In the matter of Tzavaras & Sons Pty Ltd

[2022] NSWSC 359

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

In the matter of Tzavaras & Sons Pty Ltd [2022] NSWSC 359

Hearing dates:

27 – 30 July 2021; 5 – 6 August 2021

Decision date:

05 April 2022

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Dismiss the plaintiff’s claims for the winding up of the first defendant with costs.

2. Order pursuant to s 66G of the Conveyancing Act 1919 (NSW) that Brian Raymond Silvia and Geoffrey Peter Granger be appointed as trustees for the sale of the property referred to in these reasons as the Maroubra Property, such transfer to be to the third defendant for no consideration but subject to the existing encumbrances.

3. Order the plaintiff to pay the third defendant’s costs of the application pursuant to s 66G of the Conveyancing Act, 1919 (NSW) other than the costs (if any) of the trustees for sale appointed pursuant to order 2 (with a view to those costs being borne jointly by the plaintiff and the third defendant).

Catchwords:

CORPORATIONS — Oppression — Where first defendant company formed by plaintiff’s deceased father and managed (following his death) by plaintiff and his two brothers — Where plaintiff alleges he was excluded from the management, business and affairs of defendant company — Where plaintiff “severed ties” with the company

CORPORATIONS — Winding up — Court ordered winding up — Just and equitable — Where plaintiff alleged irremediable breakdown of relationship of quasi-partnership — Whether quasi-partnership principles applicable to company established by different persons than those who suffer a breakdown of a personal relationship

LAND LAW — Co-ownership — Statutory trust for sale — Where plaintiff made part payment of the purchase price — Where plaintiff’s deceased father made part payment of the purchase price — Presumption of advancement — Whether repayment of plaintiff’s contribution to purchase price by second defendant amounted to purchase of plaintiff’s interest in property

LAND LAW — Co-ownership — Rights between co-owners — Occupation fee

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 56

Conveyancing Act 1919 (NSW), ss 54A, 66F, 66G

Corporations Act 2001 (Cth), ss 53, 232, 233, 234, 461, 467

Supreme Court Act 1970 (NSW), s 67

Cases Cited:

Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121

Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27

Australian Securities and Investment Commission v Storm Financial Ltd (2009) 71 ACSR 81; [2009] FCA 269

Australian Securities and Investments Commission v Green Pacific Energy Ltd (2006) 59 ACSR 142; [2006] FCA 1254

Australian Securities and Investments Commission v Letten (No 10) [2011] FCA 498

Backoffice Investments v Campbell (2007) 61 ACSR 144; [2007] NSWSC 161

Biviano v Natoli (1998) 43 NSWLR 695

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

Burwood Council v Visy Paper Pty Ltd [2021] NSWSC 565

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

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

Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495

Cremin, in the matter of Brimson Pty Ltd (in liq) (2019) 136 ACSR 639; [2019] FCA 1023

Darrington v Caldbeck (1990) 20 NSWLR 212

Delehunt v Carmody (1986) 161 CLR 464; [1986] HCA 67

Doyle v Australian Securities and Investments Commission (2005) 227 CLR 18; [2005] HCA 78

Dyer v Dyer (1788) 2 Cox Eq Cas 92

Ebrahimi v Westbourne Galleries Ltd [1973] AC 360

Ehsman v Nutectime International Pty Ltd (No 2) [2009] NSWSC 1096

ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1994) 15 ACSR 536

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

Fexuto v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688; [1998] NSWSC 413

Forgeard v Shanahan (1994) 35 NSWLR 206

Foundas v Arambatzis [2020] NSWCA 479

Gartside v Inland Revenue Commissioners [1968] AC 553

Guirguis v Girgis [2021] NSWCA 156

Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124

Hughes, in the matter of Substar Holdings Pty Ltd (in liquidation) (2020) 149 ACSR 185; [2020] FCA 1863

Hunter v Organic and Natural Enterprise Group Pty Ltd (2012) 92 ACSR 183; [2012] QSC 383

Hunter v Organic and Natural Enterprise Group Pty Ltd [2013] QCA 331

In Re a Company (No 00709 of 1992); O’Neill v Phillips [1999] 2 All ER 961; [1999] UKHL 24

In the matter of AJ Roberts Removals & Storage Pty Ltd [2017] NSWSC 1054

In the matter of Amazon Pest Control Pty Ltd [2012] NSWSC 1568

In the matter of Catombal Investments Pty Ltd [2012] NSWSC 775

In the matter of Computer Room Solutions [2021] NSWSC 845

In the matter of Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749

In the matter of Glenvine Pty Limited (in liquidation) [2020] NSWSC 866

In the matter of Ledir Enterprises Pty Ltd (2013) 96 ACSR 1; [2013] NSWSC 1332

In the matter of Matrix Global Investment Group Sydney Pty Ltd (ACN 614 718 399) [2021] NSWSC 80

In the matter of Scientific Management Associates Pty Ltd (2019) 141 ACSR 115; [2019] NSWSC 1643

John J Starr (Real Estate) Pty Ltd v Robert R Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63; (1991) 9 ACLC 1,372

Leigh v Dickeson (1884) 15 QBD 60

Luke v Luke (1936) SR (NSW) 310

Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452

McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603

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

Munstermann v Rayward [2017] NSWSC 133

Napier v Public Trustee (WA) (1980) 32 ALR 153

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

Nelson v Nelson (1995) 184 CLR 538; [1995] HCA 25

Nullagine Investments Pty Ltd v Western Australia Club Inc (1993) 177 CLR 635; [1993] HCA 45

Re Dernacourt Investments (1990) 20 NSWLR 588

Re Straw Products Pty Ltd [1942] VLR 222; [1942] ALR 361

Roberts v Walter Developments Pty Limited (1997) 15 ACLC 882

Ryan v Dries (2002) 10 BPR 19,497; [2002] NSWCA 3

Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324

Shelton v National Roads and Motorists Association Ltd (2004) 51 ACSR 278; [2004] FCA 1393

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

Thomas v HW Thomas Ltd (1984) 2 ACLC 610; [1984] 1 NZLR 686

Thomas v McKay Investments Pty Ltd (1996) 22 ACSR 294

Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152

Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd (No 6) (2014) 102 ACSR 130; [2014] WASC 278

Vigliaroni v CPS Investment Holdings Pty Ltd (2009) 74 ACSR 282; [2009] VSC 428

Wayde v NSW Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68

Williams v Legg (1993) 29 NSWLR 687

Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685

Texts Cited:

JD Heydon, MJ Leeming, PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, LexisNexis, 2014)

Category:

Principal judgment

Parties:

John Tzavaras (Plaintiff)
Tzavaras & Sons (First Defendant)
William Tzavaras (Second Defendant)
Peter Tzavaras (Third Defendant)

Representation:

Counsel:
J Baird (Plaintiff)
JC Kelly SC with Mr L Katsinas (Defendants)

Solicitors:
Carneys Lawyers (Plaintiff)
Antonenas Legal Pty Ltd (Defendants)

File Number(s):

2020/251170

Publication restriction:

Nil

Judgment

1. HER HONOUR: This matter involves two separate disputes between members of the Tzavaras family. First, an application by the plaintiff (John Tzavaras) for orders for the winding up, pursuant to s 233(1)(a) of the Corporations Act 2001 (Cth) (Corporations Act), or alternatively under s 461(1)(e) and/or s 461(k) of the Corporations Act, of the first defendant (Tzavaras & Sons Pty Ltd) a family company in which John and his brothers (the second and third defendants, namely William (known as Bill) and Peter Tzavaras), together with their mother, Giannoula (known as Jenny), are shareholders. Second, a claim by John for the appointment, pursuant to s 66G of the Conveyancing Act 1919 (NSW) (Conveyancing Act), of trustees for sale of a property at Maroubra (the Maroubra Property) of which John and Peter are the registered proprietors.

2. For convenience, and without intending any disrespect, I will refer to the Tzavaras brothers (and other family members) by their first names. Bill is the eldest of the three sons and John is the youngest. Their father, Nicholas (or Nick), who is now deceased, established Tzavaras & Sons in March 1985. Tzavaras & Sons is the trustee of a discretionary family trust, the Nicholas Tzavaras Family Trust (Family Trust). John also seeks an order that a receiver be appointed to the Family Trust.

3. At the hearing, John abandoned an alternative claim for relief pursuant to s 233(1)(d) of the Corporations Act that Bill and/or Peter purchase John’s shares in Tzavaras & Sons at a price to be determined by the Court. John also abandoned a claim for an account in relation to a shareholder’s loan account (see T 245-6; thus not pressing [24] of the amended statement of claim).

