In the matter of Scientific Management Associates Pty Ltd

[2019] NSWSC 1643

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of Scientific Management Associates Pty Ltd [2019] NSWSC 1643

Hearing dates:

7–10, 14–16 & 24 May 2019, last written submissions 14 June 2019

Decision date:

27 November 2019

Jurisdiction:

Equity - Corporations List

Before:

Rees J

Decision:

Judgment for the plaintiffs: see [351]

Catchwords:

CORPORATIONS — Oppression — Where father of plaintiff had business partnerships with defendant — Several American and Australian companies — Defendant had day-to-day control of interests in Australia — Australian shareholdings approximately 50/50 — Father passed away — Heads of Agreement and Shareholders Agreement to govern future management of Australian companies — Long course of non-communication by defendant — Suit prompted by large number of irregular transactions.

 

CORPORATIONS — Oppression — Conduct relevant to finding of oppression — Failure to provide information in breach of Shareholders Agreement — Failure to appoint plaintiff as director in breach of Shareholders Agreement — Failure to pay dividends declared to plaintiff where defendant’s dividends fully paid — Large loans to defendant — Use of company funds for defendant’s private ventures — Irrecoverable loans by defendant brought onto the books of the company — Sale of company property at undervalue to related parties — “Adjustments” to defendant’s loan account said to reflect undocumented historical payments — Some transactions conceded by defendant as oppressive — Declaration of oppression made.

   

CORPORATIONS — Oppression — Defences — Construction arguments raised in defence of breach of Shareholders Agreement — Estoppel by convention — Whether necessary to prove detriment — Delay, acquiescence and laches — Relevance of plaintiff’s conduct — No defence established.

 

CORPORATIONS — Oppression — Remedies — Plaintiff seeks buyout order — Relevance of defendant’s ability to meet such an order — Group of companies whose principal asset is real property — Appropriate valuation methods — Property holding companies valued on the basis of assets held — Trading company valued as going concern —Determining value but for the oppressive conduct — Fefendant maintained spreadsheet with estimated value of companies’ property and investments —Whether spreadsheet as basis for fair value of property and investments — Whether recoverability of loans properly recorded in financial statements — Appropriate method of determining EBITDA where trend in earnings — Buyout order made.

 

EVIDENCE — Rule in Browne v Dunn — Business record demonstrably wrong — Author of document gave oral evidence —Not necessary to put inaccuracy of business record prepared years earlier to witness as a matter of fairness.

  CIVIL PROCEDURE — Pre-judgment interest — Difference between dividends declared and paid credited to loan account — Loan repayments made from time to time — No consent to treat dividends in this way — Whether “running account” within the meaning of Clayton’s Case — Clayton’s Case not applicable — Interest calculated on balance from time to time from date when debt first arose.

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 100
Corporations Act 2001 (Cth), ss 9, 232, 233, 286, 290, 292, 297, 467, 1305
Evidence Act 1995 (NSW), s 79

Cases Cited:

Airservices Australia v Ferrier (1996) 185 CLR 483; [1996] HCA 54
Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1
Allways Resources Holdings Pty Ltd v Samgris Resources Pty Ltd (2017) 121 ACSR 1; [2017] QSC 74
Amalgamated Investment & Property Co ltd (in liquidation) v Texas Commerce International Bank Ltd [1982] QB 84
Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] 3 Qd R 520; [2018] QCA 48
Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; [1988] HCA 17
Australian Securities and Investments Commission v Rich (2005) 53 ACSR 752; [2005] NSWSC 417
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Browne v Dunn (1893) 6 R 67
Byrne v Australian Airlines Ltd (1995) 185 CLR 411; [1995] HCA 24
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Castlemaine Tooheys Ltd v Carlton and United Breweries Ltd (1987) 10 NSWLR 468
Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39
Cory Brothers & Co Ltd v Owners of the Turkish Steamship Mecca (The Mecca) [1897] AC 286
Crawley v Short (2009) 76 ACSR 286; [2009] NSWCA 410
Devaynes v Noble (“Clayton’s Case”) (1816) 1 Mer 572; (1816) 35 ER 781
Dynasty Pty Limited v Coombs (1995) 59 FCR 122; (1995) 13 ACLC 1,290
Electrical Pty Limited (2002) 54 NSWLR 503; [2002] NSWSC 178
ES Gordon Pty Limited v Idameneo (No 123) Pty Limited (1995) 15 ACSR 536
Falkington v Peninsula Kingswood Country Golf Club (2015) 104 ACSR 481; [2015] VSCA 16
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407
Grundt v Great Boulder Gold Mines (1937) 59 CLR 641; [1937] HCA 58
In re Bird Precision Bellows Ltd [1984] Ch 419
In re R.A. Noble & Sons (Clothing) Ltd [1983] BCLC 273
In the matter Cheal Industries Pty Limited [2012] NSWSC 595
In the matter of Ledir Enterprises Pty Ltd (2013) 96 ACSR 1; [2013] NSWSC 1332
In the matter of Optimisation Australia Pty Ltd (2018) 362 ALR 374; [2018] NSWSC 31
In the matter of OTS (Australia) Pty Limited [2017] NSWSC 175
Jesner v Jarrad Properties Ltd [1993] BCLC 1032
Joint v Stephens (2008) 26 ACLC 1,467; [2008] VSCA 210
Lukaszewicz v Polish Club Limited (2019) 136 ACSR 140; [2019] NSWSC 446
McWilliam v L J R McWilliam Estates Pty Ltd (1990) 20 NSWLR 703
Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106
Mopeke Pty Ltd v Airport Fine Foods Pty Ltd (2007) 71 ACSR 395; [2007] NSWSC 153
Moratic Pty Ltd v Gordon (2007) 13 BPR 24,213; [2007] NSWSC 5
Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692; (1987) 5 ACLC 222
Munstermann v Rayward [2017] NSWSC 133
New South Wales v Banabelle Electrical Pty Limited (2002) 54 NSWLR 503; [2002] NSWSC 178
Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266
Re a Company (1986) 2 BCC 99,453
Re a company (No 00709 of 1992); O’Neill v Phillips [1999] 2 All ER 961; [1999] UKHL 24
Re DG Brims & Sons Pty Limited (1995) 16 ACSR 559
Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008
Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193
Re Hollen Australia Pty Limited (2009) 27 ACLC 199; [2009] VSC 95
Re Jermyn Street [1970] 1 WLR 1194; [1970] 3 All ER 57
Re London School of Electronics Ltd [1986] Ch 211; [1985] BCLC 273
Re Posgate & Denby (Agencies) Ltd (1986) 2 BCC 99,352
Re Quest Exploration Pty Limited (1992) 6 ACSR 659
Re SG White Pty Ltd (1982) 1 ACLC 254
Rydledar Pty Ltd t/as Volume Plus v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65
Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324
Shamsallah Holdings Pty Ltd v CBD Refrigeration & Airconditioning Services Pty Ltd (2001) 19 ACLC 517; [2001] WASC 8
Short v Crawley (No 30) [2007] NSWCA 1322
Smith Martis Cork & Rajan Pty Limited v Benjamin Corp Pty Limited (2004) 207 ALR 136; [2004] FCAFC 153
Sutherland v NRMA Ltd (2003) 47 ACSR 428; [2003] NSWSC 829
Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152
Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 84 ACSR 121; [2011] NSWCA 104
Wayde v New South Wales Rugby League Limited (1985) 180 CLR 459; [1985] HCA 68
Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109
Zephyr Holdings Pty Ltd v Jack Chia (Australia) Ltd (1988) 14 ACLR 30

Texts Cited:

Austin & Black’s Annotations to the Corporations Act (2019, LexisNexis, looseleaf)

Category:

Principal judgment

Parties:

Christopher Glatis (First Plaintiff)
Glatis Family Limited Partnership (Second Plaintiff)

  Keith Snell (First Defendant)
Owen Culley (Second Defendant)
Scientific Management Associates Pty Ltd (Third Defendant)
Scientific Management Associates (Australia) Pty Limited (Fourth Defendant)
Scientific Management Associates (Victoria) Pty Limited (Fifth Defendant)
Scientific Management Associates (Operations) Pty Limited

Representation:

Counsel:
Mr N Kidd SC / Mr J Foley (Plaintiff)
Mr A Fernon / Mr M Keene (Defendant)

  Solicitors:
Dentons Australia Limited (Plaintiffs)
Chamberlains Law Firm (Defendants)

File Number(s):

2016/183457

Judgment

1. HER HONOUR: In the 1980s, two gentlemen experienced in the defence industry began to work together: they were an American businessman, George Glatis Snr, whose company provided consultancy services to the US Department of Defence, and Keith Snell, who had worked for the Australian Department of Defence for many years. Over almost 20 years, they formed a prosperous group of companies called the SMA Group. Mr Glatis Snr held 51% of the shares but they ran the companies as if they were equal shareholders. Mr Snell had the main responsibility for Australian operations. Mr Snell also had a particular interest in real estate and accumulated a substantial property portfolio for the SMA Group — today some 70 pieces of real estate worth roughly $178 million — albeit accompanied by significant debt.

2. Mr Glatis Snr passed away in 2003. None of Mr Glatis Snr’s family is involved in the defence industry, but the family have endeavoured through a Shareholders Agreement to ensure that they are fully apprised of the group’s activities; the real estate portfolio is sold down and debt retired; and a regular stream of dividends is paid. In this endeavour, the Glatis family have been represented by Mr Glatis Snr’s son, Christopher Glatis, assisted by Sydney-based accountant, Andrew Skyring. This has proved a most difficult task as Mr Snell has resisted their efforts, including in respect of queries raised about a number of investments and transactions entered into by Mr Snell on behalf of the SMA Group, both before Mr Glatis Snr died and more recently. Mr Snell has also raised a number of long-standing issues from his perspective: that he was to get a 50% shareholding in two US companies owned by Mr Glatis Snr; that Mr Glatis Snr owed him money when he died; and that the SMA Group would be nothing without him.

3. In 2016, Mr Glatis and the Glatis Family Limited Partnership (which holds Mr Glatis Snr’s shares in the SMA Group) commenced an oppression suit under sections 232 and 233 of the Corporations Act 2001 (Cth). Mr Snell is the first defendant. The companies in which the plaintiffs have shares are the third to sixth defendants, being Scientific Management Associates Pty Limited (SMA), Scientific Management Associates (Australia) Pty Limited (SMA Australia), Scientific Management Associates (Victoria) Pty Limited (SMA Victoria) and Scientific Management Associates Operations (SMA Operations). Owen Culley, managing director and a shareholder of SMA Operations, is the second defendant but was not actively involved in the proceedings.

4. By the end of an eight-day hearing, the defendants agreed to pay the plaintiffs unpaid dividends dating from 2008, but disputed any obligation to pay interest. The defendants accepted that some, but not most, of the conduct complained of was oppressive. The defendants agreed that the Glatis family and Mr Snell should now both extract their investments in the SMA Group. The corporate defendants proposed to appoint attorneys to sell the assets of the SMA Group together with an order enjoining Mr Snell from interfering with that process. The proposed orders reflected an acceptance on the defendants’ part that Mr Snell had dealt with the Glatis family in an uncooperative and obstructive manner. The plaintiffs, however, are not interested in this proposal and want their shares in the SMA Group bought out for $66 million.

witnesses

5. The plaintiffs’ witnesses were Mr Glatis, Mr Skyring and Jonathon Moore, a US attorney who holds a small portion of shares in the SMA Group on trust for the Glatis Estate Employee Trust. Mr Moore was not required for cross‑examination.

6. Mr Glatis was cross-examined for three days and gave evidence in a careful, considered, fair, consistent and accurate manner. He readily made proper concessions, for example, that he wanted Mr Snell to buy the Glatis family out, and that his desire to become a director was not motivated by a wish to become actively involved with the conduct of the business activities of the SMA Group. It was repeatedly put to Mr Glatis that he had sought to create circumstances to justify a claim of oppression, and he repeatedly and credibly denied any such intention. Nor was there any contemporaneous evidence pointing to such a contrivance on his part. Mr Glatis was an impressive witness who appeared thoroughly honest and I accept his evidence. Mr Skyring was a fair, reasonable, careful, precise, although at times unnecessarily anxious, witness. Mr Skyring appeared to me to be a very decent, honest and conscientious professional and I accept his evidence.

7. The defendants relied on evidence from Mr Snell, Margaret Vincent (accountant for the SMA Group) and Robert Pottenger (Group Financial Manager of the SMA Group). Mr Pottenger was not required for cross-examination and the plaintiffs agree that he is a conscientious and honest man. Ms Vincent has worked for Mr Snell for many years and appeared most devoted to him. Ms Vincent was very quick to provide unsolicited information in answer to questions and to advance Mr Snell’s position if possible. Her evidence had a partisan quality and I am hesitant to rely upon it in the absence of contemporaneous corroborative material.

8. Mr Snell was a most unsatisfactory witness. Mr Snell’s answers were replete with unsolicited responses and irrelevancies, and were often non-responsive and inconsistent. He was argumentative, combative and prone to speeches. His answers were frequently starkly at odds with contemporaneous documents, for example, loan agreements which he had signed. Mr Snell blamed others wherever possible including Ms Vincent, Mr Skyring, the global financial crisis, the banks and his solicitors. His answers were, on occasion, improbable. For example, he was not worried that his personal loans to property developer, Gregory Walker, might not be able to be repaid, being a person to whom he had already lost considerable sums.

