’s acquisition of the business at a lower price.

200. It seems to me that the relevant oppression is here at least the conduct of Mr Crossley which I set out in paragraph 143 above. That conduct has continuing effects, where Mobius was and is deprived of its business and of payment of fair value for that business; the Plaintiffs were and are deprived of the fair value of their shares, either at the point that Mobius’ business could have been sold by the process contemplated by the Sale Agreement or the point the creditors’ statutory demands were served or Mobius was placed in voluntary administration in consequence of those demands; and Mr Crossley and his associated companies were and are the continuing beneficiary of that conduct where they acquired Mobius business in consequence of his breach of his director’s duty owed to Mobius and at an undervalue. The continuing character of that oppression is sufficient to support orders that Mr Crossley now buy out the Plaintiffs’ shares at a price that excludes the effect of the oppressive conduct. The Plaintiffs initially indicated that they did not press this relief if they succeeded in their contractual claim for breach of the Sale Agreement. However, I have determined this claim where the making of an order on this basis would remove any loss arising from that breach, just as an order for contractual damages would likely remove the need for an order on this basis.

201. I now turn to the applicable legal principles in respect of questions of valuation arising in respect of a buy-out order. The court has a broad discretion as to the mode of valuation in an oppression case: United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514; [2003] NSWSC 910. The court’s task is to fix a price that is fair in all the circumstances having regard to the value that the shares would have had, but for the oppressive conduct. In Strategic Management Australia AFL Pty Ltd v Precision Sports & Entertainment Group Pty Ltd (No 3) [2017] VSC 35 at [34]–[35], Sifris J observed that:

“The granting of appropriate relief requires the Court to fix a price which is fair in all the circumstances. The value that is fair is a value which the shares would have had, had it not been for the oppressive conduct.

The price to be paid is compensatory in nature and is aimed at redressing 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. Further, ‘the method of determining the price is not confined to ordinary valuation principles’. The relevant question is what is a ‘fair value’ to be attributed in all the circumstances and there is room for different approaches as to valuation. As the Full Court of the Federal Court stated in Dynasty Pty Ltd v Coombs [(1995) 59 FCR 122], it is not just a question of value; it is a matter of fixing a price that should be paid.” [footnotes omitted]

202. In Re Scientific Management Associates Pty Ltd (2019) 141 ACSR 115; [2019] NSWSC 1643, Rees J similarly observed that the basic requirement in an oppression suit is that “the valuation must be fair on the facts of the particular case”, and will be determined as a “price that is fair in all the circumstances having regard to the value that the shares would have had but for the oppressive conduct” and that:

“The price to be paid is compensatory in nature, aimed at redressing the wrong done, so the price is not confined to ordinary valuation principles and will not always reflect the real worth of the shares …”

203. I also bear in mind the nature of a “market value” test as described in MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 at [55], in the context of the purchase of shares on exercise of a call option, by Spigelman CJ (with whom Mason P and Hodgson JA agreed) as follows:

“A test of a “market value”, whether in a statutory or contractual context, usually invokes the test long established and frequently applied in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 esp at 432 and 440–441 of a willing but not anxious purchaser and vendor, bargaining with each other. This approach was most recently expressed in a joint judgment of three judges of the High Court in Marks v GIO Australia Holdings Ltd [1988] HCA 69; (1998) 196 CLR 494 at 514:

“… The value … is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it.”

204. In Tomanovic v One Australia Pty Ltd (2015) 104 ACSR 596; [2015] NSWCA 11 at [180]–[188], Bathurst CJ also set out the principles governing the valuation of company shares, and observed, inter alia, that “[t]he process of valuation may produce a range of results from different judges valuing in accordance with accepted principle and making no error of law.”. The range of accepted valuation methodologies was noted by Dixon J in Smith v Gould [2012] VSC 461 at [125], where his Honour observed that:

“In theory, all valuation methodology for a business is based on its cashflow. Discounted cashflow is the most commonly accepted valuation methodology. Other common valuation methodologies include capitalisation of future maintainable profits, capitalisation of future maintainable dividends, value of net tangible assets on a going concern basis, or notional realisation of assets (hypothetical liquidation).”