Background

4. As noted above, Bill, Peter and John are brothers, the three children of Nick (who is now deceased) and Jenny. Jenny was diagnosed with dementia in 2010 and, as at the time of the hearing, resided in a nursing home aged in her late 80s.

5. The first defendant, Tzavaras & Sons, as noted above, is a company that was established by Nick on 22 March 1985. Until his death on 2 September 2001, Nick was a director and shareholder of Tzavaras & Sons and was substantially responsible for its management and the conduct of its affairs. Since 25 November 1994, each of the three sons has also been a director of Tzavaras & Sons.

6. The issued share capital of Tzavaras & Sons is comprised of four $1.00 ordinary shares, held as to one share each by: Bill; Peter; John (who purchased his share from Jenny in 1994); Nick (until his death in 2001); and, after Nick’s death, Jenny. Since 17 June 1985, Bill has been the secretary of Tzavaras & Sons. Bill’s wife, Kylie Tzavaras, has been and is the company’s bookkeeper. For some time Mr George Ferizis (who gave evidence in John’s case) was the accountant for Tzavaras & Sons, the Family Trust and a company controlled by Bill (Northmead Auto Centre Pty Ltd, to which I refer below). Mr Ferizis is now only John’s accountant; another accountanting firm (Lime Street Wealth, where both Mr Jim Dionysatos and Mr Chris Dionysatos provide accounting services to the defendants) has been engaged on behalf of Northmead Auto Centre and Tzavaras & Sons (and associated entities).

7. Tzavaras & Sons does not itself trade or conduct any business. It operates solely as the trustee of the Family Trust, which was created by deed dated 13 May 1997 (Trust Deed). The income and corpus beneficiaries of the Family Trust include each of Bill, Peter and John.

8. Tzavaras & Sons, in its capacity as trustee of the Family Trust, is the registered proprietor of two properties: a property in Northmead NSW (the Northmead Property), purchased in 1997 and valued as at 10 December 2020 at approximately $7,600,000 (a more recent valuation obtained by John, which was dated 29 June 2021 but not served until 12 July 2021, was rejected – see the debate at T 31), which is subject to a mortgage to AMP Bank Ltd (AMP Bank), with a debit balance of $2,394,809 as at 30 June 2020 (AMP Mortgage); and a unit in Surfers Paradise, Qld (the Surfers Paradise Unit) purchased in 2003 for $650,000 (and now valued at approximately $700,000).

9. The sole source of income for Tzavaras & Sons (and through it the Family Trust) is the rental income it receives from the Northmead Property and the Surfers Paradise Unit. The upper level of the Northmead Property is leased by Tzavaras & Sons to 7 Eleven Stores Pty Ltd (for a rental by the time of the hearing at approximately $434,000). The lower level of the Northmead Property has been occupied by Northmead Auto Centre Pty Ltd (Northmead Auto Centre) as trustee of the Northmead Auto Centre Trust (NAC Trust) (of which John is not a beneficiary) since at least 2015. Bill is the sole director, secretary and shareholder of Northmead Auto Centre, which was incorporated in 2013 (a fact relevant to certain of the complaints made by John on the oppression application).

10. Northmead Auto Centre operates an automotive mechanics workshop and repair business from that part of the Northmead Property that it occupies. It does not pay any rent or fee to Tzavaras & Sons for its use and occupation of the lower level of the Northmead Property. John says that the estimated present rental value of the lower level of the Northmead Property is approximately $50,000 to $56,000 per annum (relying on a real estate appraisal to which I will refer in due course). On that basis John argues that the value of the lower level of the Northmead Property is approximately $869,000 (saying that this is the market range as at 10 December 2020).

11. John points to the operating profit after income tax of the NAC Trust for FY16 to FY20 and notes that the financial statements for the NAC Trust for FY20 record that the total income available for appropriation (after application of carried forward tax losses) of $36,458.38 was distributed to NAC Trust, recorded as “beneficiary loan”. It is noted by John that the NAC Trust is not an income beneficiary of the Family Trust. Complaint is made that John has received no part of the profits from Tzavaras & Sons as trustee of the Family Trust (despite the profits as recorded in the relevant financial statements) and that those profits have been offset against tax losses (see T 3.10-40). John’s two principal complaints as to alleged financial mismanagement (which I address in due course) are as to the reduction in the joint shareholder loan account and the failure of Tzavaras & Sons to distribute profits of the trust (although no breach of trust is here alleged) (see T 3.38), but there is also a complaint as to an increase in the loan account for Northmead Auto Centre (which it is contended is part of the distribution of the profits of the Family Trust – see T 3.42).

12. The Family Trust has net assets which have been valued by the Court appointed single expert, Ms Fiona Bateman of Dolman Bateman Chartered Accountants, as at 30 June 2020 at $5,766,000 (Ms Bateman’s report dated 1 April 2021 was adopted by the Court – see the orders of Black J of 26 April 2021 – and marked Exhibit A at the final hearing). Those assets comprise: the Northmead Property ($7,600,000); the Surfers Paradise Unit ($700,000); a loan to NAC Trust (valued at $593,761), which John notes represents an increase from $486,490 as at 30 June 2019); a loan account in the name “N, G, W, P, J Tzavaras” ($209,370) (the Shareholders’ Loan Account), which John notes represents an increase from $191,870 as at 30 June 2019; and the amount recorded as a beneficiary loan in relation to NAC Trust of $36,458 (that amount being the subject of an entry “Distribution to beneficiaries, Northmead Auto Centre Trust” and then an entry under the heading Financial Liabilities, as a current unsecured liability, reading “Beneficiary loan Northmead Auto Centre Trust” – from which it appears that there was a notional distribution to the trustee of the NAC Trust and a loan back to Tzavaras & Sons) (see T 254.18-36).

13. It is relevant to note at the outset (since John’s complaints seem largely to derive from a misunderstanding of this distinction) the distinction between the position of Tzavaras & Sons (i.e., the company) as trustee of the Family Trust and the position of the Family Trust (in which the relevant assets are held) itself. John sees himself as having an entitlement to one quarter of the assets of the Family Trust because he holds one quarter of the issued share capital of Tzavaras & Sons. Thus, it is said that “an integral part of the mathematics” in the present case is that one-quarter of the valued assets of the Family Trust is $1.44 million (see T 4.29-31). The difficulty which the defendants here emphasise (and by defendants I refer to Bill and Peter, since those are the relevant contradictors to the claims by John in relation to Tzavaras & Sons) is that what John has is one ($1) share in a trustee company, which itself has no relevant assets; he is only a discretionary object (as are they) of the Family Trust and would not be entitled to call for one-quarter of the assets of the Family Trust.

14. Indeed, in closing submissions it was accepted that Ms Bateman had valued the company and the trust as one, rather than separately valuing a 25% shareholding in the company and then an expectancy as a beneficiary of a discretionary trust (see T 258.14-23); and hence that if any order for the compulsory purchase of John’s share in Tzavaras & Sons (which is not the relief he is now seeking in any event) were to be made then there would be no evidence as to the value of his minority share (and it was suggested that in that case were such a valuation to be necessary there might be a fresh referral out to determine the value of John’s minority share in Tzavaras & Sons and/or interest as a discretionary object of the Family Trust).

15. Moreover, a winding up of the trustee of the Family Trust (i.e., Tzavaras & Sons) would bring into operation provisions of the Trust Deed as to the ongoing management of the Family Trust (see below), which would not necessarily result in John obtaining a one-quarter share of the assets of the Family Trust.

16. Insofar as John complains of the reduction in the shareholder loan account (which he accepts is a joint loan account), his complaint is not as to the “legitimacy” of the making of withdrawals from that account (which I note have included some not insubstantial payments made by the defendants for the benefit of Jenny’s needs); rather, the complaint of oppressive conduct in this regard is as to the perceived unfairness of John’s treatment (i.e., that the shareholder loan account has been reduced by some $1.1 million – $1,125,527 – for the benefit of the other three named owners of that loan account, in a period of in excess of three years, with no part of that money being paid to or for his benefit between 1 July 2012 and 30 June 2020) (see T 252.28-31; T 256.11-17).