No, I wasn’t particularly worried about it at all. I — I recognised that he was going to go into liquidation and I would lose my money. I invested moneywith Mr Walker on other occasions personally as well, which I haven’t been paid for.

Mr Snell later said, in respect of another development called “Tide 2”, that “I wasn’t prepared to go into another joint venture with him.”

9. Mr Snell said whatever he thought would assist him regardless of whether it was true or false. To avoid replication, examples are at [72], [79], [86], [158] to [159] and [163]. Mr Snell’s answers were sometimes incredible and I paused at the time to wonder how he could have thought that anyone would accept what he was saying was likely, plausible or remotely possible. It was surprising that Mr Snell persisted in his answers nonetheless.

10. The plaintiffs submitted that Mr Snell was a dishonest witness, whose evidence was not credible or reliable, and whose evidence should not be accepted except to the extent that it is evidence against his interests or is corroborated by contemporaneous documents or other reliable evidence. The defendants’ counsel did not submit otherwise. I agree with the plaintiffs’ submission. That is not to say that Mr Snell is dishonest in his dealings with the world at large but, in his evidence in these proceedings, he was.

11. Andrew Ross of KordaMentha was the plaintiffs’ expert accountant and valuer and Matthew Gwynne of PKF (NS) Forensic Accountants Pty Ltd was the defendants’ expert. Mr Gwynne’s report was largely based upon inadmissible evidence of Mr Snell and thus the foundation of his report ‘fell away’. He nonetheless assisted the Court by participating in a joint report and conclave with Mr Ross. Overall, I found Mr Ross’ methods and reasoning to be more conventional, comprehensive and robust, and they were generally better supported by available accounting records.

The SMA Group

12. In 1981, SMA was incorporated to act as consultant engineers and to provide design services. The directors were three American gentlemen, Thomas Bowe, William Hare and Robert J Wells. The idea was to build on a relationship established by an American company, Scientific Management Associates Inc (SMA Inc) as a support contractor for the US Navy in providing services to support an Australian program. The general manager of SMA was Mr Snell, who had many years’ experience with the Australian Department of Defence.

13. By 1984, Mr Snell and two other American gentlemen, Mr Glatis Snr and Louis Donatelli, had become directors of SMA. Mr Glatis Snr and Mr Snell formed a strong working relationship. Its ultimate holding company was SMA Inc, which owned 85% of SMA’s shares. SMA Inc continued to perform consultancy services for the US Department of Defence.

14. In 1988, SMA Australia was incorporated to provide integrated logistics support for the Collins Class submarine project with the Australian Department of Defence. Mr Glatis Snr and Mr Snell became directors. Mr Glatis Snr was the majority shareholder. The company went on to win a number of other integrated logistics support contracts and was also involved in training naval personnel.

15. In 1989, SMA Victoria was incorporated to provide integrated logistics support to the Anzac ship project for the Australian Department of Defence. Mr Glatis Snr and Mr Snell became directors. Mr Glatis Snr was the majority shareholder. Mr Snell later described acquiring this contract as a “major watershed” for the SMA Group with eventual earnings exceeding $100 million. The company went on to win a number of other contracts to provide support functions for the Command Helicopter Project and was given responsibility to construct and manage the Command Aerospace International Support Centre adjacent to HMAS Albatross.

Intercompany payments and loans

16. By 1989, another US company, Gladon International Inc (the name was a combination of the names of directors Mr Glatis Snr and Mr Donatelli), acquired a majority interest in SMA Inc and thus SMA. The relationships between these companies can be seen in the financial statements of that year.

1. The financial statements of SMA record that it paid management fees to Gladon and dividends to SMA Inc. SMA had also made intercompany loans to SMA Inc, which were to be repaid by retention of management fees and dividends.

2. The financial statements for SMA Australia recorded that its holding company was SMA Inc and its ultimate holding company was Gladon. An interest free unsecured loan had been advanced to Gladon, which charged monthly management fees to the company. It was intended that loans due from SMA Inc and Gladon would be repaid by retention of inter-company funds including management fees and dividends payable to the holding companies in the future.

17. In March 1991, SMA Inc sent a facsimile to Ms Vincent and Mr Snell regarding payments to Gladon and the 1990 financial statements:

Our records indicate that Gladon … received payments from SMA Aust companies during 1990 of USD525,000.

Gladon has classified $35,000 as management fees (income) and the remainder of $490,000 as intercompany loans / advances. This will avoid large 1990 tax liability for Gladon — as long as there is not a problem on your side of the ledger.

Please confirm this approach … so that our accountants can finalize Gladon’s tax reporting — due 15 March 1991.

A facsimile sent from Ms Vincent the next day characterised the payments conformably with that requested by SMA Inc. Perhaps consistently with this, in 1990 SMA wrote off monies not expected to be recovered from Gladon and, in 1992, SMA and SMA Australia wrote off monies owed by Gladon and SMA Inc. Reference to loans to Gladon and SMA Inc, and the recoverability of those loans, disappeared from financial statements in the years which followed. The financial statements were audited by Coopers & Lybrand accountants and thus it is reasonable to think that the accounts were accurate and prepared in accordance with accounting standards. Thus, having regard to the financial statements, the payments from the Australian companies to the US companies were likely a combination of management fees, dividends and loans, but predominately characterised as loans for the purposes of US tax and then written off, presumably for the same reason, that is, it was a tax effective way for the US companies to receive monies from their Australian subsidiaries.

18. The defendants point to a number of funds transfers from SMA Australia and SMA Victoria to Gladon and Mr Glatis Snr from 1990 to 1994, said to be loans similar to those supporting accounting entries made by Mr Snell after these proceedings commenced to reduce his indebtedness to SMA Victoria. However, the documents supporting the funds transfers do not suggest that the transfers were loans. Nor is there reliable evidence that these were loans to Mr Glatis Snr. Rather, it appears that Mr Glatis Snr and Gladon were regularly paid monies by reason of their shareholding in the Australian companies and thus their entitlement to share in the fruits of those companies’ endeavours. Loans to the US companies disappear from the financial statements after 1992.

Governing Director and control of SMA Victoria

19. In 1992, the articles of association of SMA Victoria were amended. The share capital was divided into one million $1 shares including one “A” class special share allotted to Mr Snell, which entitled him to four times the total number of votes to which all other members were entitled. Article 69A of the company’s constitution provided for Mr Snell to be the “Governing Director” as long as he held that share and:

… whilst governing director the said Keith Eddy Snell shall, insofar as is lawful, not be subject to removal, retirement or disqualification as provided for in these Articles. The office of governing director shall be strictly personal to the said Keith Eddy Snell.

The Governing Director held significant powers under the company’s constitution including that no share could be transferred or allotted without his consent (articles 4B and 22), directors had to be consented to in writing by him (article 61A), directors’ meetings could not be held in his absence without his consent (articles 45AA and 70A) and he was entitled to a casting vote at directors’ meetings (article 71(3)).

20. Thus, although Mr Glatis Snr held 51% of the ordinary capital of SMA Victoria, Mr Snell had control of it. Mr Glatis Snr, either individually or together with SMA Inc, continued to control SMA and SMA Australia. SMA Victoria held no shares in either SMA or SMA Australia at the time, and so Mr Snell’s control of SMA Victoria added nothing to his effective shareholding in SMA or SMA Australia of 49%. Today, SMA Victoria holds the bulk of the real estate assets of the SMA Group.

SMA Operations and the Glatis shareholding

21. In 2000, SMA Operations was incorporated to consolidate the expanded employment base of the SMA Group on a single payroll; ensure the longevity of the SMA Group by making available equity positions for key senior staff; and to isolate risk factors with ongoing defence business away from the asset base of SMA Australia and SMA Victoria. SMA Operations had two ordinary shares held by Mr Snell but, as explained by Mr Snell to Mr Skyring after Mr Glatis Snr passed away:

We understand that equitable interest in the shares reside with the following individuals:-

20%   -      George Glatis

20%   -      Owen Culley — part held with equitable title, part to vest only on       completion of agreed service periods

40%   -      Mr Keith Snell — Held for future allocation to staff for incentive       purposes

20%   -      Mr Keith Snell (personal holding)

That is, Mr Glatis Snr had an equitable interest in 20% of the shares of SMA Operations. Today, SMA Operations operates the ongoing business of the SMA Group and is the most valuable company in the group after SMA Victoria.

A loan to Mr Glatis Snr?

22. In October 2002, Mr Snell transferred US $200,000 to Mr Glatis Snr. The relevance of this transaction is that, in 2017, an accounting entry was made by Mr Snell to reduce the amount he owed to SMA Victoria by an ‘adjustment’ of $219,577 (the equivalent in Australian dollars of US $200,000) on account of ‘historic amounts owed by George Glatis’. I have considered this ‘adjustment’ at [181], [183] and [244] to [250].

23. The contemporaneous documents do not indicate what the payment was for, or suggest that the payment was a loan. If the payment was a loan, it would appear to have been a loan by Mr Snell to Mr Glatis Snr. It was not a loan by SMA Victoria. Nor was such a loan recorded in financial statements of SMA Victoria at the time, although the financial statements do not contain the level of detail which would have revealed it.

The Estate of Mr Glatis Snr

24. On 27 June 2003, Mr Glatis Snr passed away.

25. In November 2003, Mr Skyring was engaged to value the interest of the Estate of Mr Glatis Snr in the SMA Group to assist the Glatis family to file a US tax return and obtain probate. Of the sources of information on which Mr Skyring relied in preparing his report, three warrant particular mention. First, Mr Skyring reviewed the financial statements of the SMA Group, which contained no detail of the investments and transactions which gained prominence in these proceedings. Second, Mr Skyring met with Mr Snell, who explained the operations of the SMA Group. The SMA Group had annual revenue exceeding $25 million. The group employed over 360 professional and support staff in offices in Canberra, Sydney, Melbourne, Adelaide, Perth, Cairns and Newcastle and in the USA, UK and New Zealand. The group’s business involved providing integrated logistics support services to major defence contractors, primarily in Australia, but also included providing integrated logistics support to other suppliers of submarines, helicopters and other vessels to the defence force as well as to industry. The SMA Group had also diversified its activities and held a significant commercial and residential property portfolio with gross rental receipts of some $1.3 million. SMA, SMA Australia and SMA Victoria were then servicing existing contracts but were not tendering for new contracts: SMA Operations had taken over the employment of all defence training and integrated logistics support personnel within the SMA Group, provided all labour and expertise to service existing contracts and tendered for new contracts.

26. Third, Mr Skyring relied on a spreadsheet which Mr Snell maintained in respect of the properties and shares owned by the SMA Group. According to a March 2004 version of the spreadsheet, the group owned over 100 properties in Australia, New Zealand, the UK, the US, France and the Cayman Islands as well as interests in other companies and a share portfolio. The estimated value of the assets in the spreadsheet was some $88 million. Mr Snell’s spreadsheets gained considerable prominence in these proceedings, in particular, in respect of the value of the plaintiffs’ shares in the SMA Group.

27. In September 2004, Mr Skyring valued the shares held by the Estate of Mr Glatis Snr in the SMA Group to be worth some $33 million. By this time, SMA Victoria had become a shareholder in SMA and SMA Australia. By reason of Mr Snell’s ability to control SMA Victoria by virtue of the “A” class special share, Mr Snell could now also control SMA. Thus, whilst the Estate of Mr Glatis Snr held the largest individual direct shareholding in SMA, Mr Skyring considered the Estate’s interest to be a minority holding due to an inability to exercise control. Mr Glatis Snr continued to hold 50.95% in SMA Australia.

28. Through the course of preparing the valuation report, Mr Skyring developed an understanding of the operations of the key entities in the SMA Group. Mr Snell suggested that Mr Skyring become involved in assisting the Glatis family and its representative, Christopher Glatis, to understand the affairs of the companies, relay any inquiries or concerns of Mr Glatis and obtain information for the Glatis family.

Mr Snell’s other business interests

29. A recurring theme in the allegations of oppression is the extent to which Mr Snell lent money or made investments in other businesses, in particular, property development, car dealerships and boats, either in his own name or via the SMA Group, and the extent to which personal transactions came ‘onto the books’ of the SMA Group by way of accounting entries when the loan or investment proved to have been a bad one. It is thus necessary to introduce the following companies, people and businesses.

Jim Ireland

30. Jim Ireland was a business colleague of Mr Snell who operated a Ford car dealership. Mr Snell referred to Mr Ireland as a “partner”.

31. In 1995, Mr Snell became a director of Car Care Clinic Systems Pty Limited (later called Car Care Clinic Pty Limited), a company of which James (Jim) Ireland was also a director. SMA Victoria was a shareholder. In 1996, Mr Snell became a director of CCC Investments Pty Limited, another company of which Mr Ireland was a director. SMA Victoria became a shareholder. In Mr Snell’s spreadsheet of November 2004, that is, prepared at the time of Mr Skyring’s valuation, SMA Victoria’s shares in Car Care Clinic (33%) and CCC Investments (50%) were together estimated by Mr Snell to be worth $350,000. In April 2002, Mr Snell became a director of Cat Club Pty Limited, another company of which Mr Ireland was a director. Mr Snell and Mr Ireland owned one share each. These investments were disclosed in management accounts of SMA Victoria for the year ended 30 June 2007, the first management accounts circulated to the Glatis family.