205. I recognise that, as I observed in Re Global Mortgage Equity Corporation Pty Ltd (2013) 97 ACSR 30; [2013] NSWSC 1586, the Court is not bound to choose between the respective valuations prepared by accounting experts, adopting one or the other without modification, although any adjustments to an expert valuation must be supported by the evidence.

206. Mr Atkin also submits, and I accept that, where I have found that Mobius’ financial records were inadequate and, in particular, where Mr Crossley had caused Mobius to fail to record income from cash sales of its products, I should take a robust approach to the assessment of the value of Mobius and the damages to which the Plaintiffs are entitled: Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59, where Handley JA (with whom Mason P and Beazley JA agreed) observed that:

The defendants, having improved common property without lawful authority, and attempted to effect a fraud on the minority, are wrongdoers, and their failure to keep and produce proper accounts of their actual expenditure on the common property has made it difficult to assess the compensation due to the plaintiff: compare Armory v Delamirie (1722) 1 Stra 505; 93 ER 664. In my judgment the Court should assess the compensation in a robust manner, relying on the presumption against wrongdoers, the onus of proof, and resolving doubtful questions against the party “whose actions have made an accurate determination so problematic”: see LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (1990) 24 NSWLR 499 at 508.

207. Both parties led expert evidence, although the Plaintiffs ultimately did not seek to rely on Mr Giliberti’s report (Ex P3) led in their case. Mr Giliberti’s report initially addressed the questions whether Mobius was “financially viable” as at 30 June 2023; whether there were lost profits by reason of “Mr Crossley’s Conduct” (as defined) and Mr Hardie’s exclusion, and what those amounts were for years past and future; the “true value” of the business as at 30 June 2023 absent Mr Crossley’s Conduct; and the market value of the Mobius brand absent Mr Crossley’s Conduct. That report was based, in part, on specified assumptions as to Mr Crossley’s conduct, and the conclusions that Mr Giliberti reached as to Mobius’ financial viability in turn reflected the exclusion of the consequences of that conduct. That approach undermined the utility of his report, where he assumed that Plaintiffs’ case would be proved in its entirety and his report would not assist if that was not the case.

208. Mr Giliberti initially valued Mobius’ business at $842,367 and had regard to the sale of another distillery business in doing so. He was cross-examined at some length as to the implications of that sale for his valuation and Mr Cleary submitted, in closing, that:

“One of the biggest weaknesses with Mr Giliberti’s valuation is the comparable that he uses – being the acquisition of Kangaroo Island Distillery by Mighty Craft Limited. Despite that acquisition being for an entity dramatically longer established, with exponentially higher revenues (over triple the best year Mobius had managed in the one year identified) and net profits (around 10 times the best year for Mobius in the one year identified), and completely different capital, the amount paid for that distillery was less than double what Mr Giliberti has opined.”

There is some force in that criticism, although I recognise that a purchaser of Mobiu’s business might well value it by reference to its growth potential, and the position is further complicated by the likelihood that Mobius’ earnings were understated in its financial accounts by reason of inaccurate recording of cash takings.

209. By a subsequent revision to that report on 2 April 2025, Mr Giliberti adjusted that valuation because he had not added back legal expenses incurred in connection with registration of trademarks, which increased his assessed value of Mobius’ business to $886,702. It would of course then be necessary to have regard to Mobius’ liabilities to derive a value of the Plaintiffs’ shares in Mobius.

210. In indicating that the Plaintiffs no longer relied on Mr Giliberti’s report, Mr Atkin there recognised, rightly in my view, that the assumption made by Mr Giliberti as to the accuracy of Mobius’ financial records had been undermined by the evidence of (I interpolate, material but unquantifiable) cash sales made by Mr Crossley and by the difficulty in valuing the barrels of alcohol acquired by Infinity IP in the voluntary administration, which had a value substantially exceeding the value recorded in Mobius’ financial records. Mr Cleary, notwithstanding his criticisms of Mr Giliberti’s evidence, pointed out that that report had been tendered and was in evidence, and relied on that report so far as it may have impliedly valued the Plaintiffs’ shares at a lesser figure than that for which they now contend.