Chronology of events

Establishment of Tzavaras & Sons and acquisition of Northmead Property

17. Nick established the family company (Tzavaras & Sons) in 1985, and the Family Trust in May 1997.

18. The Northmead Property was acquired by Tzavaras & Sons, expressly as trustee for the Family Trust, in 1997 for the sum of $654,000. The transfer was registered on 23 July 1997. It was encumbered by a mortgage (dated 11 July 1997) in favour of St George.

The family business

19. Each of Nick’s sons appears to have worked at various times as a motor mechanic in what was started by Nick as the family business. Relevantly, from 2000 until about 2012, John worked (his consistent complaint in this proceeding being that this was without wages) as a mechanic at the Northmead Property. The evidence is nevertheless to the effect that the sons, including John, were able to draw on funds from time to time by way of use of the company cheque book – and John seems to accept that from time to time he did indeed have use of the cheque book to pay for tools or other items for his own benefit (see T 92.9-50, 93.1-11). John also made use of the lower part of the Northmead Property for some time, storing one or more racing cars on that part of the premises for no cost (see T 93.34-41, 94.1-23).

Establishment of Northmead Auto Centre

20. I interpose here to note that Bill’s company, Northmead Auto Centre, was incorporated on 15 October 2013. Until then, the “Northmead Auto Centre” business was apparently conducted by Tzavaras & Sons. Hence the defendants say that the allegation at [13A] of the amended statement of claim to the effect that John worked as a mechanic for Bill or Northmead Auto Centre for the period from 2002 to 2012 is factually incorrect.

Departure of John from family business

21. In 2012, John ceased working at the Northmead Property and (on his own evidence) left those premises permanently. John says that his main complaint at that stage was as to non-payment of wages (see T 262.8-14). John commenced his own business at or about this time. In closing submissions, John emphasises the distinction between the business of Northmead Auto Centre, i.e., the business conducted by Bill from the lower level of the Northmead Property; and the assets and affairs of the Family Trust (see at T 261.47-50, 262.1-2), John maintaining that what happened in 2012 was that John ceased to work for or in Bill’s business but that this did not mean he had absented himself from the affairs of Tzavaras & Sons and the Family Trust (and see for example the submissions at T 281.10-11). However, as at 2012, Bill’s company did not exist; rather, the business conducted at the Northmead Property seems to have been the family business through Tzavaras & Sons.

21. In his (third) affidavit, sworn 27 July 2021, John deposes to a conversation that he says he had with Bill in about March or April 2012 at the time he “left the Northmead Auto Centre site permanently” (and immediately following which he says he handed Bill the keys to the workshop) to the following effect:

John:   Bill, can we have a chat. I’ve had enough. I can’t do this anymore. I want out. I want you and Peter to buy me out.

Bill:   Well, what’s your number? Obviously you’ve got a number in your head.

John:   Four million.

Bill:   No way. One million for everything, including Maroubra. [This being a reference to the property jointly owned by Peter and John – see below]

John:   No way. That’s not enough.

23. John deposes that the conversation was in the presence of the brothers’ uncle (Bill Coundrelis). No evidence was called by either side from the uncle.

24. Bill denies that this conversation took place (at [4] of his affidavit affirmed  29July 2021).

25. By letter dated 30 July 2012, John’s solicitor (Mr Titus of Carneys Lawyers) wrote to Bill, Peter and Mr Ferizis (Annexure “A” to Bill’s affidavit of 29 July 2021) stating that John “did not work for the Company from 2007 to 2010”; that John “walked out on 13 July (or 20 July) [sic] 2012”; and that John “wishes to sever his ties with the Company and for [his solicitors] to advise in relation to his rights as a shareholder in the Company”.

26. On any view of the matter, this letter must have been referring to Tzavaras & Sons (not Northmead Auto Centre) since John was a shareholder in (and director of) that company (not Bill’s company). Furthermore, what is abundantly clear from this correspondence is that John did not wish to continue in the management of Tzavaras & Sons and that he wanted to be bought out of the company.

27. The defendants point out that the letter made no complaint as to the exclusion of John from management of Tzavaras & Sons. The 30 July 2012 letter referred to John not being paid a salary (although the company “pays his tax”) but that he was a director. The letter also noted that “the Directors have income from other sources”. The defendants point out that, in John’s case (see [14] of his affidavit of 25 August 2020), Nick left him a takeaway fish and chip shop at Lethbridge Park, including the unencumbered land and business; an unencumbered industrial unit at Mount Druitt, which was leased to a business named “Car Batteries”; a one third interest in a shopping centre at Georges Hall; and a bank account in Greece containing $120,000.

28. Pausing here, while I accept that John’s share in Tzavaras & Sons was not acquired (and thus he was not ever “bought out”), and he remained as a shareholder and director (hence he did not sever his ties completely with the company), the position there conveyed by John’s solicitors in July 2012 makes it difficult – to say the least – for John now to contend, as he does, that he was excluded from management of the company. Rather, John chose to withdraw from involvement in Tzavaras & Sons (albeit remaining as a director and shareholder). The distinction sought to be drawn in oral submissions on behalf of John (between saying that he wished to sever his ties and saying that he had severed his ties) seems to me to be a matter of semantics; in the context of this family company, what John was clearly conveying was that he did not wish to take any active part in the ongoing management of the company. Consistent with that expressed wish is the fact that John did not thereafter seek to take any part in the management of the company (and did not complain about receipt of notices of meetings or financial statements of the company nor did he seek to attend any such meetings) for a lengthy period. This is not to gainsay that, as a director and shareholder, he was entitled to receive notices of meetings and the like. However, it is difficult to see any oppression arising where the remaining directors and shareholders simply acceded to John’s expressed wishes. Further, it is evident that from time to time documents in relation to Tzavaras & Sons were supplied to John (albeit, at least at times, indirectly through a conduit). Complaint is nevertheless made that, so long as he was a director of the company, John was entitled to receive and continue to receive notices and financial statements of the company (see T 264.1-5).

29. It is not disputed that John has not attended any meeting of directors of Tzavaras & Sons since at least 2012. John maintains that there has been an irretrievable breakdown in the personal relationship between the brothers since 2012 (noting the evidence of both Bill and Peter to the effect that they had not spoken with John since 2012; although there was some evidence from them to the effect that they had attempted to contact John but he had not taken or returned their calls). For John’s part, it seems to be accepted that he has not attempted to contact his brothers. That said, and somewhat surprisingly given the adamance with which John asserts that there has been an irretrievable breakdown in the relationship with his brothers such as to warrant the winding up of Tzavaras & Sons and the appointment of a receiver to the Family Trust, as noted above there is evidence that the brothers inherited from Nick a shopping centre at Georges Hall and there is no suggestion that they have been unable to operate that business, through their joint ownership of the property, in the years since Nick’s death in 2001.

John’s automotive repair and service centre business

30. John deposed (at [13] of his affidavit of 25 August 2020) that in 2010 he started his own automotive repair and service centre business, trading as Norwest Automotive at Seven Hills, which he managed until it ceased trading in 2013. In cross-examination, John accepted that this was incorrect in that the relevant date was not 2010 it was 2012 (see T 82.8-24). The defendants point out that John’s email address as at 27 July 2012 was “norwestauto” (see Bill’s 29 July 2021 affidavit, annexure A). Further, the defendants argue that it is clear from T 82.29-30 that John’s business did not cease trading until 2013 when “it went broke”.

Maroubra Property

31. As to the chronology of events in relation to the Maroubra Property (which is the subject of the separate claim by John), it was acquired at auction on 20 January 1997 for the price of $610,000. Settlement of the purchase occurred on 25 June 1997 (which was at around the same time that the Northmead Property was acquired by Tzavaras & Sons).

32. There appears to be no dispute that, when the Maroubra Property was acquired, John contributed a sum of $125,000 towards the purchase price; Peter contributed a sum of $90,000; Nick (or perhaps, according to Bill, Nick and Jenny out of their joint funds) contributed around $195,000; and there was a loan taken out from Westpac Banking Corporation (Westpac) by John and Peter secured by mortgage over the property in the sum of around $200,000 in relation to the balance.

33. In oral evidence, Bill was adamant that he had also contributed to the Maroubra Property, saying that “we sold a family property and paid off the property” (T 208.33-35). Bill clarified this by saying that he put his money into the property “when the property got sold and paid it off” (T 208.49). As far as I can glean, Bill was referring to amounts paid at the time of the refinancing of the property but this was not altogether clear (see below as to Bill’s evidence in cross-examination).