Greg Walker

32. Mr Snell was in the thrall of property developer Greg Walker and, from time to time, lent money to Mr Walker for his developments, including from Mr Snell’s personal superannuation account. Mr Snell agreed that Mr Walker was a friend of his, to whom he lent personal funds to complete projects and to help Mr Walker get out of his financial dilemmas: “I treated Mr Walker as a partner … and loaned him money”.

33. One of Mr Walker’s many corporate vehicles was Greatest Ever Pty Limited, a company of which Mr Snell was both a director and shareholder. Mr Snell had a personal overdraft with ANZ Bank. From December 2003 to September 2004, Mr Snell paid a total of $500,000 from his personal overdraft to “Greatest Ever”, in payments sometimes described in Ms Vincent’s working papers as loans and otherwise with no narration. A general journal entry was made on 30 June 2005 crediting Mr Snell’s loan account with SMA Victoria for $400,000 of the payments made to Greatest Ever, and thus effectively repaying Mr Snell for these loans. It is not clear why this was done, nor is there reference to a loan from SMA Victoria to Greatest Ever in the financial statements for SMA Victoria for the year ended 30 June 2005 but nor are the financial statements of sufficient detail to have revealed such a loan.

34. On 21 June 2005, Mr Snell paid $600,000 from his personal overdraft to “GWalker Holdings” in respect of a development on Ryde Road, Pymble. There is no reference to an investment by either Mr Snell or the SMA Group in Greatest Ever, Greg Walker Holdings or a development on Ryde Road, Pymble in Mr Snell’s spreadsheets prepared in 2005, although an investment by SMA Victoria in “Greatest Ever” is referred to in the management accounts for SMA Victoria for the year ended 30 June 2007.

35. The relevance of these transactions is that, after these proceedings were commenced, accounting entries were made on the instructions of Mr Snell to adjust his loan account with SMA Victoria on the basis that these were loans by SMA Victoria. I have considered this alleged oppressive conduct at [181]–[182] and [243]–[250].

Heads of Agreement

36. In December 2006, representatives of the Estate of Mr Glatis Snr, Mr Snell, the SMA Group, SMA Inc and Gladon entered into Heads of Agreement pending resolution of a shareholders agreement, addressing matters set out in a “Memorandum Concerning Future Operations and Relationship between the Shareholders”. The memorandum stated that, following the death of Mr Glatis Snr, there was a need to set out a future method of operation and management parameters, recognising that the beneficiaries of Mr Glatis Snr’s Estate needed to have input into, and information about, the operations of the SMA Group; Mr Snell and senior staff had been a unique factor in the success of the SMA Group; the relationship between Mr Snell and Mr Glatis Snr was one of mutual trust “but where arrangements between them for the restructuring of American companies ha[d] not been implemented”; and the ongoing success of the SMA Group relied upon the skills and contacts of Mr Snell and senior staff who needed flexibility and independence to pursue these activities subject to reasonable accountability to the Estate of Mr Glatis Snr including access to company accounts, participation in general and board meetings and consultation on matters requiring explanation.

37. The memorandum recognised that, since Mr Glatis Snr’s passing, there was no one in the Glatis family with equivalent knowledge of the defence industry and consultancy business. It was thus agreed that control of ongoing operations of the SMA Group should continue with Mr Snell, who recognised that the Glatis Estate and the Glatis family had a proper interest in the assets and future success of the SMA Group. Each party committed as a matter of good faith to continuing the previous successful and harmonious relationship that had existed between Mr Snell and Mr Glatis Snr. In respect of directorships, it was proposed that Mr Glatis or another nominee of the Estate would be a director of each of SMA, SMA Australia, SMA Victoria and SMA Operations. Mr Snell would continue with the powers of Governing Director. Clause 5.6 provided that Mr Snell would remain as the group managing director whilst Mr Culley would be managing director of SMA Operations and responsible for all new business.

38. In respect of the shareholdings in the SMA Group, the memorandum recognised that for historical reasons the Estate had held 51% of the SMA Group whilst Mr Snell had held 49%. During the lifetime of Mr Glatis Snr, it was said that this was not an issue because of the relationship between Mr Glatis Snr and Mr Snell, but the intention was that they were to be equal partners in the Australian and US companies, including SMA Inc and Gladon. The memorandum provided that the current shareholding in each company in the SMA Group was to be formalised with the intention that the Estate and Mr Snell would each have a 50% interest in the group, including SMA Inc and Gladon.

39. In respect of SMA Operations, the memorandum provided in clause 4.2(e) that the current shareholding would be formalised as follows:

Keith Snell   20% A Class Shares

Keith Snell   20% retained for potential reassignment to other key company managers to ensure the longevity of the Australian defence business (SMA (Operations) Management Allocation)

Keith Snell   20% retained for potential bonus allocations to other key staff/ex-employees that have made or continue to make an outstanding contribution to the Group operations (SMA (Operations) Employee Trusts).

Glatis Estate      20% A Class Shares

Owen Culley       20% A Class Shares

This was consistent with the position recorded in Mr Skyring’s valuation, being that the Estate had an equitable interest in 20% of the shares of SMA Operations. Clause 4.9 of the memorandum noted that the shareholding for SMA Operations would be revised in a tax-effective way to reflect the revised allocation. It will become apparent is that the SMA Operations Employee Trust was never established.

40. In clause 8, Mr Snell recognised the rights of the Estate as shareholder, and Mr Glatis, to all information about the affairs of the SMA Group and agreed to operate as group managing director to ensure that this happened. Full accounts would be provided each year, and a summary each quarter. The Estate could have the accounts examined by an independent accountant from time to time and the reasonable costs would be borne by the SMA Group.

41. The Heads of Agreement provided that, so far as possible, dividends of at least $600,000 would be paid to Mr Snell and the Estate each year and, pending declaration of dividends, advanced to shareholders during the year.

SMA Operations dividends

42. On 31 March 2007, SMA Operations paid a dividend of $1.375 million to Mr Snell. According to the general journal of SMA Operations, this was for “extra dividends to compensate for past company payments from own funds”. The details in the accounts were:

Reimbursement for money paid to GWG from KES funds   $500,000

Payment of equivalent amount to KES         $500,000

Reimbursement for money paid to WLK for SMA payout   $375,000

Mr Snell said the first amount was in respect of loans he had made to Mr Glatis Snr and $375,000 was in respect of money paid to employee, Warren King, to buy out the company’s obligation to give him shares. “It really isn’t a dividend to me it’s a repayment of expenses to me to catch up …”.

43. There were no contemporaneous documents to support $500,000 in loans to Mr Glatis Snr. There was a spreadsheet maintained by Ms Vincent for a Wells Fargo Bank cheque account from 1999 to 2002 which recorded a payment to Mr Glatis Snr of US $200,000 in 2000 and US $17,500 “repayments” by Mr Glatis Snr. I note the payment to Mr Glatis Snr of US $200,000 in October 2002, referred to at [22]. It may be that the $500,000 is effectively both of these transfers with a bit more thrown in. What the general journal does clarify is that the monies were paid “from KES funds”, that is, by Mr Snell and appears to have been a payment from him personally to Mr Glatis Snr. Retrospectively treating such loans, if loans they were, as a dividend paid by SMA Operations to Mr Glatis Snr, with a matching dividend paid to Mr Snell, was an odd accounting treatment, to say the least.

44. There is no contemporaneous record of Mr Snell having paid $375,000 to Mr King. Nor is it clear why Mr Snell would declare a dividend in his favour to repay money paid by him on behalf of SMA Operations and therefore a debt owed to him by SMA Operations. There is no suggestion that Mr Snell discussed the payment of this large dividend with Mr Glatis before making the payment. This was a portent of things to come: large payments made by Mr Snell to himself without consultation, unsupported by contemporaneous records and at odds with basic accounting principles or, on occasion, common sense.

45. Apparently in support of this accounting entry, in February 2017 Ms Vincent swore an affidavit in which she described conversations with Mr Glatis Snr in the late 1990s, that is, some 20 years earlier, in which Mr Glatis Snr apparently agreed that he had been taking excessive funds out of the SMA Group for some years in a manner grossly unfair to Mr Snell, and agreed to make it up to him. Mr Glatis Snr had apparently also agreed that he and Mr Snell were discussing a new company and Mr Snell could “use that company to make up the difference of the excess funds that I have taken”. Mr Glatis Snr had apparently also accepted that the excess funds which he had taken for his own personal purposes amounted to some millions of dollars. The only specific payment that Ms Vincent referred to in her affidavit was a payment of $300,000 made at the request of Robert Fillmore of SMA Inc. However, the document referred to by Ms Vincent does not support her description of the payment: it was the facsimile referred to at [17] where SMA Inc requested that payments from the SMA Group to Gladon be classified, where possible, as loans for the purposes of US tax law. I attach little weight to Ms Vincent’s evidence of conversations with Mr Glatis Snr given how long has passed since those conversations were said to have taken place, its inconsistency with contemporaneous documents and the partisan quality of her evidence in general.

46. For the year ended 30 June 2007, SMA Operations declared dividends to Mr Snell of $1,742,500. This was at odds with the Heads of Agreement which envisaged $600,000 per year and equality between Mr Snell and the Glatis family. No dividend was paid to the Glatis family, even though it held an equitable interest in 20% of SMA Operations.

43. In part, this was because the wish to secure a tax-effective means of reallocating the shares of SMA Operations led to a long delay in issuing these shares until 2014 and then as ‘dividend only’ shares. Mr Skyring recalled that the tax issue arose because transferring the shares might “cause Mr Snell a very large tax problem”. In the meantime, however, both Mr Glatis and Mr Skyring understood from Mr Snell that, until shares were allocated in SMA Operations, dividends from SMA Operations would be paid through SMA Victoria on top of whatever dividends SMA Victoria was obliged to pay the Glatis family. According to Mr Skyring, “Mr Snell had said to me that he transferred the dividend from [SMA] Op[eration]s to [SMA] Victoria and paid Mr Glatis from that entity. I do recall Mr Snell saying that to me.” Mr Skyring did not accept that it was apparent from the accounts for SMA Victoria for 2007 that no credit was made in those accounts in respect of any allowance for dividends for SMA Operations. “I don't agree with that. I was never provided with the detailed transactions going through the Glatis loan account, so I had no way of appreciating whether that was the case or not.” Mr Glatis added,

I do remember myself — I speak for myself and I speak for Andrew [Skyring] too — we were utterly, entirely confused with this whole process. I mean, it was — I mean, money was coming from here, going there, going there, moving around. I was always confused in Keith’s explanations to me. I mean, it just - it was — it was unbelievably tough. Unbelievably tough.

In fact, no SMA Operations dividends were paid to the Glatis family via SMA Victoria, or at all, for 8 years until 2015.

48. In June 2007, perhaps more consistently with the Heads of Agreement, SMA Victoria declared dividends to Mr Snell and Mr Glatis of $598,000 each. Also at this time, management accounts began to be produced for, at least, SMA Victoria and SMA Operations. These contained substantially more detail than the financial statements had. However, Mr Skyring said that management accounts were always late – sometimes nine months late – and irregularly provided. He also usually had to request financial statements several times “and they were often very much later than six months after the end of the financial year”. Mr Glatis agreed that the management accounts “would always be unbelievably late” and, by the time the accounts were received, Mr Skyring and he were frustrated as by then they were seeking information in respect of more recent matters.

Bank guarantee to Mr Ireland

49. In 2008, Mr Ireland told Mr Snell that his business was experiencing financial hardship as a result of the global financial crisis, and Mr Snell arranged for SMA Victoria to provide a $1.5 million bank guarantee for the benefit of Mr Ireland’s Ford dealership. Mr Snell agreed that, although Mr Ireland owned many properties, he did not seek any security over those properties.

Shareholders Agreement

50. On 24 February 2009, representatives of the Estate, Mr and Mrs Snell, the SMA Group, Gladon and SMA Inc entered into a Shareholders Agreement. After repeating many of the sentiments expressed in the Heads of Agreement, the parties agreed to take steps within two months to ensure that the shareholdings were as set out in Schedule 2, including that the shareholders of SMA Inc and Gladon were also to become the Estate and Mr Snell in equal shares: clause 3.4(b). In respect of SMA Operations, the shareholding to be attained was that envisaged in the Heads of Agreement. More precisely:

4. SMA Operations
KES	1000 A Class Shares representing 20% of the capital of the company.
A company controlled by KES (as trustee for the SMA (Operations) Management Allocation Trust)	1000 B Class Shares held on trust for potential reassignment to other key company managers to ensure the longevity of the Business (SMA (Operations) Management Allocation Trust) representing 20% of the capital of the company.
A company controlled by KES (as trustee for the SMA (Operations) Employee Trust	1000 C Class Shares retained held on trust for potential bonus allocations to other key staff/ex-employees that have made or continue to make an outstanding contribution to the Business (SMA (Operations) Employee Trust) representing 20% of the capital of the company.
Anastasia and Christopher Glatis	1000 A Class Shares representing 20% of the capital of the company
Owen Culley	1000 A Class Shares representing 20% of the capital of the company.