211. Mr Crossley in turn relied on an expert report dated 4 March 2025 of Mr Goodyer (Ex D1) which concluded that Mobius’ business had a net asset deficiency for a significant period prior to 21 April 2024 and that it had insufficient working capital to meet its debts throughout much of that period, although that conclusion appears to depend upon the treatment of the debts asserted by Mr Crossley’s and Mr Blaxhall’s companies against Mobius. I have addressed the circumstances in which those debts were claimed above. Mr Goodyer assumed, on instructions, that the recipes for key products used by the Company were not intellectual property owned by it, but were owned personally by Mr Crossley, and that Mr Crossley was “therefore entitled to deal with” the relevant product. That assumption was not correct, on the conclusions that I have reached above, and it is plain that Mr Goodyer’s approach would need to be adjusted to have regard to the value of those recipes and their capacity to generate future revenue for Mobius or an adequately capitalised purchaser of its business. Mr Goodyer also relied upon the financial statements for the Company for the 2020 and 2022 financial years, which plainly understate its revenue and assets, likely materially, by reason of Mr Crossley’s failure properly to record cash sales.

212. Mr Goodyer in turn emphasised the financial challenges facing Mobius, including its need for continuing shareholder support. I recognise that matter, although I also recognise a willing but not anxious purchaser of the shares in Mobius or its business would have regard to the capital which it could make available to support its continuing activities, in determining the price that it would pay to acquire its business. Mr Goodyer concluded there was no utility in a future maintainable earnings valuation of the Company, where it did not have a positive EBITDA. While I accept that proposition is correct in a limited sense, it indicates the potential lack of utility in such a valuation in respect of a company that is in a growth phase and building its business rather than generating profits in the early years of its existence.

213. Mr Goodyer’s report valued the Company at $257,272.73 as at 30 June 2023 using fair market value for the continued use of its equipment and stock stated in a third party valuation, although that valuation was wholly based on an auctioneer’s valuation of that equipment, and at $77,345.45 as at 21 April 2024 using a forced liquidation value. It seems to me, with respect to Mr Goodyer, that his report provides no assistance in this matter. First, the approach which he has adopted, either by reference to equipment and stock or a forced liquidation value, has no regard to the prospective value of the Company, arising from its recipes and apparent growth prospects, to which a willing but not anxious purchaser of the business would have had regard. Second, the use of a forced liquidation value reflects the result of Mr Crossley’s oppressive conduct. Third, as Mr Goodyer fairly accepted in cross-examination, an asset-based valuation was not appropriate where assets were undervalued, and it is apparent that, at least, the barrels of alcohol which were acquired by Infinity Distilling in the voluntary administration had not been valued in a way that represented their fair market value

214. The experts in turn prepared a joint expert report dated 24 March 2025 (Ex P3) which was to some extent superseded by the late amendment to Mr Giliberti’s report to which I referred above. In an approach which frustrated the purpose of an expert conclave and joint report, Mr Giliberti and Mr Goodyer observed that their respective instructions did not allow them to reach conclusions on value which were directly comparable. I do not accept that proposition. The legal representatives should not have given, and the experts should not have accepted, instructions that prevented their engagement with each other’s methodology in a manner that would have properly exposed the valuation issues which the Court had to decide.

215. Mr Atkin now relies, to value the Plaintiffs’ shares in Mobius, on the email dated 14 September 2023 from Mr Crossley to DJR (Ex P11, CB 5749), where (as I noted above) he valued Mobius, prior to liabilities owed to his associated companies and Mr Blaxhall’s company as $1,040,000, and a 50% share of Mobius as $520,000 or, in an alternative option, as approximately $920,000 after third party liabilities, to give rise to a value of a 50% interest in the Company of approximately $450,028.

216. In closing submissions, Mr Atkin initially submitted that:

“The [P]laintiffs’ primary submission is that the best evidence of the value of Mobius is provided by Mr Crossley’s own email of 14 September 2023 (sent 10 days after the commencement of these proceedings). In it, Mr Crossley valued Mobius’ business at $1,040,000. …

Mr Crossley recorded that the statutory demands asserted debts to himself, to Myline and to Mr Blaxhall totalling $213,667.30. The [P]laintiffs submit that the Court would be justified in disregarding (or discounting) those asserted liabilities in the assessment of any relief to be awarded for the following reasons.