34. The title to the Maroubra Property was (and remains) in the name of Peter and John as tenants in common in equal shares (and it is now subject to the AMP Mortgage). Peter and John together occupied the Maroubra Property for about a year after it was purchased before John moved back into his parents’ home (he says to look after his ailing mother, Jenny). The Maroubra Property has been occupied since about 1997 exclusively by Peter and his family (and John complains in this proceeding that no rent or occupation fee has been paid to him in respect of Peter’s occupation of the property since 1997).

35. In 1999, the St George Bank mortgage to Tzavaras & Sons in relation to the Northmead Property was refinanced with Westpac, the mortgage being stamped as at 27 March 1999 on the basis that the amount secured was $680,000.

36. On 27 January 1999, a second mortgage was granted to Westpac over the Maroubra Property, securing the sum of $1.9 million as collateral security for an increased loan by Westpac to Tzavaras & Sons for the development of the Northmead Property.

37. There were thus two separate mortgages to Westpac over the Maroubra Property (one relating to the initial purchase price and one which was collateral security for the Westpac loans in relation to the Northmead Property redevelopment). Bill’s evidence in cross-examination, questioned as to the two separate mortgages, was somewhat confused. At first, Bill’s evidence was that the mortgage over the Maroubra Property (here meaning I think the initial mortgage that was refinanced in January 1999 but not granted as collateral security for the Northmead Property redevelopment finance) was paid out by the sale of a factory unit (T 206.35-38). Bill then appeared to accept the proposition put to him (T 206.40-47) that there were two separate mortgages before again giving evidence as to his understanding that the indebtedness over the Maroubra Property as at 2002 (see T 207.15-19) was that the property was paid out and it was only the mortgage to the service station. Bill also said that he knew about the $1.9 million but not the $200,000 mortgage (and said “I’m pretty sure that we would’ve sold the property by then”) (T 209.1-5).

38. It is not disputed that in 2002, there was some discussion between John and Peter in relation to John’s interest in the Maroubra Property. (There are, however, competing versions of what was said and whether it was in one conversation or two – see John’s oral evidence at T 68-78 and Peter’s oral evidence at T 126-131).

39. On John’s version of the conversation, Peter was angry when John said to him “Peter, I want to buy my own home. Would you agree to sell Maroubra, or buy my share of Maroubra”. (The defendants say that why anyone would become angry in response to such a question is unexplained.) John deposes that Peter said “I’m not selling. I’m not buying you out. If you go legal against me, I’ll put a bullet in your fucking head” but that (shortly after this and in the same conversation) Peter then said “I can only pay you $125,000” and that he, John, responded to this “Ok, give me the $125,000 and we can sort the rest out later” (it being left unclear what was contemplated by sorting the rest out later or whom that might be).

40. At that time (the end of 2002) the $1.9 million AMP Mortgage was on the title to the Maroubra Property to secure the funds advanced to construct the new service station at the Northmead Property. The defendants say that it is inherently more probable that Peter said (as he has deposed) “[w]e can’t (sell the Maroubra Property) as you know its tied up as security for the petrol station”. On Peter’s version of the conversations about this topic, he says that a few days later he agreed that he would repay to John the amount he had contributed to the purchase price and his evidence is that this was in effect in satisfaction of any claim by Peter to the property (T 126.14-19).

41. Bill’s version in his affidavit was that he said words to John to the effect “[b]oth our houses are mortgaged over the Northmead Property. We can’t just remove one of them without reducing the loan or replacing it with another property” but in cross-examination he said that it was Peter who had had that conversation with John and he could not remember if he (Bill) had had such a conversation with John (see T 209.43-49). When I tried to clarify this with Bill, he said that “when all this was said, the discussion was brought in front of me and me and Kylie are the ones that transferred the money to John’s account”. Bill was initially adamant that he heard John say “I want my original amount that I put in and I will walk away from the house” (T 210.7-9) but pressed in cross-examination on this Bill said that he could not remember exactly, then said he did remember the conversation but did not remember when and where it was (see T 210.26-50, 211.1-16).

42. The defendants submit that John’s version is not plausible, i.e., that Peter would start making threats and then shortly after agree to pay all the money that he then had as a part payment for a larger sum which was not discussed, let alone agreed.

43. It is not disputed that on 23 January 2003, the sum of $125,000 was paid to John. On Bill’s evidence, this payment was made by him and his wife Kylie on behalf of Peter (T 210.19-23). Bill was adamant that the payment was for the house “and for John to move on” (T 211.46-47). With the ring of truth, Bill asked rhetorically “[w]hy would Peter give him 125 if he was going to come after him again?” (T 212.3-4).

44. In 2011, the Northmead Property was refinanced with AMP Bank Ltd (AMP Bank). The two mortgages to Westpac over the Maroubra Property were discharged (see 4 August 2011 discharge of mortgage) and a fresh mortgage over the Northmead Property was granted to AMP Bank (dated 5 August 2011), securing the amount of $2,118,000. The Maroubra Property was provided as collateral security for AMP Bank’s loan to Tzavaras & Sons secured over the company and the Northmead Property (as also was Bill’s own home). On or shortly prior to 5 August 2011, at the request of Bill, John signed the mortgage to AMP Bank over the Maroubra Property as registered proprietor and co-mortgagor together with Peter.

45. In 2019, Bill requested that John sign a personal guarantee in relation to a proposed refinance of the Northmead and Maroubra Properties. John refused to do so. Bill accepted that there were discussions at that time with Peter, Kylie and Mr Ferizis, and that there were some documents that emanated from AMP Bank that were required to be signed (T 212.46-48). AMP Bank wanted a personal guarantee from the three brothers and Bill accepted that he had asked John to sign the mortgage (T 213.43-44) and that John had refused to do so (T 214.33-35). Bill understood that this was because John’s name was still on the title to the Maroubra Property (T 214.41-44). However, Bill clarified that evidence by adding that “I didn’t ask John to sign nothing over the Maroubra property” (T 214.37-39), saying that the request was through an intermediary (a Mr Manolis) (T 215.6-16, 35-47). (That evidence is consistent with the evidence on both sides that there have not been personal communications between Bill and John since 2012.)

Pleaded claims

46. In prayers 1, 2 & 3 of the initial Originating Process filed on 28 August 2020, John sought: an order pursuant to s 232 of the Corporations Act declaring that Bill and Peter’s conduct of the affairs of Tzavaras & Sons is and has been oppressive to, unfairly prejudicial to or unfairly discriminatory against him; an order pursuant to s 233(1)(a) of the Corporations Act, that Tzavaras & Sons be wound up; and, in the alternative, an order pursuant to s 233(1)(d) of the Corporations Act that Bill and/or Peter purchase his shares in Tzavaras & Sons at a price to be determined by the Court. As noted, the relief sought in prayer 3 (the compulsory purchase order) was not ultimately pressed.

47. In prayers 4-12 of the initial Originating Process, John also sought orders for the appointment of trustees for sale of the Maroubra Property under s 66G of the Conveyancing Act.

48. On 15 October 2020, Black J ordered that the matter proceed on pleadings. A statement of claim was filed on 1 December 2020. In the statement of claim, John pleaded claims of oppressive conduct under five headings: exclusion from the management of Company affairs; shareholder loans and dividends; Northmead Auto Centre claim; misuse of Company funds (relating to the failed acquisition of the trucking business); and the Surfers Paradise Unit claim (in relation to unpaid holiday rent).

49. In summary, those oppression claims are as follows.

50. The exclusion from management claim (pleaded at [12]-[13]) involves an allegation that John has “taken no part in” the management of the company’s (Tzavaras & Sons) affairs and business, received no notice of any annual general meeting of the company or its board of directors and has not been provided with any minutes of meetings or financial statements or other information about the company’s financial or taxation affairs.

51. The claim as to the Shareholders Loan Account and non-payment of dividends (pleaded at [14]-[24]) is an allegation that John did not receive repayment from the joint Shareholder Loan Account (referred to above) owned by Nick, Jenny, Bill, Peter and John; and that John was not paid any dividend by Tzavaras & Sons. (I note that the Shareholder Loan Account was established by Mr Ferizis, on instructions from Nick, in 1998 – see Mr Ferizis’ evidence at T 115.22-25.)

52. The Northmead Auto Centre claim (pleaded at [25]-[26]) is an allegation that Bill and/or Peter have preferred their own interests to those of Tzavaras & Sons by allowing Bill to use the workshop under the service station for motor vehicle repairs, without Bill’s operating company (Northmead Auto Centre) being required to pay rent. The claim is for a 25% share of rent alleged to be properly assessed at a rate of $50,000 per annum (for an unstated number of years).