51. In respect of A class shares, clause 3.5(a)(i) provided that shareholders would have the following rights: (emphasis added)

A class: The right to one vote per share at any general meeting of the company. The right to receive dividends declared by the directors on the A class shares, equally with all other holders of shares of that class. The right to participate in any surplus on the winding up or sale of assets of the company, or on a return of capital equally with all of the other shareholders.

52. Clause 3.5(f) provided that the rates of dividend between each class of shares may be different but the total amount of dividends declared for B and C class shares might not exceed 20% each of the total dividend pool of SMA Operations. Clause 3.5(g) provided:

The parties agree that, until the B class and C Class Shares have been allocated to the SMA Operations Allocation Management Trust and the SMA Operations Employee Trust in accordance with Schedule 2, the Group Managing Director of SMA Operations may approve the payment of financial bonuses to senior management of SMA Operations with the maximum amount payable being no more than 20% of the dividend pool and/or the payment of financial bonuses to certain employees and past employees with the maximum amount payable being no more than 20% of the dividend pool.

As will become apparent, a difficulty emerged — which continued during the hearing — as to precisely what bonuses had been approved by Mr Snell to senior management and employees of SMA Operations.

53. As to the Board of Directors, the Estate and Mr Snell were entitled to appoint a director to a company where they owned shares in that company: clause 6.2. In respect of the Estate, Mr Glatis was appointed as its nominee and the parties agreed that he had the right to access information and documents concerning the business of the companies: clause 6.3. The parties agreed to take all reasonable steps necessary within two months to ensure that the officeholders of the SMA Group companies were as described in Schedule 3: clause 6.5. Schedule 3 noted that Mr Glatis or a nominee of the Estate was entitled to be a director of each of the companies in the SMA Group.

54. Clause 6.14 provided that board meetings were to happen at least once a year, with ten days’ notice supported by an agenda and, unless notice had been given in the agenda of a particular matter, a resolution of the board had to be unanimously agreed: sub-clause (g). A quorum was constituted by the Estate’s nominee and Mr Snell, or alternatively a minimum of two directors: clause 6.17. Clause 8.3 provided that certain decisions could only be made by the unanimous decision of both the Estate and Mr Snell including certain decisions — generally over $10 million — in respect of a Joint Venture Interest, being those set out in Schedule 7. Amongst those listed in Schedule 7 were:

Greatest Ever Pty Limited (one sixth interest) [and other “Greatest Ever” entities]

CCC Investments Pty Limited (one half interest)

Cat Club Pty Ltd …

G Walker Investments / CCC Investments Pty Ltd …

Car Care Clinic Pty Ltd (recover losses only) …

55. Under clause 9, the parties agreed that Mr Snell was Group Managing Director and would manage the business conducted by the SMA Group on a day-to-day basis in accordance with sound business and budgeting practice: clauses 9.1, 23.1. Further, clause 9.9 provided:

Financial Benefits to Directors and Officers

The Board of a Group Company must not provide a financial benefit, whether in the form of a loan or compensation or otherwise, to a Director or officer of a Group Company unless the financial benefit has been approved by Unanimous Vote of those Directors of the Group Company providing the financial benefit who do not have a material interest it the vote.

56. Clause 10, “Investment Disposal Plan and Accelerated Asset Sale Plan”, attached an Investment Disposal Plan for the period ending 31 December 2007 and obliged the parties to ensure that the board of each of the SMA Group companies updated the plan annually to maximise returns for shareholders and increase the level of dividends and (clause 10.1(c)(iii)):

… has regard to the needs of the [Estate] and their family and maintains a reasonable level of consistency in the level of dividends.

An Accelerated Asset Sale Plan was envisaged by clause 10.2. It is reasonably apparent from this clause that the shareholders, particularly the Estate, wished to sell down the real estate portfolio of the SMA Group and to increase the dividends being received by the Estate. Mr Glatis said, “… the spirit of the Shareholders Agreement, if you really look through it and read it, [is] that the business would be wound down over a certain — over a fairly — you know, within nine, ten years. That was always my understanding.”

57. Under clause 11, “Accounts and audit”, Mr Snell was obliged to ensure that the accounts of the SMA Group companies reflected accounting standards, and to provide the board and the Estate with all information and reports about the business and its operations: clauses 11.1, 11.2.

58. In respect of dividend and reinvestment policy, clause 12.2(b) obliged the board to ensure that dividends of at least $600,000 were paid to each of the Estate and Mr Snell each year.

59. As to related party transactions, clause 13 provided:

Agreements between Company and Shareholders

Each Shareholder acknowledges that a Group Company may wish to enter into certain agreements or arrangements with any Shareholder or Related Body Corporate of the Shareholder. Those agreements or arrangements must:

(a)   be negotiated on an arm’s length basis;

(b)   be finalised on normal commercial terms;

(c)   not be entered into without the prior approval of the Board of the Group Company making the agreement or arrangement by vote of those entitled to vote;

(d)   be fully disclosed to the Board of the relevant Group Company before any consideration or vote being held in relation to that agreement or arrangement; and

(e)   not be performed unless an agreement has been entered into in accordance with this clause.

60. Clause 22.1 provided that the Shareholders Agreement prevailed over any inconsistent provisions in the constitution of any SMA Group company and the parties were obliged to amend the constitutions to ensure consistency. In fact, the constitutions of the SMA Group companies were not amended, in particular, the constitution of SMA Victoria was not amended to bring Mr Snell’s plenary powers as Governing Director into line with the Shareholders Agreement. As will become apparent, notwithstanding the provisions of the Shareholders Agreement to which I have referred, Mr Snell considered that he had a wide range of powers and did not have to consult the Glatis family, other than perhaps in relation to the sale of the business: at [123] and [131].

Greg Walker and SMA Systems

61. On 20 August 2003, that is, two months after Mr Glatis Snr passed away, SMA Systems was incorporated. Mr Snell was its sole director and shareholder. Mr Snell gave evidence that he held the share for the benefit of the SMA Group, but the records held by the Australian Securities and Investments Commission (ASIC) and contemporaneous documents indicate that he considered at the time of these events that he held the share beneficially: he told Mr Skying this in May 2011, August 2012 and September 2012 (see [79], [85] and [91]). I do not accept Mr Snell’s evidence to the contrary. SMA Systems became the corporate vehicle through which Mr Snell participated in property developments with Mr Walker and acquired property directly.

62. In June 2006, Mr Walker established the Lot 3 The Esplanade Trust, which held property at Garners Beach. Greg Walker Holdings Pty Limited was trustee and Mr Walker was the specified beneficiary. In August 2007, Mr Walker established The Tura Beach Trust with the same trustee and beneficiary. In 2008, Mr Walker and Mr Snell executed a deed which noted that Mr Walker and Mr Snell were engaged in a property development at Tura Beach and, notwithstanding any provision of the trust deed, Mr Walker and Mr Snell each owned 50% of the Tura Beach Trust.

63. In about March 2008, Mr Snell executed a deed with Mr Walker in relation to loans to develop a luxury house on Minkara Road, Bayview. The deed recorded that, in November 2007, Mr Snell had lent Mr Walker approximately $300,000 and proposed to lend him a further $900,000 or $1.2 million (depending which version of the deed one looks at) for the project. The deed recorded an agreement by Mr Walker that interest would be payable on the loan at 20% per annum. Mr Snell agreed that he had personally lent substantial sums of money to Mr Walker to assist him with the Minkara Road project, as Mr Walker was starting to have financial difficulties as a result of the global financial crisis.

Mission Beach

64. In March 2008, Mr Snell and Mr Walker bought a property at Mission Beach in Queensland and obtained a loan from a bank in relation to the property. According to the management accounts for SMA Victoria for the year ended 30 June 2008, in March 2008, SMA Victoria lent some $1.2 million to Mr Walker in respect of a development in Mission Parade and by 30 June 2008 had advanced him $1,327,272. Indeed, by 30 June 2008, SMA Victoria had apparently lent Mr Walker and the Greatest Ever companies some $4.65 million.

65. In April 2008, Mr Walker established The Church Point Trust. Again, Greg Walker Holdings Pty Limited was a trustee and Mr Walker was the beneficiary.

First $1 million loan to Mr Walker

66. In July 2008, Mr Walker asked if he could borrow $1 million to finish a project at Avalon, and Mr Snell agreed to “a short term loan”. Mr Walker’s projects were then badly affected by the global financial crisis. Mr Snell agreed that he caused SMA Victoria to advance $1 million to Mr Walker: there was no written agreement, the loan was unsecured and there was no discussion about interest. The loan was never repaid.

67. On 6 March 2009, that is, about a week after the Shareholders Agreement, Mr Snell and Mr Walker signed an amendment deed in respect of The Church Point Trust and The Tura Beach Trust. Greg Walker Holdings Pty Limited was removed as trustee and SMA Systems was appointed in its stead. A like amendment deed was made in respect of the Lot 3 The Esplanade Trust (which concerned property at Garners Beach), although it is not known when that trust was originally established. Mr Snell said that SMA Systems became the trustee for the purpose of getting Mr Walker out of financial difficulty and to take control away from the Walker family. In August 2009, The Minkara Road Trust was established: SMA Systems was the trustee and Mr Walker was the beneficiary.

68. Mr Snell said that he caused SMA Systems to become the trustee of these trusts on the advice of Mr Skyring. His evidence in this regard was unsolicited and improbable as it is apparent from contemporaneous documents that Mr Skyring first learnt of SMA Systems more than a year later in June 2010: see [74]. Mr Snell said it was necessary to amend the trust deeds to make SMA Systems the appointer of each of the trusts in order to add SMA Victoria as a beneficiary of the trusts, but this was never done, and it is not clear why a change of appointer was necessary in order to add a beneficiary. Mr Snell agreed that the sole beneficiaries of each of the trusts were Mr Walker and his family.

Second $1 million loan to Mr Walker

69. In April 2009, Mr Walker asked to borrow a further $1 million from Mr Snell to enable him to complete a project at Pentecost Avenue, Pymble, and Mr Snell agreed. Despite the first $1 million “short term loan” not having been repaid, Mr Snell caused SMA Victoria to lend a further $1 million to Mr Walker as “a short term loan”. The loan was not in writing, was interest free and unsecured. When challenged as to whether this loan was in the best interests of SMA Victoria, Mr Snell gave the following revealing evidence:

Q.   Do you agree that the $1 million short term loan transaction which you caused SMA Victoria to enter into with Mr Walker, was not a transaction entered into in the interests of the members of SMA Victoria to your understanding?

A.   It was certainly in the interests of getting the project completed and saving him—

Q.   But it wasn’t SMA Victoria’s project, was it? It was Mr Walker’s project. Correct?

A.   It was Mr Walker’s project and it was a loan.

Q.   What I’m asking you is not whether it was in the interests of Mr Walker, but whether it was in the interests of SMA Victoria to advance $1 million to Mr Walker in the way that we’ve discussed?

A.   No. In my view, if Mr Walker went under at that particular point in time — and I had no reason to believe that he would — it would have caused greater hurt because of the other associated interests with him. …

Q.   What were the SMA interests associated with Mr Walker as at July 2008?

A.   That he would not go into receivership and cause me greater grief with all of the — all of the joint ventures we were associated with.

Q.   Mr Snell, the only joint ventures that existed with Mr Walker as at 2008 were joint ventures between you, personally, and Mr Walker. Correct?

A.   No. I’m — I don’t believe that’s true. … Those deeds, as I’ve said before, were all for — in — in the benefit of SMA Victoria making a profit out of them.

Mr Snell appeared to have significant difficulty delineating between his personal interests and the companies’ best interests: he tended to view these as ‘one and the same’. The second $1 million loan was never repaid.

Purchase of units from Mr Walker

70. On 9 July 2009, SMA Victoria purchased Unit 1 in the Avalon development from Greg Walker Holdings for $1.82 million even though, at the time, the first $1 million loan advanced by SMA Victoria to complete this development had not been repaid.

71. On completion of the Pentecost Avenue development, partially funded by the second $1 million loan from SMA Victoria, three units were purchased by SMA Australia and one by SMA Systems. The unit purchased by SMA Systems, Unit 6, was acquired in January 2010 for a discounted price of $1.2 million as against the sale price of $1.84 million. Mr Snell was cross‑examined as to why Unit 6 was acquired by SMA Systems at a discount whilst three units were purchased by SMA Australia at full price in circumstances where Mr Walker and his companies owed so much money to the SMA Group. It was suggested that Mr Snell caused SMA Systems to buy Unit 6, rather than SMA Australia, as he wanted to keep the discount for himself.

72. This was a particularly concerning part of Mr Snell’s evidence. Whilst Mr Snell initially agreed that SMA Systems paid only $1.2 million of the $1.84 million sale price of Unit 6 — recorded in Mr Snell’s spreadsheet at the time as “(Paid $1,200,000 only)” — he then said that the reference to a purchase price of $1.84 million in his spreadsheet was a typographical error. When presented with the transfer of the property signed by Mr Walker for the vendor, Pentecost Developments Pty Limited, which recorded $1.84 million as the consideration, Mr Snell maintained, “if it wasn’t a typographical error, it was an error of — of transformation”.