(a)   first, there are substantial cash sales in the order of $120,000 which have not been accounted for;

(b)   second, Mr Crossley paid himself a discretionary bonus of $12,000 by way of “overtime” to which he had no legal entitlement;

(c)   third, the evidence as to whether and when there was any agreement that Mr Blaxhall would charge for his time would not satisfy the Court that Mobius had any actual liability to Mr Blaxhall;

(d)   fourth, and more generally, the principle in Armory v Delamirie looms large in the present case, and justifies a robust approach to any calculation of the relief to be granted. …

Mr Crossley’s email records other liabilities of $60,971.07, which might properly be [disregarded, as amended in oral submissions] in the calculation of any relief.

The Court ought order that Mr Crossley pay approximately $500,000 to the plaintiffs (whether by way of damages for breach of contract, or as payment for the purchase of the plaintiffs’ shares in Mobius).”

217. In oral submissions, Mr Atkin sought to further vary Mr Crossley’s calculation in this email to exclude deductions which Mr Crossley had made. I do not consider that I should take that approach. That valuation has weight because of Mr Crossley’s familiarity with the business, his knowledge of the extent of its unreported cash sales (the amount of which is not known to the experts) and the fact that the conclusion which he has reached is one that he regarded as having sufficient basis to be provided to DJR to consider an alternative cause to forcing Mobius into liquidation. As Mr Atkin submits, Mr Crossley may have made deductions which an expert accountant would not have made; as Mr Cleary submits, he may have applied a higher multiple than an expert accountant would have applied, although I again recognise that he had knowledge of Mobius’ unreported cash earnings which would likely have supported adopting a higher multiple of understated earnings; but it is not necessary or appropriate to make either adjustment in giving weight to Mr Crossley’s own assessment of the value of the shares in Mobius.

217. Mr Cleary responds (T340) that that email does not seek to put a “serious or formal value on the business” and is merely addressing a starting point for a negotiated resolution; and that the figures used do not represent a realistic value of the business, in either adopting an EBITDA of $260,000 or in the multiple adopted. Mr Cleary also submits (T341) that the multiple adopted in that calculation exceeds a multiple of 2.9 times EBITDA to which Mr Goodyer referred (CB 5712), in respect of a recent valuation of a solvent entity conducting a distillery business with a better turnover and profit margin that Mobius. However, any comparison of turnover or profit margin between that entity and Mobius is undermined by the fact that Mobius financial records do not set out its true position, by the under-reporting of cash sales. Mr Crossley had information that the Plaintiffs and the experts who prepared reports in this case did not, as to the unrecorded cash sales of the business, to which I referred above.

218. I also bear in mind the offer made by Mr Crossley on 20 April 2023 to acquire Mr Hardie’s shares (Ex P4, CB 303) by which, as I noted above, Mr Crossley put an offer to acquire one-sixth of the Plaintiffs’ shares in the Company for $60,000, and subsequent tranches of shares for amounts which value the Plaintiffs’ shares at $230,000, although that amount would need to be further discounted for the time value of money in respect of later payments. Mr Cleary in turn refers to a letter dated 14 October 2022 from Mr Hardie’s solicitors (CB P4, CB 200), which identified a value of his shares of $260,000 as the starting point for negotiations, which is substantially less than the value which he now claims. I recognise that that letter also provides some basis for a valuation of the shares.

219. I can give little weight to third party offers in the sale process undertaken by the voluntary administrator where Mr Crossley had deprived the voluntary administrator of the opportunity to realise fair value for that business by withholding its key recipes at the time of the sale process as I noted above, and that allowed Infinity IP to acquire that business with lesser price competition from third party purchasers who were left at risk that they could not acquire those recipes. Mr Cleary also points to the amount paid by Infinity IP to acquire the business in the voluntary administration, and it appears that Infinity IP acquired Mobius business for a stated consideration of $354,154, including a payment of about $100,000, withdrawal of asserted debt claims, providing replacement security for a lease, paying out employee entitlements and assuming the costs and liabilities associated with a vehicle. The Plaintiffs obtained no apparent benefit, as shareholders in Mobius, from that transaction.