53. The misuse of company funds claim (pleaded at [27]-[35]) relates to a loss sustained when a proposed acquisition of a trucking business did not proceed (apparently due to the fraud of the prospective vendor). At [34], it is pleaded that “[t]he proposed acquisition of the trucking business did not proceed, but the Company was unable to recover the ... sum of $825,400 from the putative vendor and that sum was lost to the Company”. In essence it seems to be submitted by John that negligence in relation to this transaction is an indicium of mismanagement or misuse of company funds (see T 260.50, 261.6-10).

54. The Surfers Paradise Unit claim (pleaded at [36]-[38]) is an allegation as to unpaid holiday rental for the property owned by Tzavaras & Sons as trustee for the Family Trust. At [37], it is alleged that since about 2003 Bill has occupied the Surfers Paradise Unit from time to time “without however paying any rent or other amount to the Company for or in connection with the same”.

55. At the commencement of the hearing, there was an application for leave to amend the Originating Process (an amendment that had first been foreshadowed on or about 22 July 2021, i.e., about a week before the hearing was to commence). The application was opposed. The principal amendment sought was to add as an alternative prayer for relief a claim for the winding up of Tzavaras & Sons pursuant to s 461(1)(e) and/or (k) of the Corporations Act (John referring in that context to the decision of Rees J in In the matter of Crow Inn Pty Ltd (No 2) [2020] NSWSC 1749 (Crow Inn (No 2))). It was contended that the alternative ground did not expand the evidence that was required, since the same conduct that was relied upon as constituting oppression was also relied on in order to found the claim for winding up on the just and equitable ground (namely, the relationship between the parties; the “deadlock” between them; and the irretrievable breakdown of the relationship between them – see T 13.14-22). This was put as an alternative or fallback to winding up under the oppression ground.

56. Also sought by way of amendment was a prayer for the appointment of a receiver to the trust (with the ancillary powers specified in the draft amended originating process), to deal with the consequences of Tzavaras & Sons being a trustee of a trust; and an amendment to prayer 3 (which sought a compulsory purchase order in relation to the company shares pursuant to s 233(1)(d)) to add “including his interest in the Nicholas Tzavaras Family Trust”. Reference was made in that context to In the matter of Glenvine Pty Limited (in liquidation) [2020] NSWSC 866 per Black J (at [37]-[43]); Hughes, in the matter of Substar Holdings Pty Ltd (in liquidation) (2020) 149 ACSR 185; [2020] FCA 1863 per McKerracher J (at [27]-[28]), referring to the position where a corporate trustee is removed by operation of a disqualification clause in the trust deed and the right of indemnity or exoneration persists; Cremin, in the matter of Brimson Pty Ltd (in liq) (2019) 136 ACSR 639; [2019] FCA 1023 per Moshinsky J; and Amirbeaggi, in the matter of Simpkiss Pty Ltd (in liq) [2018] FCA 2121 per Markovic J, where a receiver was appointed and an order made that the liquidator could distribute the assets of the trust.

46. In summary, it was submitted that the proposed amendment (though late) was “not too late”; that it “exposed no further ambit” of the evidence than was already encompassed by the oppression case; and that it raised purely a point of law, such that (having regard to s 56 of the Civil Procedure Act 2005 (NSW)), it was just that the amendments be allowed in order that all legal issues between the parties be ventilated at the one hearing.

47. The principal complaint by the defendants to the proposed amendment (noting that there had been no explanation for the delay in this regard, contrary to the requirement for a satisfactory explanation as made clear in Aon RiskServices Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [5] (Aon Risk Services)) was the absence of any proposed amended statement of claim to make clear the basis on which the amended relief was sought.

48. As to the amendment to the relief sought to add a winding up on the just and equitable ground, complaint was made that there was nothing in the existing pleading as to the concepts of “deadlock” or “irretrievable breakdown of the relationship”; and the defendants maintained that evidence would need to be adduced in relation to those matters (including as to the history of the manner in which the affairs of Tzavaras & Sons had been conducted over several years – such as the co-operation between the directors in the passing of circular resolutions and the like). Complaint was made that there would need to be a properly pleaded and particularised claim in that regard and it was foreshadowed that the defendants would need to adduce further evidence.

49. As to the amendment in relation to the appointment of a receiver to the Family Trust, it was noted that the order proposed was to be sought pursuant to s 67 of the Supreme Court Act 1970 (NSW) and/or s 233(1)(h) of the Corporations Act but that those two heads of claim, although stated in the alternative, have a different threshold. The defendants submitted that, insofar as the power under s 67 was invoked, it could not be said that the appointment of a receiver was merely ancillary, for the reason that one of the grounds upon which it had been suggested that such a claim would be made was to support or enable an outgoing trustee to exercise its lien or right of exoneration over trust assets to any extent that the trustee has unpaid debts or liabilities. The defendants maintained that, again, it would be necessary for there to be a properly pleaded and particularised basis for the claim (noting that such a claim was predicated upon the assumption that there was going to be an outgoing trustee).

50. The prejudice identified in this regard was the scope of the order and the absence of any pleaded basis for it (see T 16.27-36); the defendants noting that there was no allegation or evidence justifiying realisation of the assets of a solvent trust; and that John is a mere discretionary object of the trust with no proprietary interest (just a contingent future interest or expectancy) (see T 17.1-4), thus raising the spectre of the need for a different class of expert evidence.

51. After an adjournment to obtain instructions on the amendment application, it was pressed by John. Accordingly, I directed that an amended draft pleading be served, properly particularised, with an affidavit explaining the delay, and deferred ruling on the application that day. When the matter resumed on the second day of the hearing, the application for leave to amend was pressed (albeit not in relation to the proposed amendment to add the relief as to the powers of a receiver appointed to the Family Trust). The explanation proffered for the delay in the amendment application was to lay the blame at the feet of Counsel for the plaintiff (it being said that the alternative ground of relief in respect of the winding up occurred to him when drafting the submissions for the hearing). Reliance was placed on Aon Risk Services at [102]-[103]; and to a decision of Henry J in Burwood Council v Visy Paper Pty Ltd [2021] NSWSC 565 (at [55]) in support of the application to amend.

52. Ultimately, after some debate, I allowed the amendments in relation to the alternative basis for the winding up order that had been sought (but not the application for amendment in relation to the proposed relief by way of an order for the acquisition of John’s interest in the Family Trust) and ordered the plaintiff to pay the costs thrown away by the amendment including any vacated hearing dates. I permitted the defendants time to adduce further evidence on the just and equitable ground issue that had belatedly been raised (see T 45.39-41). This had the unsatisfactory consequence of extending the hearing time (and requiring the reallocation of other matters in the Court).

Issues

64. The following issues thus arise for determination: first, whether there has been oppressive conduct by Bill and Peter within the meaning of s 232 of the Corporations Act; second, if so, whether an order for the winding up of Tzavaras & Sons should be made pursuant to s 233(1)(a) of the Corporations Act; third, and alternatively, whether Tzavaras & Sons should be wound up on the just and equitable ground pursuant to s 461(1)(e) and/or s 461(k) of the Corporations Act; third, whether some alternative remedy should be granted under s 467(4) of the Corporations Act; and, finally, whether an order should be made under s 66G of the Conveyancing Act appointing trustees for the sale of the Maroubra Property (and, if so, on what terms).

Evidence

65. Affidavit evidence was adduced from John (three affidavits sworn on 25 August 2020, 11 February 2021 and 27 July 2021, respectively) and from Mr Ferizis (an affidavit sworn 15 October 2020, and a further affidavit sworn 27 July 2021), who, as noted above, is the former accountant for Tzavaras & Sons. Much of the evidence on which John relied was documentary, such as the financial statements and records of the Family Trust, particularly since 2015.

66. The defendants adduced affidavit evidence from each of Bill and Peter (each of whom affirmed an affidavit on 7 December 2020, with Bill affirming an additional affidavit on 29 July 2021), from Bill’s wife (Kylie) (being an affidavit affirmed 7 December 2020) and from their current accountant (Mr Chris Dionysatos) (being an affidavit affirmed 7 December 2020).