73. What this evidence demonstrated was that Mr Snell put his own interests before those of the SMA Group whenever it came to his personal forays into property development with Mr Walker. He provided loans by SMA Victoria to Mr Walker’s developments — undocumented, interest-free and unsecured — and then entrenched rather than reduced SMA Group’s exposure to Mr Walker’s developments by buying units in the completed developments without first obtaining repayment of the loans advanced for those developments. To add insult to injury, any benefits conferred by Mr Walker in recognition of the financial support which had been provided to him at a time of financial stress, in the form of a discount on the sale price of a unit, was secured by Mr Snell for a company in which he was the sole shareholder – SMA Systems — rather than for SMA Victoria which had provided the funding, and in which the Glatis family held an interest. Nor is there any evidence that Mr Snell at any point consulted Mr Glatis before making these loans or buying these units. The requirements of the Shareholders Agreement in respect of financial benefits to directors (clause 9.9) and related party transactions (clause 13) were ignored.

Enquiries begin

74. In June 2010, Mr Skyring sent Mr Glatis a review of management accounts for March 2010 for the SMA Group. Mr Glatis enquired about a loan given to Mr Walker, and Mr Skyring said he did not have many details but understood it was made by a new company, SMA Systems.

Keith hasn’t given me any further details of this company. … It came up in discussions with Keith when I was querying the properties, in particular, the new additions and costs associated. He said to me that “$2 million were invested in G Walker Issues”.

Mr Skyring suggested it might be a good topic to discuss with Mr Snell and, on obtaining a company search for SMA Systems, advised that Mr Snell was the sole director and shareholder of the company and beneficially held the shares, that is, not on trust for anyone. “You should query this company and its shareholdings”.

75. Mr Skyring also provided a summary of dividends for 30 June 2010:

•   Not sure what has happened in SMA Victoria, but accounts show that you have repaid $750,000 to SMA whilst Keith has drawn that same amount

•   Therefore, Keith has drawn $830,747 whilst you have actually repaid $650,000 net

Details about related party loans were also given, including in respect of Tura Beach and SMA Systems. It would appear that Mr Skyring thought that SMA Systems might be a related company.

76. Mr Glatis replied:

This is a bit confusing. When you say repaid, I’m assuming it means the loan pending dividend was repaid (by a dividend).

According to this last document, [it] looks like Keith has loaned 1.6 mil (none has been repaid) and my family 850K?? (750K has been repaid)

Mr Skyring agreed, “It seems odd to me. I’m sure there is an explanation”. Whilst, on the face of the management accounts, equal dividends were paid to Mr Snell and the Glatis Family Limited Partnership, what was not readily apparent from the accounts was that those dividends were not actually paid but were credited to a loan account in Mr Glatis’ name, in contrast to dividends to Mr Snell which were actually paid. Mr Glatis said that it was not until mid-2010 that he realised that his family was owed money. “… in 2010 … I became aware of a shortfall in Vic. I remember that distinctly”. It was suggested that there was no complaint to Mr Snell at the time, but Mr Glatis disagreed with this proposition: “Actually there was. I definitely approached Keith about that”.

May 2011 meeting

77. In May 2011, Mr Skyring attended a meeting with Mr Snell. In preparation for the meeting, Mr Skyring and Mr Glatis compiled a list of topics for discussion which included, from Mr Glatis:

SMA Systems shares? Greg Walker loan status? I believe Keith was going to put something down in writing. i.e. documentation that states that SMA Systems is a sub of VIC

78. Mr Skyring’s notes of the meeting with Mr Snell record that the cash flow difficulties of the SMA Group continued under the weight of large bank debt levels:

In summary, cashflow seems very tight. … Most assets are also non-liquid eg. Property. So it is difficult to free up cash, especially if not prepared to take a loss on those assets.

79. In respect of Mr Walker and SMA Systems, Mr Skyring’s note records:

•   Per KES this company is not a subsidiary of SMA Victoria it is a separate entity and borrowings are secured by KES assets

•   SMA Victoria has lent funds to SMA Systems. Will be repaid at cost + 6.5%

•   25% of net profit will be paid to SMA Victoria. Profit won’t be realised until properties are developed and/or sold.

The interests involved were Church Point, Tura Beach, Greatest Ever Properties and Mission Beach. When asked about these notes, Mr Snell’s evidence was unsatisfactory. Mr Snell initially denied telling Mr Glatis and Mr Skyring that SMA Systems would repay the amounts advanced to it by SMA Victoria plus interest of 6.5% per annum. Mr Snell said that, if he had made such a statement, it had been “overtaken by events”. When taken to the file note of the meeting in May 2011, he said:

…This is a note produced by somebody else. I don’t know who. I haven’t seen it before. I didn’t — it was never produced for me. It was probably something that Mr Skyring wrote. But if I did say 6.5% and 25%, then I would have subsequently amended that to the fact that all those projects were based upon a 50% return for SMA Victoria, plus the costs of investment. This document here has not been signed by me. I cannot recall it. And if I did say it, then it was amended to a 50% relationship.

He said the plan was always that SMA Victoria would receive 50% net profit but no interest.

80. According to Mr Skyring’s note of the meeting, Mr Snell outlined dividend allocations from SMA Operations, including to staff, in respect of which Mr Skyring reported to Mr Glatis:

It’s not easy to follow what happens regarding bonus payments as KES makes payments direct to individual and there is no real trail to follow or verify.

In addition, Mr Snell advised that there would be a distribution of $1 million, being $200,000 to each of SMA Victoria, $200,000 to staff, $200,000 to Mr Snell, $200,000 to Mr Culley and $200,000 to the Glatis Family. I note this is consistent with a recognition of a 20% equitable interest of the Glatis family in SMA Operations.

81. In December 2011, Mr Snell, Mr Glatis and Mr Skyring participated in a telephone conference call. Mr Glatis’ solicitors, including Ian Clarke of Gadens Lawyers, joined the conference for a short time. In respect of dividends, Mr Skyring’s note of the call concluded by noting that cashflow was tight, Mr Snell was contributing funds to the company to stay within banking limits and properties were being sold. In respect of Church Point and SMA Systems, the note recorded that SMA Victoria had lent about $1 million which it would get back with interest plus 6.5% and would also get a 25% profit share. At the hearing, Mr Snell disavowed this note, saying that, if anything had been said about interest, any agreement was later changed to envisage a 50% profit share in the projects.

82. In June 2012, Mr Skyring signed the accounts for SMA Victoria for the year ended 30 June 2011. Mr Skyring explained that from 2011 to 2014, he was the external accountant for the SMA Group, assisting with statutory matters only. He was responsible for converting the accounts prepared by the SMA Group’s internal accounting group into statutory format. Where necessary, he called for supporting records or working papers from the internal accounting group, but he did not audit the accounts. The accounts for SMA Victoria for the year ended 30 June 2011 included a director’s revaluation of land and buildings, increasing the value of those assets by $43.7 million, or more than double the book value. No deferred tax liability was recorded in the accounts at the time to reflect this revaluation and the experts agreed that, in this respect at least, the accounts did not comply with accounting standards.

83. In July 2012, Mr Skyring provided an updated valuation of the Estate’s shares in the SMA Group. Overall, the value of the Estate’s shares in the SMA Group was estimated to be $44 million. In respect of SMA Victoria, some $8.7 million in loans were considered to be irrecoverable, including Greatest Ever ($6.2 million) and Tura Beach ($876,000). Further loans to Mr Walker in respect of developments in Pentecost Avenue, Pymble ($1.66 million) and Ryde Road, Pymble ($1.215 million) were discounted by 15% to reflect recoverability. A provision for impairment was made of 40% on loans in relation to Mission Beach and Church Point (some $415,000) and a provision of 50% on other loans to Mr Walker’s company, GW Productions, of $1 million and Car Care Clinic ($1.18 million).

August 2012 meeting

84. In August 2012, Mr Snell, Mr Glatis, Mr Skyring and Mr Glatis’ solicitor, Mr Clarke, met. An agenda for the meeting evidenced impatience on the part of Mr Glatis, with some issues noted to have been the subject of discussion for more than two years, including establishment of the Employee Trust, “documentation of $$ going from [SMA] Op[eration]s to employees”, Church Point and Greg Walker “documentation that states that SMA Systems is a sub of [SMA] VIC. KEITH MENTIONED HE WOULD DO THIS BACK IN SEPT. 2001”. Mr Glatis said that he continually brought up the loans to Greg Walker at shareholder meetings.

I had a deep concern about Greg Walker, and anything involving Greg Walker, which most of these trusts were involved with … the story that I got from Keith was, you know, we’re going to benefit from this … we’re going to sell the properties, we’re going to get our money back. And I did not believe it. I did not believe it. … SMA Systems has been a huge problem. … I had just been deeply concerned about that. … probably almost $10 million has gone to Greg Walker personally, and this ‑ and SMA Systems … unsecured.

85. According to the notes of the August 2012 meeting, discussion also took place about efforts to refinance with the National Australia Bank (NAB). In respect of loans to Mr Walker, Mr Skying noted:

•   KES reiterated Church Point deal — SMA to receive back $1m loan +6.5% interest +25% profit share …

•   KES confirmed SMA Systems is not a subsidiary of SMA Vic and is owned wholly by KES.

86. Again, Mr Snell distanced himself from the record that SMA Systems was to pay 6.5% interest on its loans from SMA Victoria. Mr Snell denied ever seeing the meeting notes before and, when it was pointed out it was exhibited to his affidavit, said:

It’s possible that could have happened, but notwithstanding that, these notes if they were sent to the company, would have been sent to the financial guy. Not to me, so I didn’t really see this document. It may well have been part of the documents compiled and included with my affidavit, but I certainly haven’t seen that document before, to the best of my knowledge.

87. Returning to the note of the August 2012 meeting, Mr Snell advised that he expected to recover $2.4 million from the Church Point property, sufficient to repay monies lent by SMA Victoria to Mr Walker in respect of the Pymble development and the GW Production loan and thus recover its losses. Mr Snell advised that further funds had been lent to Mr Walker for Tura Beach and Mission Beach and agreed to prepare a summary of all monies lent to Mr Walker and all ‘deal’ details by 7 September 2012. This was never provided.

88. Mr Snell also agreed to provide a ‘bonus’ list paid to employees from 2011 and 2012 dividends. This was never provided. Mr Snell advised that he intended to increase the dividends payable to the Glatis family, cashflow permitting, to $50,000 a month. The notes confirm that the Glatis family was considered to be a 20% shareholder of SMA Operations.

89. It is reasonably apparent from Mr Skyring’s notes of the August 2012 meeting that Mr Glatis and Mr Skyring did not know, or understand, the complex structure of the SMA Group and each of its investments. Mr Snell, according to the notes of the meeting, agreed to provide details of the structure and investments by the SMA Group.

September 2012 meeting

90. In September 2012, Mr Snell and Mr Skyring met again in Canberra. Mr Skyring’s note of this meeting is extensive. Mr Snell tabled an historical summary of the SMA Group going back to the 1980s as he felt it important to note the development of the group. He tabled an SMA business group structure and raised the fact that he was supposed to have a share in each of SMA Inc and Gladon, but this had never happened: “KES advised on 2 separate occasions SMA Vic paid $1m + to execute a share trfr that has not yet occurred”. I note that such a suggestion was not repeated in any other contemporaneous documents or evidence in these proceedings. Mr Snell gave a description of the various entities and joint ventures in the group, including CCC Investments (“closed down several years ago due to unsatisfactory performance, losses mitigated following successful property sale … intention is to close down CCC asap”, Cat Club (“has been decided to sell”) and Greatest Ever.

91. In respect of SMA Systems, Mr Snell advised that he personally controlled this entity, which was established to provide a vehicle to manage various joint venture projects. The company was set up due to Mr Walker’s dire financial situation and to protect the properties from repossession. Mr Skyring’s note records that SMA Victoria was entitled to recover its costs plus 6% interest on loan funds.

KES asked AWS what was thought of above G Walker transactions. I said I thought Glatis interests were in a position of a ‘no win’ but a potential big loss. This was not a good position for the Glatis family. KES referred back to George Glatis deals that also cost money like the JHJ business in the US ? It was acknowledged that the past issues were not relevant to the current.

The note records that, when Mr Walker failed to meet his financial obligations to ANZ Bank, the bank transferred the loan to SMA Victoria. As to how Mr Walker’s debt would be repaid, Mr Skyring’s note records, “this is still a loose informal arrangement with no written agreement”.

92. Mr Snell also outlined his dealings with NAB and ANZ Bank, who was said to be being patient with him. Mr Snell also agreed to provide a summary of the dividends paid by SMA Operations.

Banks lose patience

93. In November 2012, ANZ Bank required payment of all facilities by 31 January 2013 and advised that, in light of continuing default by the SMA Group, the bank intended to appoint an investigative accountant and increase the interest margin charged in respect of all facilities by 2% per annum. Mr Skyring became aware of this soon afterwards.