220. I bear in mind the principles applicable in a valuation in an oppression case, to which I have referred above, and the difficulties which arise because of the inadequacy of Mobius’ financial records and Mr Crossley’s failure properly to record cash sales in those financial records, and the issues as to the valuation of alcohol barrels which Infinity IP acquired in the sale under the voluntary administration. I have borne in mind the difficulties with Mr Giliberti’s report, arising both from the inadequacies of the financial records which he relied and his attempt to make adjustments for the conduct alleged against Mr Crossley; and the difficulties with Mr Goodyer’s report, which provides no useful basis for determining the amount which a willing but not anxious purchaser would pay to acquire Mobius’ business. I also bear in mind the extent to which the sale process in the voluntary administration was undermined by Mr Crossley’s denying access to the recipes to the voluntary administrator.

221. In these circumstances, it seems to me that Mr Crossley’s own assessment in the 14 September 2023 email of the value of the business, made where he had reasons to seek accuracy and only he knew the amount of the undisclosed cash sales, and conveyed to his advisers, provides substantial assistance in assessing the value of that business. However, I must also bear in mind the possibility that a willing but not anxious third party purchaser would not have been prepared to pay the value which Mr Crossley ascribed to the business, even if Mr Crossley had not undermined the sale process by preventing the voluntary administrators from accessing the recipes used in the business. I am not persuaded that I can adopt Mr Crossley’s calculation as to the value of the business without further discount, although I am comfortably satisfied that that calculation provides a better starting point for a valuation than the other alternatives.

222. It is not possible here to derive a valuation of the Plaintiffs’ shares with any mathematical certainty, given the issues to which I have referred above. I am, however, required to do the best I can in these circumstances. It seems to me that, bearing in mind Mr Hardie’s starting point for negotiations, to which Mr Cleary referred, Mr Crossley’s calculation, on which Mr Atkin relied and the experts’ reports with the deficiencies to which I have referred above, a fair valuation of the Plaintiffs’ shares in Mobius’ business, discounting for the uncertainty involved in any sale process, is $350,000 and Mr Crossley should be ordered to buy-out the Plaintiffs’ shares on that basis.

223. Mr Crossley is not entitled to any discount or set-off for the amount paid by Infinity IP to the voluntary administrator to acquire Mobius’ assets in the voluntary administration. That result follows because, first, Mr Crossley and Infinity IP are separate legal entities; and, second, the Plaintiffs received no financial benefit from that payment which was apparently applied to the insolvency administrators’ costs and, possibly, creditors’ claims including the purported claims of Mr Crossley, Mr Blaxhall and their associated companies.

224. Turning now to the Plaintiffs’ claim for contractual damages, I bear in mind the observations of Mason CJ and Dawson J in Amann Aviation at 83 that:

“The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v Fink (1946) 74 CLR 127, at p 143; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, at pp 411–412; Chaplin v Hicks (1911) 2 KB 786 , at p 792. Indeed, in Jones v Schiffmann (1971) 124 CLR 303, Menzies J. went so far as to say that the assessment of damages … does sometimes, of necessity involve what is guess work rather than estimation”: at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co Ltd v Permanite Ltd (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357–359.”

226. I also accept that this is not a case where an assessment of the amount of damages recoverable by the Plaintiffs has no rational basis or would be a mere guess, although that assessment will be made on incomplete or imperfect evidence for the reasons noted above, by contrast with the position where no rational basis for an assessment of damages is available: Troulis v Vamvoukakis [1998] NSWCA 237; McCrohan v Harith [2010] NSWCA 67 at [128].

227. Although the Plaintiffs’ contractual claim is put as a loss of opportunity case, it seems to me that there is no real doubt that the shares in Mobius or its business could have been sold for fair value, but for the steps taken by Mr Crossley to deny the voluntary administrator access to the recipes for its key products during the sale process. That is demonstrated by the fact that not only Mr Crossley but also third parties sought to acquire the business from the voluntary administrator, even in circumstances where there was no assurance that its recipes could be delivered to them. No discount to the Plaintiffs’ contractual damages is required for any material risk that the business would not have sold at its market value in the relevant circumstances, but for the steps taken by Mr Crossley to undermine any competitive sale process,

228. Once relief is granted in oppression on the basis set above, the Plaintiffs no longer have any compensable loss arising from the breach of the Sale Agreement. If I had not granted relief on that basis, I would have assessed damages in contract in the same amount as the amount required to buy-out the Plaintiffs’ shares.