67. As noted above, a joint expert report dated 1 April 2021 by Ms Fiona Bateman as to the value of Tzavaras & Sons “as trustee” of the Family Trust adopted on 26 April 2021, by consent, by Black J was tendered in evidence (marked Exhibit A). The report concluded that the value of Tzavaras & Sons (i.e., the company) as trustee of the Family Trust was $5,766,000 (that being the sum of the net assets of the Family Trust). The report did not value the interest of a minority shareholder in a company in its capacity as trustee of the Family Trust; nor did it value the interest of a beneficiary object under that discretionary trust. With no disrespect to Ms Bateman (since her report was addressing the questions asked and on the assumptions with which she was provided), ultimately this report was of little assistance since it seems to have been premised on an incorrect assumption that the interest of a shareholder in a trustee company (that shareholder being no more than a discretionary object under the trust of which the company is trustee) has a proportionate share (in this case one quarter) of the assets of the trust. It is unfortunate, to say the least, that time and expense was wasted by the parties on this misconceived exercise.

Lay witnesses

68. As to the respective lay witnesses, the following submissions as to credit were made.

John Tzavaras

69. John submits that he should be accepted as a truthful witness, even if a little naïve and stubborn at times. It is noted that John is not well educated, having left school before completing his HSC and is a car mechanic (not a mechanical engineer); and it is said that he is not a sophisticated person (noting that his evidence was that he did not understand what a trust was (T 80.18-23).

70. John’s evidence is to the effect that, until Nick’s death in 2001, John had been content to leave Tzavaras & Sons in Nick’s hands; and that, after Nick’s death, Bill assumed the management of the company’s affairs and John trusted Bill, until at least 2018.

71. Much complaint is made by John to the effect that John had worked in the workshop at the Northmead Auto Centre (a business said to be owned and conducted through Bill’s company and effectively Bill’s business but – as the defendants point out – this was not the case until 2013, after John had left) from at least 2000 until 2012, without receiving a wage. The significance attributed by John to the non-receipt of a wage by him over this period is that it informs the oppression claim. Perhaps ironically, in circumstances where John himself seems not to have understood the import of the distinction between a company and a discretionary trust – nor even the nature of a trust – John says that Bill conflates the business of Northmead Auto Centre or the NAC Trust and the business of Tzavaras & Sons or the Family Trust.

72. For John, it is said that it was hardly surprising that, in 2012, shortly after John became married in 2010, he should desire to start his own business and to cease working (for no payment) at the Northmead Auto Centre. It is said that much of John’s attitude can be explained by his resentment at his treatment by Bill (including the refusal of Bill and Peter to buy out his interest in Tzavaras & Sons or the Family Trust at a fair price). Pausing here, whether or not John felt justifiably resentful of his treatment by his brothers is not to the point when assessing his credit as a witness (which is the context in which John here raises this). It simply indicates to my mind that caution should be exercised in accepting John’s account of events in circumstances where that is likely to have been influenced, subconsciously or otherwise, by his admitted feelings of resentment,

73. My impression of John in the (virtual) witness box was that he has a genuine sense of grievance as to the matters of which he complains but that he has a misguided sense of his entitlements (hence, his belief that he is entitled to a payout of a quarter of the net assets of the trust) and that this (perhaps understandably) has influenced his perception or recollection of events. The complaint about oppression in relation to the Shareholders Loan Account is one such example. The fact is that there were not insignificant sums paid for the benefit of his elderly mother (who as noted is suffering from dementia) yet no account seems to have been made for this in John’s perception of events. Further, John’s evidence is not always reliable such as the date on which he commenced his own service station operation. More relevantly, for example, the complaint as to non-payment of wages by Bill’s company is untenable in circumstances where Bill’s company was not incorporated at the time (though I accept that it may perhaps be explicable on the basis that John’s understanding was that Bill was in control of the business from the family perspective).

74. The concession by John’s Counsel that John might be seen as stubborn was borne out by John’s unwillingness in the witness box to concede that any relief other than the (draconian) step of winding up Tzavaras & Sons (and/or the Family Trust) would satisfy him. It is abundantly clear that what John wants is to be bought out of the family company (and trust) at a sum that reflects the one quarter share of the assets of the trust to which John believes he is entitled. John’s evidence as to how he determined in his own mind the figure of $4 million (that he says he put to Bill in the disputed conversation in 2012) is revealing in this context (see at T 83.28-46).

75. John complains of exclusion from management yet is clearly not interested in any resolution of the matter which might see him take on a meaningful role as director of the family company (his apparent belief that to do so would require him to work as a mechanic for Bill’s company for no wage is in my opinion untenable); and John’s focus on benefits obtained by his brothers (such as their use of the Surfers Paradise Unit for brief periods – a trivial complaint at best – or the occupation at no rent of the lower level of the Northmead Property, when he too used the property for a time at no cost to store and work on his racing cars) as amounting to oppression does him little credit. There is thus no little force in the suggestion put by the defendants that the application for orders to wind up Tzavaras & Sons is no more than an attempt to secure a buy-out of John’s shares at a substantial price.

76. Thus, I am cautious about adopting John’s evidence of conversations and events where there is no independent corroboration; and I would place more weight on contemporaneous documentary evidence (such as the assertions made – and those not made – in John’s solicitors’ correspondence in July 2012).

Bill Tzavaras

77. John refers to the following evidence of Bill: that the NAC Trust occupied the lower level of the Northmead Property without paying rent to Tzavaras & Sons (at T 198.33-36); his description of himself as a caretaker (at T 198.43-49); and Bill’s acceptance that John was not paid any wages for working in the Northmead Auto Centre workshop from 1998 to 2012, and that this was probably a source of complaint by John to him (at T 217.14-20). It is further noted that Bill agreed (T 215.31-33; T 222.42-43) that he had not himself spoken with John since John’s departure in 2012. I pause here to note that Bill says at T 239.34-35 that “John’s never been kicked out of the place. He, he was welcome to come up any time he wants” and Bill was emphatic in his denial (which I accept) that this was on the proviso that John came back to work at the Northmead Auto Centre.

78. It is said for by John (and I agree) that Bill’s recollection in the witness box as to John’s exit from the Maroubra Property (see T 209.19-21; T 211.13-16) was poor. Similarly, it is said that Bill’s recollection of the conversation or conversations he had with John around the time of John’s departure from the Northmead Property in 2012 was less than clear (T 218.23-221.50). John says that his own evidence should be preferred in this regard (and that he was clear in his recollection at T 83.25-49, T 90.1-29).

79. The submission that Bill’s evidence was less than clear is an understatement – Bill’s recollection on many matters was poor. Nevertheless, the argument that John’s evidence should be preferred because he was clear in his recollection seems to me to beg the question – there is little doubt that John has a firm belief in the merits of his claim but the fact that he has (or has convinced himself that he has) an entitlement to the relief he seeks does not make his evidence inherently more reliable.

80. John notes that Bill was unable to point to any notices of meetings of directors of Tzavaras & Sons or of annual general meetings of Tzavaras & Sons that he, as secretary, had sent to John (see T 223-224); and John says that his own evidence (that until 2018 at least John had received no such documents from Tzavaras & Sons) is to be preferred. (I agree.)

81. It is noted that, at T 226.32-34, Bill agreed that he had relied on Kylie to maintain the books of Tzavaras & Sons and the Family Trust on its MYOB software. Bill said that he left the bookkeeping for the Family Trust to Kylie and to Tzavaras & Sons’ accountant (T 233.36-37). It is said that, beyond that, Bill was basically unaware of the detail of those financial records (T 233.15-17) and that he again relied on Kylie and Tzavaras & Sons’ accountant (T 235.42-44). Further, it is noted that (see T 239.23-25) Bill accepted that NAC Trust’s loan account in the Family Trust amounted to approximately $593,000.

82. As indicated above, there is no doubt that Bill’s recollection of events in the (virtual) witness box was extremely poor. His constant refrain was that he could not remember things or did not know things about which he was questioned. In stark contrast to this was his adamance (“[t]hose words are 100%” – see T 211.42-47; and “those words never leave your mind” – see T 212.6-8) that John had said in his presence in relation to the Maroubra Property that “I just want the 125,000, and I’ll do my own thing. I want nothing to do with Maroubra. You guys worry about that”.

83. Although I had some concern that Bill was being unco-operative or obstructive in the witness box (having regard to the succession of answers to the effect that he did not know or did not recall – and his professed inability to remember almost anything), ultimately I formed the view that Bill was simply a laconic and not particularly sophisticated witness who was not prepared to speculate; and that it was not implausible that he simply had a poor memory of events. At some points in the cross-examination it was clear that Bill had difficulty understanding the particular question (see for example at T 207.5-8). In those circumstances, again, I exercise caution in accepting his affidavit evidence as to conversations or the like; and would prefer to find corroboration for his evidence of conversations or events in contemporaneous documents (if there are any). That said, his account of John’s statement that he wanted nothing to do with the Maroubra Property rang true and is consistent with John’s subsequent conduct in that regard.