94. On 19 December 2012, Mr Skyring met with representatives from ANZ Bank and potential refinancier, NAB, and reported to Mr Snell and Mr Glatis. According to Mr Skyring’s note, NAB was keen to refinance the SMA Group but was frustrated that, after several months of considering the proposal, it remained unable to complete a submission to credit due to a lack of financial information. A condition of any refinance would be an active asset sale program and the reduction of debt from its current level of $100 million to something in the order of $40 million. NAB required a complete organisational chart and financial statements and indicated that, if it could not be satisfied as to the transparency of the group inter-relationships and financial position, it would require a large accounting firm to conduct pre‑lending due diligence. NAB subsequently appointed Deloittes.

95. Mr Skyring described his subsequent meeting with ANZ Bank as “less positive”. ANZ Bank required a full refinance by 31 January 2013 and, in the absence of “positive traction” on a refinance, they would seek to take possession of SMA assets in the short term. “ANZ made it clear they did not wish to communicate directly with SMA or its directors”. As to how the relationship with SMA had deteriorated, Mr Skyring was told:

•   that there was no longer a viable relationship with SMA; …

•   no financial information has been provided to ANZ for 12 months;

•   ANZ “concerned with where Keith was at”.

96. On receiving Mr Skyring’s report on his meetings with NAB and ANZ Bank, Mr Glatis replied that it looked like the banks “want the same things we’ve wanted for years”. His comment reflects the frustrations which it is apparent were being experienced by Mr Glatis in getting information from Mr Snell in respect of the SMA Group. Mr Glatis said that he “barely got any documentation” in relation to the ANZ Bank. Mr Snell’s response was, perhaps surprisingly, to consider legal action against ANZ and to make a complaint to the Ombudsman. Mr Glatis wrote to Mr and Mrs Snell counselling against this course, suggesting diplomacy and a willingness to work with the banks:

I personally don’t understand why you would risk scaring off NAB, and any other bank for that matter, jeopardize the real estate assets … in an effort to avoid providing ANZ with the information they are requesting.

You are aware that NAB is requesting very similar information. And in actuality, they are requesting far more than ANZ.

97. On 30 May 2013, Mr Skyring spoke with Mr Snell, having had no update from him for two weeks. Mr Snell advised that, whilst the ANZ Bank was insisting that he correspond on all matters with the bank’s solicitor, Mr Snell refused to do so as he considered that banking matters should be dealt with by the bank. Whilst Mr Snell had endeavoured to sell a property of CCC Investments, the ANZ Bank required all of the proceeds of sale. The sale fell over as it was not entirely at arm’s length, but was to an associate of Mr Ireland, and Mr Ireland did not receive any of the proceeds of sale. Mr Snell advised that he had provided ANZ Bank with a sale program for $20 million in property. Mr Skyring reported to Mr Glatis:

It is very unclear just how seriously these properties are being marketed. KES made comments to me such as: “ANZ are looking for marketing plans, but that’s quite difficult to put together”, “you don’t want to list a property with an agent unless you really want to sell it”, “Agent’s get really pissed off if they find a buyer and you change the price”, “I really don’t want to sell properties that I don’t want to sell”, “there’s tax and other costs to pay when the properties sell and ANZ will eventually send me broke if I can’t keep some of the money … not on all the properties … but some of them”.

Mr Glatis responded with frustration as Mr Snell had not taken his phone calls for two weeks. Mr Glatis planned to contact Mr Clarke in relation to Mr Glatis being appointed a director to enable better access to information and the banks. He asked Mr Skyring to consider options for the Glatis family to present to Mr Snell with a view to gradually being separated from the SMA Group.

98. On 4 June 2013, Mr Glatis wrote to Mr and Mrs Snell expressing deep concern as he had been unable to get in touch with Mr Snell for more than three weeks. Mr Glatis said he did not understand why Mr Snell was not willing to provide ANZ Bank with a concrete sell-off plan, as this might cause the bank to take matters into its own hands. Mr Glatis followed up Mr and Mrs Snell on 8 July 2013 and 16 July 2013: “I have had no luck reaching Keith on his phone and he is not responding to my texts”. Mrs Snell replied that Mr Snell was trying to get a summary to Mr Glatis and Mr Skyring sometime the next day. On 17 July 2013, Mr Glatis continued to press Mrs Snell: “However, periodically, I need to speak to him one on one. I’ve spoken to him once since I was in Australia back in May. Considering the magnitude of what is going on right now I hope he understands my position.”

Discovery of non-payment of dividends by SMA Operations

99. In August 2013, Mr Skyring sent Mr Glatis a summary of dividends paid from 2005 to 2012. Mr Glatis asked for a breakdown of the dividends paid, because “these numbers seem very high”. Mr Skyring advised that the amounts were those appearing in the accounts.

This is what Keith has “declared” as a dividend ie it won’t tie up exactly with timing of cash payments as they are initially treated as a loan and then “repaid” by way of the declared dividend. It should tally in total to cash received when viewed in conjunction with the loan accounts to Glatis/Snell. That is, payments to you will appear in your loan with corresponding “dividends” repaying those loans.

Mr Glatis responded with his own figures, telling Mr Skyring that “you can see that these numbers are way off”. Mr Glatis gave evidence that he was “kind of shocked” when he received this information and wasn’t aware of it earlier. “I was really shocked and disturbed”. What was becoming apparent was that the Glatis family was not being paid dividends in respect of their 20% interest in SMA Operations, either directly or via SMA Victoria.

100. On 12 September 2013, Mr Skyring replied noting that, in the past, he had reviewed SMA, SMA Australia and SMA Victoria management accounts but had relied to a degree on Mr Snell’s representations as to SMA Operations. It had been difficult to keep track of SMA Operations due to the employee ‘bonuses’ that Mr Snell paid and signed off on 5 May 2011 (“remember we had to keep chasing this a number of times”). Further:

311. I note that, in September 2013, Mr Skyring referred to Mr Snell as having “unrealistic price expectations” and “high valuation expectations” in the context of efforts then being undertaken to sell down assets at the insistence of the bank. Whether these unrealistic or high expectations made their way into Mr Snell’s spreadsheets is not known as there is no version of the spreadsheet dating from November 2005 until December 2015 in evidence.

312. Three matters lead me to conclude that using the 5 March 2018 spreadsheet is a fair way to approach assessing an appropriate price to be paid for the plaintiffs’ shares in the SMA Group. First, book value will substantially undervalue the property and investments as these items are recorded at cost for three of the four companies. Second, the experts agreed that the values of assets adopted by Mr Ross based on the 5 March 2018 spreadsheet were substantially less than the directors’ valuation of real property assets in the SMA Victoria accounts by some $17.3 million, before SMA Victoria reduced its directors revaluation in December 2018 conformably with Mr Snell’s revised schedule as described at [185]. This suggests that relying on the estimated value of properties in the 5 March 2018 spreadsheet did not use values which exceeded the directors’ revaluation of properties, in SMA Victoria’s accounts at least.

313. Third, at my request, a comparison was undertaken by the experts of the last of Mr Snell’s spreadsheets which pre-dated the proceedings, being 1 December 2015, and the 5 March 2018 spreadsheet. That comparison indicated that the sales prices in fact achieved after 1 December 2015 were generally higher than the estimated values of the properties recorded in the 1 December 2015 spreadsheet. This tended to indicate that the estimated values in the 1 December 2015 spreadsheet did not overstate the market value of the properties. The comparison also indicated that many of the estimated values in the 1 December 2015 spreadsheet were revised downwards in the 5 March 2018 spreadsheet, while the values of some of the properties were revised upwards but only by relatively modest amounts. That is, there is nothing to indicate that the changes in the estimated values between 1 December 2015 and 5 March 2018 were anything other than changes reflecting genuine perceived changes in the estimated value of the relevant properties. For these reasons, it seems to me that the estimated values of property and investments in Mr Snell’s spreadsheet of 5 March 2018 are a reasonable indication of the market value of those assets. I accept Mr Ross’ approach to fixing a value for the property and investments of the SMA Group as being fair in the context of valuing shares in an oppression suit.

Value of receivables

315. The value of receivables accounted for $51.2 million of the $85.9 million difference between the experts but, as $35 million was referable to Mr Snell’s inadmissible evidence, the real gap was some $16 million. Again, a tension emerged in the cases of both parties at this point. The plaintiffs had pleaded that the financial statements of the SMA Group had not been prepared in accordance with accounting standards in breach of the Shareholders Agreement, but then sought to rely on those statements as to the value of loans made by the companies. On the other hand, the defendants maintained that those loans were not recoverable contrary to the financial statements, being by and large bad investments made at the instigation of Mr Snell but supported to this point of the defendants’ case as being reasonable and considered business decisions.

316. Mr Ross proceeded on the basis that the value of receivables was as recorded in the financial statements of the SMA Group. Accounting standards and generally accepted accounting principles require that an asset cannot have a carrying amount higher than its recoverable amount. In the case of loans, this means that loans must be assessed for recoverability and valued in the accounts accordingly. Mr Ross noted that, in general, it is value-destructive to shareholders for a company to lend money to entities who are not likely to be able to repay the loans.

317. Against this, although Mr Gwynne was instructed to assume that the financial statements of the SMA Group were prepared in accordance with accounting standards, his review of the financial information suggested that they were not, and thus he considered it was not appropriate to proceed on the basis that the loans in the accounts were recoverable in full. As to why he formed the view that the financial statements did not comply with accounting standards, Mr Gwynne noted that SMA Operations’ 2017 financial statements stated that the company did not have a statutory requirement to prepare financial statements in accordance with accounting standards. He also noted that, when the assets of SMA Victoria were revalued by directors in 2011, no deferred tax liability was raised.

318. Mr Gwynne proceeded to undertake his own assessment of the recoverability of loans from four borrowers based upon an assessment of the financial statements of those borrowers, they being SMA Boats, the Minkara Road Trust, the Tura Beach Trust and Church Point Trust. Special purpose financial statements for the year ended 30 June 2017 were prepared for the company and trusts by PricewaterhouseCoopers and signed by Mr Snell in May 2018.

319. In respect of SMA Operations’ loan to SMA Boats of $6.8 million, Mr Gwynne had regard to the financial statements of SMA Boats which recorded a deficiency in net assets at 30 June 2017 of $4.2 million and indicated that the loan was not recoverable in full and should have been reviewed for impairment. Similarly, financial statements for the Minkara Road Trust, the Tura Beach Trust and the Church Point Trust suggested that loans to SMA Systems in respect of those trusts may not be recoverable in full. The fact that these loans continued to be recorded in the financial accounts of SMA Operations on an unimpaired basis suggested to Mr Gwynne that the financial statements were not prepared in accordance with accounting standards.

320. In respect of the loan from SMA Victoria to SMA Systems as the owner of the property “Tide 2”, Mr Gwynne incorrectly assumed that SMA Systems owned the property as trustee of the Church Point Trust, and considered the recoverability of the loan based on the financial statements of the Church Point Trust. As Tide 2 was owned by SMA Systems in its own right, Mr Gwynne agreed that his comments on the recoverability of that loan were incorrect.

321. Mr Ross considered that Mr Gwynne’s analysis in respect of the recoverability of loans was inconsistent and circular as Mr Gwynne relied on financial statements of entities related to Mr Snell to suggest that the financial statements of the SMA Group were unreliable. It was not clear to Mr Ross why it should be assumed that the financial statements of the former entities would be more reliable than those of the latter given that they were each apparently under the control of Mr Snell. Mr Gwynne’s reliance on the net asset deficiency in the financial statements was also said to be, in and of itself, overly simplistic as whether a loan is recoverable depends on a variety of factors, not just the reported net asset position of the borrower. Mr Ross said that, even if the financial statements were not prepared in compliance with the Australian accounting standards, there remained a fundamental requirement to present financial statements that are representative of what is happening, such as if there are loans that are recorded as assets then they are required to be reviewed for impairment on an annual basis.

322. In respect of the loans to SMA Boats, the Minkara Road Trust and the Tura Beach Trust, the plaintiffs submitted that Mr Gwynne did not pay attention to the ‘going concern note’ contained in the financial statements of each of the borrowers, which indicated that the director of the borrowers regarded the borrower as being able to pay all of its debts as and when they fell due as a result of financial support being provided to the borrower company. Further, the primary asset of each of the borrowers was property which was recorded at cost in the financial statements which may be significantly lower than its current value. As such, a net asset deficiency in the financial statements of these borrowers was not sufficient evidence that loans to the borrowers should to be impaired.

323. The plaintiffs submitted, again relying on section 1305 of the Corporations Act, that Mr Ross’ approach should be accepted as the management accounts and financial statements are “financial records” kept by a body corporate under a requirement of the Corporations Act. It was a requirement of the Shareholders Agreement that the Group Managing Director ensure that the accounts, records and accounting information of each of the companies reflect the Australian accounting standards (clause 11.1); and the accounting standards required that loans receivable be reviewed each year for impairment, and the assessed present recoverable value be recorded in the financial statements. SMA Operations was a large proprietary company and thus the financial statements are required to “give a true and fair view” of the financial position and performance of the company under sections 292 and 297 of the Corporations Act, (even if ASIC Corporations (Non-Reporting Entities) Instrument 2015/841 applied). The note in SMA Operations’ financial statements did identify that the accounting policies adopted included a policy relating to receivables, which would require the directors to make a determination of the amount of receivables expected to be collected within 12 months of the end of the relevant financial year.