The Plaintiffs’ alternative claims for relief

229. The Plaintiffs alternatively seek an order that the Mr Crossley pay compensation to them. I addressed the legal basis of such a claim in Bailey Roberts at [273], where I observed that:

“[Counsel] also submits that the Court has power, under s 233 of the Act, to make an order that a director compensate a shareholder directly for the shareholder’s loss resulting from oppression, so long as the loss is not reflective of the loss of the company. I accept that there is case law that supports that proposition: LPD Holdings (Aust) Pty Ltd v Phillips (2013) 281 FLR 227; [2013] QSC 225; Re JGS Investment Holdings Pty Ltd [2014] NSWSC 1532 at [19]; Chaudhary v Bandicoot Group Pty Ltd [2017] FCA 517 at [20]; CIP Group Pty Ltd v So (2022) 164 ACSR 566; [2022] FCA 1490 at [76]. … [Counsel] also addresses the principle of “reflective loss”, which has been controversial in both English and Australian law: Sevilleja v Marex Financial Ltd [2020] UKSC 31; Central Coast Council v Norcross Pictorial Calendars Pty Ltd (2021) 391 ALR 157; [2001] NSWCA 75 at [103]; Haiye Developments Pty Ltd v Commercial Business Centre Pty Ltd [2022] NSWSC 937 at [442]ff.”

It was not necessary to determine the availability of such a claim in Bailey Roberts.

230. The Plaintiffs alternatively seek an order that Mr Crossley account to Mobius in respect of profits and other benefits obtained by him and third parties as a result of the oppressive conduct of the Mobius’ affairs. I understand that the Plaintiffs also do not press this relief, and it seems to me they could not obtain it, if (as is the case) they have succeeded in their claims for oppression and for breach of the Sale Agreement.

231. The Plaintiffs also plead (POC [5]) that, since Mr Crossley’s appointment as a director of Mobius on 15 February 2018, he has owed “fiduciary” duties to Mobius:

“not to promote or pursue his personal interest (or that of a third party) in circumstances in which there is a conflict or a substantial possibility of a conflict between that interest and the interests of Mobius; and

not to use Mobius’ confidential information to pursue or acquire a benefit for himself or for a third party.”

232. Mr Crossley responds (POD [5]) that he:

“admits that he owed Mobius fiduciary duties, including those identified at sections 180 – 183 of the Corporations Act 2001, but otherwise does not admit the paragraph.”

233. Neither pleading is particularly precise, where neither a duty of confidentiality nor relevant statutory duties can properly be characterised as fiduciary duties. The Plaintiffs also contend (POC [48], denied POD [48]), as part of their oppression claim, that Mr Crossley has relevantly contravened his statutory duties under ss 180-182 of the Act. The Plaintiffs then plead (POC [49], denied POD [49]) that Mr Crossley is liable to account to Mobius for payments of Mobius’ funds in discharge of debts and expenses that Mr Crossley was not authorised to incur on Mobius’ behalf, without identifying the payments and facts that fall within that category; inventory and sales that were not recorded in Mobius’ accounts, without identifying what falls within that category; cash from sales that was not deposited to Mobius’ accounts, without identifying the transaction in which that occurred; and any profits he, or his related entities, make from the use of the recipes, without further identifying any such profits. It is not necessary to determine these claims, although I have addressed matters that are relevant to them above, where I understand that the Plaintiffs also do not press this relief. It seems to me they could not obtain this relief, if (as is the case) they have succeeded in their claim for breach of the Sale Agreement.

Orders

234. I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 14 days and, in the event of disagreement, their respective draft orders and submissions not exceeding five pages in Arial font 12, one and a half spacing as to the differences between them.

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Decision last updated: 29 May 2025