Kylie Tzavaras

84. As to Kylie’s evidence, John notes that Kylie accepted the accuracy of the financial records of the Family Trust shown to her in every respect; that Kylie gave evidence of the system that operated from 2001 to 2020 in relation to maintenance of the financial records of Tzavaras & Sons and the Family Trust and in relation to the preparation, finalisation and approval of the financial statements and tax returns, as between Kylie and Tzavaras & Sons’ accountants.

85. It is noted that: Kylie agreed that all of the payments recorded as shareholder drawings represented personal payments to the shareholders (at T 184.10-13); Kylie could not recall any request from John for payment by the Family Trust of a personal expense for John (at T 184.33-35); and Kylie agreed that Tzavaras & Sons had not paid any money to or for the benefit of John in recent years (at T 185.37-38).

86. At T188.33-37, Kylie agreed that, as a result of a discussion between Tzavaras & Sons’ accountant, Bill and herself, the decision was made to distribute the Family Trust’s total available profit for FY20 of approximately $36,000 to Northmead Auto Centre. John points to Kylie’s explanation (at T 189.16-190.13) that this was in the best interest of everything as a whole, because NAC Trust had losses which that income could be written off against, so that there was no tax paid.

87. I considered Kylie in general to be a co-operative witness when giving evidence as to her role in the book keeping and administrative matters in relation to the company. I have little doubt that Kylie relied on accounting advice in relation to the preparation of the relevant company documents. More problematic was her evidence (see T 155-158) as to her inability to recall much, if any, of a telephone conversation that Mr Ferizis asserts that he had with Kylie on 18 June 2015 and that is recorded in Mr Ferizis’ contemporaneous file note of that conversation.

Telephone attendance upon Kylie regarding yesterday’s call to Bill which unsettled her greatly. Outlined potential and quite real issues with ATO audit on $387,000.00+ loss by the business in just 7 months’ trading in 2013-2014.

Pointed out above loss is before wages and market rent. Current lessee (7/11) is paying $300,000.00 in rent as well as substituted wages.

Closing stock explanation of being out of date and unsaleable not good enough. The business was trading daily and turning over stock constantly up to date of cessation of business. This stock could/should have been sold at wholesale prices to a third party or taken downstairs for use in Northmead Auto business.

Advising that the stock was thrown out does not go down well, especially due to question marks about ATO Benchmarking Variances saying that it was Peter’s fault because he did not care does not absolve everyone else.

These are serious issues which could/are likely to come back to bite you big time from the ATO and other interested parties such as John, who could argue that money had been misappropriated.

Your response that John is not entitled to anything might not be appropriate.

If this matter went before a Judge, my gut feeling is that John would end up with between 0% and 40% of the assets, more likely around 33%.

Emotional outbursts about John not being worthy might not be even considered by a Court of law dealing with his share of entitlement under equity principles.

Saying that John will be dead and Bill in jail before any Court decision is simply outrageous and not helpful. Also, all cars and equipment should be moved from Tzavaras & Sons to Northmead Auto as it is the latter using them. she said the cars are not worth much at all and equipment is…

88. One would think that if such a conversation had taken place Kylie would have remembered it; but it may simply be that things were said in the heat of the moment that did not stick in Kylie’s memory. The note, from its language, was clearly written after the telephone conversation (not during it) and could well have involved Mr Ferizis’ interpretation of what was said. That said, I see no reason not to accept that Mr Ferizis’ note was his contemporaneous understanding of what had been said to him on that occasion.

89. What it does, however, indicate is that Mr Ferizis has seemingly taken on the role of advocating for John’s position and hence has moved beyond the role of a non-partisan independent adviser.

Peter Tzavaras

90. Reference is made by John to the following evidence given by Peter in cross-examination.

91. First, at T 122.46-48, that the $200,000 Nick had put towards the purchase of the Maroubra Property he regarded as a “helping hand”, not a gift; and (at T 128.25-28, said that the $200,000 was his mother’s money as well). It is noted that (at T 131.4-7) Peter agreed that at the time of paying $125,000 to John in January 2013 he did not ask John to sign any document in relation to the Maroubra Property, nor any transfer; and that Peter agreed that it was just a verbal agreement (T 131.4-20).

92. Second, that (at T 135.25-27) Peter agreed that he had not spoken a single word to John since about 2012.

93. Third, that (at T 137.33-35), Peter agreed that Tzavaras & Sons had paid personal expenses on his behalf; that (at T 138.24-26) Peter agreed that he relied on Kylie to keep the books of Tzavaras & Sons accurately; and (at T 139.22-31) that John had not received any amounts debited to the Shareholders’ Loan Account since 2015, whereas Peter and Bill had. John says that Peter’s question (at T 144.24-25) “[w]hich business are we talking about? Northmead Auto Centre, that’s part of Tzavaras & Sons” reveals the blurring in his mind of the two distinct corporate entities. It is submitted that the use of the term “the family business” also conflates these two entities into one. Further (and consistent with John’s emphasis on this issue) that (at T 146.31-33), Peter agreed that neither he nor John got a wage from Northmead Auto Centre.

94. John notes Peter’s evidence (at T 147.38-39) that the arrangement was that, in exchange for occupying the lower part of the Northmead Property without paying rent, Bill would maintain the property; that Peter was unaware that there was a loan account of NAC Trust with the Family Trust (at T 149.24-26); and that Peter said he had no knowledge of NAC Trust owing the Family Trust $593,000 (at T 150.1-24).

95. My impression of Peter in the witness box was that he too was a laconic and not particularly sophisticated witness. Peter made no pretence of any involvement in the financial or accounting matters involving Tzavaras & Sons and I have no difficulty accepting that he relied on Bill and others for that side of things. Peter no longer works in the Northmead Auto Centre business (for health reasons) but clearly had no issue with the manner in which the business was operated by Bill (Peter’s evidence is consistent with the operation of the business being on a relatively informal basis with drawings as and when needed and with little emphasis on technical corporate requirements, no doubt as would not uncommonly be the case with many small family businesses).

96. As to Peter’s evidence of the disputed conversation(s) in relation to the Maroubra Property, I address this in due course.

Mr Ferizis

97. Mr Ferizis deposed in his affidavit sworn 15 October 2020 that, when Nick purchased the Northmead Property in 1997, he gave instructions that Tzavaras & Sons was to operate for the benefit of his three sons equally, regardless of the contribution they had made to the purchase of the property. Mr Ferizis’ evidence was that, at that time, he created a loan account of a joint shareholder or beneficiary variety, so that all shareholders would have an equal entitlement to receive repayments from Tzavaras & Sons, despite the fact that Nick had contributed the majority of the funds (at T 115.16-20).

98. Mr Ferizis deposed that he had concerns with respect to the management of Tzavaras & Sons by Bill and Kylie. He deposed to the “misuse” of company funds by virtue of the failed investment (made by Bill and George) in the amount of $825,000. Mr Ferizis further deposed to the fact that John had not received any amounts from Tzavaras & Sons in respect of his share of the shareholder loan repayments.

99. It seemed to me apparent from Mr Ferizis’ evidence that he is partisan to John’s position (and hence I am cautious when approaching his evidence in general). There is no doubt that Mr Ferizis disapproved of the way in which he accounts were prepared (and made that clear in his affidavit evidence) and he has in effect adopted a role of advocating for John’s position with the other members of the family. There is nothing in the evidence that tends to show that the new accountants (Jim Dionysatos and Chris Dionysatos) take issue with the manner in which the accounts have been prepared, which may be telling.

Oppression claims

John’s submissions

100. John submits that the conduct of the affairs of Tzavaras & Sons by Bill and/or Peter is and has been oppressive to, unfairly prejudicial to and/or unfairly discriminatory against him and he seeks the relief set out in prayers 1-3 of the amended originating process, namely that the company be wound up. Consequential orders are sought that the liquidator(s) also be appointed as receiver(s) of the Family Trust with the necessary powers, as set out in the amended Originating Process.