324. The defendants submitted that no independent test has been undertaken of the recoverability of loans. Rather, an assumption was made that they are recoverable. Neither expert had sufficient information to independently assess their recoverability. The reliance on section 1305 was misplaced as the financial statements were not prepared in accordance with accounting standards and no allowance for loan recoverability was made.

325. There was an inherent absurdity in Mr Gwynne declining to rely on the financial statements of the SMA Group because other financial statements prepared for borrowers related to Mr Snell — which statements noted that the reporting entity was not under a requirement to prepare financial statements in accordance with Australian accounting standards and the financial statements were compiled without audit, review or independent verification — reliably indicated that the value of the loans was less than book value.

326. When a director’s revaluation of land and buildings was included in the accounts for SMA Victoria for the year ended 30 June 2011, no deferred tax liability was recorded in the accounts at the time and the experts agreed that, in this respect at least, the accounts did not comply with accounting standards. But beyond this, there was no evidence that generally accepted accounting principles were not followed by the SMA Group’s in-house accounting staff or its external accountant. Further, a note in a company’s financial statements that the company “does not have a statutory requirement to prepare financial statements in accordance with the accounting standards” does not mean that the company has not in fact prepared the financial statements in accordance with the accounting standards.

327. Mr Snell deposed in his third affidavit that the treatment of loans and investments in the accounts was the subject of regular discussion with Mr Skyring and Mr Glatis at quarterly meetings.  On many occasions, Mr Snell says that Mr Skyring gave advice about the treatment of loans in the financial statements, suggesting that loans or investments should be written off, and this was actioned.  This would suggest that the recoverability of loans and investments was regularly reviewed and write-downs and write-offs made in a timely manner. End-of-year journal entries for the financial years ending June 2015, 2016, 2018 and 2018 showed loans being written off consistently with such a process.

328. In about mid-2013, according to Mr Pottenger, he and Mr Skyring reviewed loans owing to SMA Victoria and investments made by SMA Victoria thought to be irrecoverable. Adjustments were made to the accounts reflecting the results of that review: some $14 million in loans and investments were written off, including loans to Mr Walker and his companies, Car Care Clinic, Greatest Ever Ventures and Potter Design & Construct Pty Ltd (presumably a company related to Canberra property developer Mr Potter).

329. It was put to Mr Skyring in cross-examination that he reviewed the recoverability of loans with Mr Pottenger, and Mr Skyring agreed that he did. I note also that in July 2012 Mr Skyring gave advice to the Glatis family on appropriate provisions for impairment of loans (at [83]). The recoverability of loans is also a recurring theme in the emails and meeting notes between Mr Skyring and Mr Snell during the period in which the Glatis family endeavoured to investigate the affairs of the SMA Group.

330. Accordingly, the evidence suggests that the recoverability of loans was a matter of some focus by the SMA Group’s internal accounting staff and also Mr Skyring. The value of receivables was reviewed in a timely manner and appropriate write-offs or write-downs made, also in a timely manner. As such, on the balance of probabilities, the value of receivables is as recorded in the financial statements of the SMA Group. I am not satisfied on the evidence that I should adopt a different value, and certainly not in respect of the four borrowers reviewed by Mr Gwynne. Whilst it is true that the SMA Group is owed monies by some reasonably colourful companies and people, these loans are essentially those advanced as part of Mr Snell’s oppressive conduct and I am loathe to reduce the value of receivables on that score alone, having regard to the consideration of fairness when fixing a share price in oppression suits. I consider that Mr Ross’ approach to fixing a value for the receivables of the SMA Group is appropriate and fair and supported by the evidence on the balance of probabilities.

Calculation of EBITDA

331. In respect of SMA Operations, both experts agreed that capitalisation of maintainable earnings was the appropriate methodology where earnings before interest, taxation, depreciation and amortisation (EBITDA) was used as a measure of earnings. Mr Ross assessed maintainable EBITDA as $2.1 million whilst Mr Gwynne assessed it as $1.8 million. Mr Ross excluded the income which SMA Operations received from other SMA companies from its maintainable earnings, which reduced the value he attributed to the equity of SMA Operations. He was not able to exclude the costs incurred by SMA Operations in providing services to other SMA companies and thus made no adjustment for this, which had the result of understating the value he derived for the equity of SMA Operations.

332. Mr Gwynne agreed with Mr Ross’ approach to calculating the equity value of SMA Operations by adding surplus assets to and subtracting debts from his calculation of the enterprise value. Mr Gwynne disagreed with Mr Ross’ calculation of adjusted EBITDA in his treatment of interest income, service fees income, the profit on the sale of property or the gain on sale of an asset and rental income, borrowing costs, rental property expenses and “partnership income, other income and foreign exchange gains”.

333. Having considered Mr Gwynne’s report, Mr Ross revised his valuation of SMA Operations but considered that Mr Gwynne’s values were too low because he neglected to annualise the reported EBITDA for the business for one of the periods he considered and, as a result, understated maintainable EBITDA. Mr Ross accepted each of Mr Gwynne’s criticisms in respect of the calculation of adjusted EBITDA save in respect of “partnership income, other income and foreign exchange gains”.

334. The main reason for the difference between the experts was that Mr Gwynne did not annualise the EBITDA of SMA Operations for the 9 months ended 31 March 2018 and did not give any greater weight to the more recent EBITDA results of SMA Operations and lesser weight to the older EBITDA results. Mr Gwynne gave equal weighting to earnings from each of the financial years earnings from 2014 to 2018. Mr Gwynne accepted that the purpose of determining maintainable EBITDA, for the purpose of a valuation, was to identify likely earnings going forward. Mr Ross expressed the view that it is appropriate to give some weight to the recent trend of significantly better EBITDA results. Mr Gwynne appeared unwilling to accept that using such an approach was also a valid approach, but the plaintiffs submitted that Mr Gwynne did not have any coherent explanation for not regarding the more recent earnings of the business as more important to determining maintainable EBITDA than the more historical earnings. I agree: Mr Gwynne’s evidence on this topic was far from convincing. Annualising the financial results for the last reporting period (being 9 months) would have enabled the performance in previous years to be compared on the same footing with the most recent financial results. Trends in more recent years should have been acknowledged and considered and, if appropriate, weight given to such trends to better predict maintainable future earnings.

335. Another matter that contributed to the difference between the valuers as to the maintainable EBITDA of SMA Operations was whether income described as “partnership, other and FX income” should be removed from the EBITDA, being some $68,000 a year of the $400,000 a year difference between them. Mr Gwynne removed that income on the basis that “these revenue items do not appear to have any relationship to the contracting business”, but Mr Ross’ view was that there was no basis for that statement. The plaintiffs submitted that there was no evidentiary basis for Mr Gwynne’s assertion and Mr Ross’ approach should be accepted. Mr Ross’ analysis of the financial results of SMA Operations was comprehensive and, beyond assertion, Mr Gwynne’s contention did not appear to be based on anything specific in the financial results and thus I consider Mr Ross’ approach to be appropriate.

336. Consequently, I consider the assumptions on which Mr Ross based his valuation to have been proved, his methodology to be sound and his conclusions established. There was no compelling reason founded in evidence to reduce the figures he arrived at.

Interest on unpaid dividends

337. On the last day of the hearing, the defendants agreed to pay the plaintiffs unpaid dividends declared by SMA Victoria and SMA Operations, being $620,101.38 and $300,000 respectively, and orders were made to that effect. The defendants did not accept that interest was owing on unpaid dividends.

338. The defendants submitted that there was an agreement reached in April 2015 that no interest would be paid on unpaid dividends. As described at [146]–[147], the proposal put forward by Mr Skyring, at the meeting on 21 April 2015, to resolve the issue of Mr Glatis Snr’s loan “once and for all”, had seven components of which one component was that “No interest be applied to either Mr Snell or Glatis loan accounts at this time”. In circumstances where the proposal was not accepted, it does not seem to me that the defendants can select one component of the proposal as giving rise to a binding agreement that any entitlement to interest on unpaid dividends owed by SMA Victoria or SMA Operations was waived. Nor was the ability to do this explained in the defendants’ final submissions.

339. As to how interest should be calculated, the defendants submitted that interest ought to be calculated on a “first in, first out” basis, or as a running account, rather than on the basis that the debts accrued and have been owing since the time that dividends were declared by the companies, relying on Devaynes v Noble (“Clayton’s Case”) (1816) 1 Mer 572; (1816) 35 ER 781 per Sir William Grant MR. As the High Court explained, this is “the ordinary rule of appropriation of debits against credits (and vice versa) in a single running account between banker and customer”: Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; [1988] HCA 17 at 676, per curiam; see also Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 per Campbell J at [20]–[34].

337. The plaintiffs accepted the defendants’ submission with respect to the dividends declared by SMA Operations but unpaid. The total interest owed on these dividends was $52,547.94 as at 4 June 2019. I have brought those calculations up to date in Annexure A to this judgment. The defendants made no submissions in respect of interest payable on any dividends declared by SMA Operations until 2014 but paid to Mr Snell alone, of which the plaintiffs are entitled to 20%. I take it, thus, that the defendants do not suggest that Clayton’s Case has any application to those unpaid dividends. I have attempted to calculate this interest in Annexure B to this judgment, but welcome the parties’ corrections.

338. As to unpaid dividends of SMA Victoria, the plaintiffs claimed interest in their pleading on the sum owed by SMA Victoria as at the commencement of proceedings, being $720,101. The defendants submitted that, applying the rule in Clayton’s Case to that figure and taking into account dividends paid since proceedings commenced, the interest payable is $212,789.90 as at 4 June 2019.

339. There are three problems with this from the plaintiffs’ perspective. First, the defendants’ approach misunderstands the nature of the plaintiffs’ claim for unpaid dividends of SMA Victoria. The proceedings were for the recovery of money, being recovery of the loan created by the unilateral withholding of declared dividends. Section 100 of the Civil Procedure Act 2005 (NSW) provides that, in proceedings for the recovery of money, the Court may award interest on the amount for which judgment is given for the whole or any part of the period from the time the cause of action arose until judgment takes effect. The amount of the loan payable to the Glatis Family Limited Partnership when proceedings were commenced on 16 June 2016 was $1,320,101.38 as recorded in the general ledger of SMA Victoria. This loan arose, in part, on 1 July 2008 when a declared dividend was first unilaterally withheld and the cause of action to sue for payment of the declared dividends arose at that time. The balance of the loan account, as recorded in the general ledgers of SMA Victoria, rose and fell ever since. The balance of the loan account did not first ‘spring to life’ when the proceedings were instituted but was the balance of a loan account first created in July 2008 and the result of the cumulative effect of transactions that had taken place on the loan account ever since. The loan that was payable over the period of time commencing on 1 July 2008 was part of the money sought to be recovered when proceedings were commenced and the Court has power to award interest on the amount of the loan payable from the time the cause of action arose in July 2008.

340. Although partial repayments of the loan were made by SMA Victoria after the proceedings commenced, reducing the balance of the loan account to $620,101.38 at the date consent orders were made for the dividends to be paid, the Court has power under section 100(2) to award interest on the amount payable before the partial repayments were made. The plaintiffs submitted that, in order to do justice between the parties, the Court should exercise its discretion to award interest on the amounts owing by SMA Victoria to the Glatis Family Limited Partnership from time to time as recorded in the general ledgers of SMA Victoria, from when SMA Victoria first unilaterally withheld payment of declared dividends to it. Interest calculated on that basis as at 14 June 2019 was $777,290.56.

341. Second, the starting point of the defendants’ interest calculations was said to be incorrect. Although, in the originating process, the plaintiffs sought an order that SMA Victoria pay $720,101, being the amount recorded in Mr Glatis’ loan account in the management accounts of SMA Victoria as payable as at 31 March 2016, the balance of Mr Glatis’ loan account was in fact $1,320,101.38 according to the general ledger until an adjusting entry was made on 30 June 2016 reducing the balance of the loan account by $600,000 in respect of payments made to Mr Glatis during the financial year for “anticipated dividends”. In those circumstances, and given the usual accounting methods described by Mr Pottenger in respect of the dividends and loan accounts, the balance of the loan account was in fact the higher $1,320,101.38 throughout the relevant year. The fact that the two accounts were set off against each other in the management accounts should not be taken to affect the relevant balances.

342. Third, the plaintiffs argue that Clayton’s Case does not apply where there is no running account between the parties or, alternatively, that any presumption which arises from the application of the rule in Clayton’s Case is displaced on the evidence. I agree that the rule in Clayton’s Case only applies to running accounts (sometimes also referred to as current accounts: Airservices Australia v Ferrier (1996) 185 CLR 483; [1996] HCA 54 at 504, footnote 72, per Dawson, Gaudron & McHugh JJ). So much emerges from the judgment of Sir William in Clayton’s Case and Australian authorities which have followed it. The rule does not apply where there are separate debits and credits which are not a running account: Cory Brothers & Co Ltd v Owners of the Turkish Steamship Mecca (The Mecca) [1897] AC 286 at 290–1 (Lord Halsbury LC); at 295 (Lord Macnaghten); Re French Caledonia Travel at [27] ff. As to whether there is a running account in a particular case, in Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 at 286, Barwick CJ said:

In my opinion, it is enough if, on the facts of any case, the court can feel confident that implicit in the circumstances in which the payment is made is a mutual assumption by the parties that there will be a continuance of the relationship of buyer and seller with resultant continuance of the relation of debtor and creditor in the running account…

346. And in Airservices Australia, Dawson, Gaudron and McHugh JJ said, at 504–5:

… A running account between traders is merely another name for an active account running from day to day, as opposed to an account where further debits are no contemplated. The essential feature of a running account is that it predicates a continuing relationship of debtor and creditor with an expectation that further debits and credits will be recorded. Ordinarily, a payment, although often matching an earlier debit, is credited against the balance owing in the account. Thus, a running account is contrasted with an account where the expectation is that the next entry will be a credit entry that will close the account by recording the payment of the debt or by transferring the debt to the Bad or Doubtful Debt A/c.

347. An application of that principle in the context of the rule in Clayton’s Case is found in Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109. Chernov JA, with whom Warren CJ agreed, after setting out the principle that the rule does not apply where there is no running account, continued:

The evidence in this case makes it apparent that the parties conducted their affairs on the basis that each of the six loans constituted a separate transaction, as distinct from a current account. Similarly, each loan was subject to separate documentation, and the communications between the parties relevantly bear out that they treated each loan as being independent of the other loans. Thus, for example, the communication from the respondent to the first appellant of 29 May 2002 makes it apparent that each of the loans referred to in that letter was treated separately from the others. …

348. The plaintiffs submitted that this was not a running account. Rather, there were two accounts and most of the payments made to the Glatis Family Limited Partnership from 1 July 2008 to 16 June 2016 were not loan repayments nor intended by SMA Victoria to be loan repayments. The majority of payments were recorded in the accounts as “anticipated dividends” and, at the end of each financial year, a dividend was declared by SMA Victoria and the difference between the dividend declared at the end of the financial year and the anticipated dividends paid during the financial year was then applied to the loan account as between SMA Victoria and the Glatis Family Limited Partnership. The accounting records make plain the manner in which the companies’ intended payments to be appropriated and, it was submitted, it was not open to the defendants to recharacterise all of the payments made to the Glatis Family Limited Partnership as loan repayments. Thus, even if the rule in Clayton’s Case applied to the amounts treated in the accounts as loan repayments, the defendants’ calculation of interest was incorrect, and should be $566,241.46.

349. There are three features of the loan account which appear different from the trading relationships described in the authorities to which I have referred. First, the shareholder did not agree that its dividends could be credited to a loan account in the name of Mr Glatis, nor that SMA Victoria should keep track of what it owed its shareholder in this way: it was an arrangement unilaterally imposed by the company. Second, the relationship between a company and its shareholder is somewhat different to that of a money lender and borrower (Yarra Capital), travel agent and client (French Caledonia Travel) or trade supplier and customer (Airservices Australia). The shareholder and the company were not doing business together: the shareholder was entitled to be paid dividends and the company was withholding payment by unilaterally crediting declared dividends to a loan account, not in the name of the shareholder, but in the name of Mr Glatis. Third, there was no “running account” but, rather, two separate accounts which performed different functions, and in respect of which adjusting entries were made at the end of the financial year to offset the balance of one against the balance of the other. Because of these differences, I consider that this case is outside the operation of the rule in Clayton’s Case.

350. In any event, I consider that the plaintiffs’ primary submission as to interest is more aligned with the nature of the plaintiffs’ claim and does justice between the parties by compensating the Glatis Family Limited Partnership for the loss of the use of the monies sitting in the loan account from time to time since the cause of action arose in July 2008. The methodology used is to take the balance of the loan account as recorded in the general ledger each financial year, and to apply loan repayments (on the day that the payments were made), and the dividend adjustments at the end of each financial year. While the defendants complain that the payments are not taken into account until the end of the financial year, the plaintiffs’ calculations do not proceed in that way. The plaintiffs’ interest calculations appeared to me to contain a series of errors and I have calculated interest in Annexure C.

Orders

351. For the reasons given, I make the following orders:

(1)   Declare that the affairs of the third, fourth, fifth and sixth defendant companies have been and are being conducted in a manner which is contrary to the interests of the members as a whole and is oppressive to, unfairly prejudicial to, and unfairly discriminatory against the plaintiffs.

Unpaid SMA Victoria dividends

(2)   NOTE that on 25 May 2019, by consent, the fifth defendant was ordered to pay the second plaintiff the sum of $620,101.38.

(3) Pursuant to section 100 of the Civil Procedure Act 2005 (NSW), order the fifth defendant to pay the second plaintiff interest on the sum referred to in Order (2) in the amount of $781,561.80.

Unpaid SMA Operations dividends

(4)   The first defendant pay to the first plaintiff:

1. the sum of $796,128.80; and

2. interest pursuant to section 100 of the Civil Procedure Act 2005 (NSW) in the amount of $598,015.85.

(5)   NOTE that on 25 May 2019, by consent, the sixth defendant was ordered to pay the first plaintiff the sum of $300,000.

(6) Pursuant to section 100 of the Civil Procedure Act 2005 (NSW), order the sixth defendant to pay the first plaintiff interest on the sum referred to in Order (5) in the amount of $59,020.54.

Buyout orders

(7)   The first defendant to purchase from the first plaintiff, within 30 days of the date of this order, all of the shares held by the first plaintiff in the sixth defendant for a purchase price of $6,600,000.

(8)   The first defendant to purchase from the second plaintiff, within 30 days of the date of this order, all of the shares held by the second plaintiff in the fifth defendant for a purchase price of $31,835,680.

(9)   The first defendant to purchase from Jonathon Moore, within 30 days of the date of this order, all of the shares held by Jonathon Moore in the fifth defendant for a purchase price of $964,320.

(10)   The first defendant to purchase from the second plaintiff, within 30 days of the date of this order, all of the shares held by the second plaintiff in the fourth defendant for a purchase price of $19,891,150.

(11)   The first defendant to purchase from Jonathon Moore, within 30 days of the date of this order, all of the shares held by Jonathon Moore in the fourth defendant for a purchase price of $608,850.

(12)   The first defendant to purchase from the second plaintiff, within 30 days of the date of this order, all of the shares held by the second plaintiff in the third defendant for a purchase price of $5,900,530.

(13)   The first defendant to purchase from Jonathon Moore, within 30 days of the date of this order, all of the shares held by Jonathon Moore in the third defendant for a purchase price of $199,470.

(14)   The defendants to pay the plaintiffs’ costs of the proceedings.

(15)   Grant liberty to the parties within 28 days to notify any amendment sought to these orders to correct any errors or omissions.

(16)   Liberty to apply.

**********

Annexure A: Interest on unpaid SMA Operations dividends payable for financial years 30 June 2015 on

Period	No. of Days	Outstanding Dividends	Interest Rate	Interest Payable
1/7/2015 – 15/6/2016	350	$50,000	6.00%	$2,876.71
16/06/2016 - 28/06/2016	13	$50,000	6.00%	$106.85
29/06/2016 – 30/06/2016	2	$0.00	6.00%	$0.00
01/07/2016 – 31/12/2017	184	$350,000	5.75%	$10,145.21
01/01/2017 – 18/01/2017	18	$350,000	5.50%	$949.32
19/01/2017 – 20/04/2017	92	$300,000	5.50%	$4,158.90
21/04/2017 – 02/05/2017	12	$250,000	5.50%	$452.05
03/05/2017 – 20/06/2017	49	$150,000	5.50%	$1,107.53
21/06/2017 – 30/06/2017	10	$0.00	5.50%	$0.00
01/07/2017 – 07/03/2018	250	$350,000	5.50%	$13,184.93
08/03/2018 – 27/06/2018	112	$250,000	5.50%	$4,219.18
28/06/2018 – 28/06/2018	1	$150,000	5.50%	$22.60
29/06/2018 – 30/06/2018	2	$0.00	5.50%	$0.00
01/07/2018 – 30/06/2019	339	$300,000	5.50%	$15,324.66
1/7/2019 – 27/11/2019	150	$300,000	5.25%	$6,472.60
TOTAL INTEREST PAYABLE:			$59,020.54

Annexure B: Interest on Interest on unpaid SMA Operations dividends payable for financial years 30 June 2007 to 30 June 2014

Period	No. of Days	Outstanding Dividends (cumulative)	Interest Rate	Interest Payable
1/7/2007–30/6/2008	366	$348,500.00	10.00%	$34,850.00
1/7/2008–5/3/2009	248	$479,528.80	10.00%	$32,581.68
6/3/2009–30/6/2009	117	$479,528.80	9.00%	$13,834.08
1/7/2009–30/6/2010	365	$539,528.80	9.00%	$48,557.59
1/7/2010–31/12/2010	184	$644,128.80	8.50%	$27,600.48
1/1/2011–30/6/2011	181	$644,128.80	8.75%	$27,949.01
1/7/2011–31/12/2011	184	$684,128.80	8.75%	$30,176.64
1/1/2012–30/6/2012	182	$684,128.80	8.25%	$28,143.00
1/7/2012–31/12/2012	184	$724,128.80	7.50%	$27,378.02
1/1/2013–30/6/2013	181	$724,128.80	7.00%	$25,136.20
1/7/2013–31/12/2013	184	$796,128.80	6.75%	$27,090.19
1/1/2014–30/6/2015	546	$796,128.80	6.50%	$77,409.89
1/7/2015–30/6/2016	366	$796,128.80	6.00%	$47,767.73
1/7/2016–31/12/2016	184	$796,128.80	5.75%	$23,076.83
1/1/2017–30/6/2019	911	$796,128.80	5.50%	$109,287.76
1/7/2019–27/11/2019	150	$796,128.80	5.25%	$17,176.75
TOTAL INTEREST PAYABLE:			$598,015.85

Annexure C: Interest payable on unpaid SMA Victoria dividends

Period	No. of Days	Loan balance	Interest Rate	Interest Payable
1/7/2008–5/3/2009	248	$175,405.91	10.00%	$11,917.99
6/3/2009–30/6/2009	117	$175,405.91	9.00%	$5,060.34
1/7/2009–30/6/2010	365	$910,405.91	9.00%	$81,936.53
1/7/2010–31/12/2010	184	$1,051,518.43	8.50%	$45,056.84
1/1/2011–30/6/2011	181	$1,051,518.43	8.75%	$45,625.82
1/7/2011–13/7/2011	13	$1,196,810.27	8.75%	$3,729.79
14/7/2011–31/12/2011	171	$1,046,810.27	8.75%	$42,912.05
1/1/2012–31/5/2012	152	$1,046,810.27	8.25%	$35,964.39
1/6/2012–30/6/2012	30	$1,026,248.95	8.25%	$6,958.81
1/7/2012–8/8/2012	39	$1,318,640.36	7.50%	$10,567.19
9/8/2012–31/8/2012	23	$1,268,640.36	7.50%	$5,995.63
1/9/2012–29/11/2012	90	$1,220,101.38	7.50%	$22,563.52
30/11/2012–31/12/2012	32	$1,170,101.38	7.50%	$7,693.82
1/1/2013–18/1/2013	18	$1,170,101.38	7.00%	$4,039.25
19/1/2013–8/4/2013	80	$1,120,101.38	7.00%	$17,185.12
9/4/2013–13/5/2013	35	$1,070,101.38	7.00%	$7,182.87
14/5/2013–28/6/2013	46	$1,020,101.38	7.00%	$8,999.25
29/6/2013–30/6/2013	2	$920,101.38	7.00%	$352.92
1/7/2013–1/10/2013	93	$1,270,101.38	6.75%	$21,844.00
2/10/2013–31/12/2013	91	$1,220,101.38	6.75%	$20,532.80
1/1/2014–30/6/2014	181	$1,220,101.38	6.50%	$39,327.38
1/7/2014–30/6/2015	365	$1,320,101.38	6.50%	$85,806.59
1/7/2015–30/6/2016	366	$1,320,101.38	6.00%	$79,423.09
1/7/2016–29/7/2016	29	$1,320,101.38	5.75%	$6,030.87
30/6/2016–31/12/2016	185	$1,120,101.38	5.75%	$32,644.05
1/1/2017–26/6/2017	177	$1,120,101.38	5.50%	$29,874.48
27/6/2017–3/7/2018	372	$920,101.38	5.50%	$51,576.09
4/7/2018–23/8/2018	51	$820,101.38	5.50%	$6,302.42
24/8/2018–4/1/2019	134	$720,101.38	5.50%	$14,540.13
5/1/2019–30/6/2019	177	$620,101.38	5.50%	$16,538.87
1/7/2019–27/11/2019	150	$620,101.38	5.25%	$13,378.90
TOTAL INTEREST PAYABLE:			$781,561.80

Amendments

24 March 2020 - [60] - formatting correction: [123] and [131].

Decision last updated: 24 March 2020