101. As to the principles applicable when considering the issue of oppression, John notes that the test of oppression is an objective one of unfairness (see Wayde v NSW Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68 at 472-473 per Brennan J (Wayde); Munstermann v Rayward [2017] NSWSC 133 at [22] per Stevenson J (Munstermann)): whether objectively in the eyes of a commercial bystander there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision to be fair (see Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; [2008] NSWCA 95 at [181] per Basten JA (Campbell v Backoffice Investments NSWCA)). It is noted that this does not necessarily entail a finding of breach of fiduciary duty on the part of directors of the company, nor does it involve application of the Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (Briginshaw) standard of proof (the standard of proof being the balance of probabilities).

102. It is accepted by John that, in a family situation, fairness must be considered against the background of the fair treatment of the whole body of shareholders, in the light of the history of the company and the family and the purpose for which the company was formed (see In the matter of Ledir Enterprises Pty Ltd (2013) 96 ACSR 1; [2013] NSWSC 1332 at [178] per Black J (Ledir Enterprises)).

103. John notes that conduct of a company’s affairs may be oppressive even though the conduct is otherwise lawful; and that improper diversion of corporate business and unauthorised payment of funds in breach of fiduciary duty may also constitute oppressive conduct for the purposes of s 232; and may amount to exclusion from management (at least where there is an expectation of participation in management).

104. The principal basis on which the allegation of oppression is made is the assertion by John that, since the death of Nick on 2 September 2001, he has been excluded by Bill and Peter from the management, business and affairs of Tzavaras & Sons. John contends that, since 2001, the affairs of Tzavaras & Sons and its business have been exclusively managed by Bill and Kylie; that he has been excluded from, and has taken no part in, the management of the company’s affairs and business (though I would interpose here to note that this seems to have been at his own instigation – see the evidence below), and in particular that this has been the case since 2012; that he has not received notice of the convening or holding of any annual general meeting or general meeting of Tzavaras & Sons and has not attended any annual general meeting or general meeting of the company; that he has not received notice of the convening or holding of any meeting of directors of Tzavaras & Sons and has not attended any meeting of directors of the company; that he has not received minutes of any meeting of directors of Tzavaras & Sons or of any annual general meeting or general meeting of the company; and that he has not received from Bill, Peter or Kylie any financial statements of Tzavaras & Sons or information as to its financial or taxation affairs. Complaint is made that, since 1994, there has been no declaration of any dividend to shareholders nor has John received any dividend from the company. At [13] of their defence filed on 16 December 2020 there is a general denial of these allegations by Bill and Peter.

105. As noted, John also complains that he was not paid any wages by Northmead Auto Centre while working “in the family business” at the Northmead Property (in submissions and in his affidavit he places this as during the period from 2000 to 2010. It is clear that his departure from the “family business” was not until 2012 and in any event, for the reasons that I explain in due course, the relevance of this in my opinion to the oppression claim is moot).

106. Further, it is noted that the jurisdiction to order winding up on the just and equitable ground may become exercisable in circumstances that do not amount to oppression, unfair prejudice or unfair discrimination. John points out that the existence of irreconcilable differences among persons involved in what is in effect a partnership will destroy the personal relationship involving mutual confidence that lies at the heart of the partnership analogy. It is noted that this analogy has been applied both to applications for winding up on the just and equitable ground and also to oppression suits; and that irreconcilable differences may establish a basis for winding up, even if they do not of themselves constitute oppression or unfair prejudice.

Factual findings sought by John

107. John contends for the following factual findings, about most of which there appears to be no dispute (although the significance of those matters is disputed).

108. First, as to the unequal treatment of the Shareholders’ Loan Account, that the credit balances of the Shareholders’ Loan Account for the period 2001 to 2020 recorded in the Financial Statements of the Family Trust (following amounts paid in the respective financial years to Bill and/or Peter which were debited to the Shareholders’ Loan Account in the total amounts there specified) decreased as follows:

1. for FY12 (after amounts totalling $67,135), a decreased credit balance from $1,334,897 to $1,267,759;

2. for FY13 (after amounts totalling $132,090) a decreased credit balance from $1,267,759 to $1,135,669;

3. for FY14 (after amounts totalling $67,819) a decreased credit balance from $1,135,669 to $1,067,850;

4. for FY15 (after amounts totalling $120,837.13 by way of shareholders’ drawings debited to the Shareholders’ Loan Account, and amounts totalling $86,761) a decreased credit balance from $1,067,850 to $981,089;

5. for FY16 (after amounts totalling $91,556.02 by way of shareholders’ drawings were debited to the Shareholders’ Loan Account, and amounts totalling $545,856, including the amount of $91,556.02) a decreased credit balance from $981,089 to $435,233;

6. for FY17 (after amounts totalling $128,057.80 were paid by the Trust) a decreased credit balance from $435,233.00 to $307,175.20;

7. for FY18 (after amounts totalling $115,305.39 including shareholders’ drawings of $84,556.96, which amounts were debited to the Shareholders’ Loan Account) a decreased credit balance from $307,175.30 to $191,869.21; and

8. for FY19 (after a debit for shareholders’ drawings of $71,560.34) the amount standing to the credit of the Shareholders Loan Account increased by $17,500.21 from $191,869.81 to $209,370.02.

109. Thus, John says that, between 1 July 2012 and 30 June 2020, the amount standing to the credit of the Shareholders’ Loan Account was reduced in total by $1,125,527 from $1,334,897 to $209,370 (one quarter of which he notes is $281,382).

110. There is no dispute, as I understand it, that there was a reduction in the amount standing to the credit of the Shareholders’ Loan Account over the period here mentioned (nor, for that matter, is there any dispute as to the arithmetical calculation of a one quarter share of the total amount distributed from the account).

111. Second, that no part of the said total sum of $1,125,527 was paid to or for the benefit of John between 1 July 2012 and 30 June 2020. Again, I do not understand there to be any dispute as to this.

112. Third, that the net profits of the Family Trust from FY15 to FY20 recorded in the financial statements of the Family Trust were respectively as follows: in FY12, $850,387; in FY13, $325,308; in FY14, $173,854; in FY15, $191,277; in FY16, $231,271; in FY17, $218,714.15; in FY18, $237,634.03; in FY19, $263,933.20; and no part of the net profits of the Family Trust for the period from 1 July 2014 to 30 June 2020 was distributed to John or has been received by him. Again, I do not understand this to be in dispute.

113. Fourth, that in FY20 the net income of the Family Trust available for distribution to beneficiaries was $36,458.38; and that the entire amount available for distribution by the Family Trust to beneficiaries of $36,458.38 in that year was distributed to NAC Trust which lent the said sum of $36,458.38 back to the Family Trust, recorded as “beneficiary loan”. This is evident from the financial statements and again does not appear to be disputed.

114. Fifth, that (by the adoption of the Bateman Report) the value of Tzavaras & Sons as trustee for the Family Trust was $5,766,000 as at 1 April 2021, including the following: the Northmead Property as an asset valued at $7,600,000; the Surfers Paradise Unit as an asset valued at $700,000; the loan to NAC Trust as an asset valued at $593,761; the loan account entitled “N, G, W, P, J Tzavaras” as a liability of $209,370; and the beneficiary loan from NAC Trust as a liability of $36,458.

115. As to this, the report of Ms Bateman speaks for itself but it should be noted that this was based on the instructions that Ms Bateman was given. Ms Bateman valued the company (Tzavaras & Sons) as the value of the net assets of the Family Trust; thus it would be more accurate to say that Ms Bateman was valuing the net assets of the trust. The company itself was not beneficially entitled to those assets; and hence I have some difficulty in making the finding here sought. Further, as was accepted in the course of submissions, Ms Bateman did not purport to value the interest of a minority one-quarter shareholder in Tzavaras & Sons nor the interest of a discretionary beneficiary under the Family Trust – both matters that would make difficult any order for the compulsory purchase of John’s share in Tzavaras & Sons (and the recognition of which no doubt led to the abandonment by John of that claimed alternative relief).

116. Sixth, that the debit balances of the NAC Trust loan account recorded in the financial statements of the Family Trust from 1 July 2014 to 30 June 2020 were respectively as follows: as at 1 July 2013, nil; as at 30 June 2014, $292,820; as at 30 June 2015, $297,668; as at 30 June 2016, $367,536; as at 30 June 2017, $396,300; as at 30 June 2018, $440,999.45; as at 30 June 2019, $486,489.59; and as at 30 June 2020, $593,760.64. This accords with the records and I so find.

117. Seventh, that Northmead Auto Centre or NAC Trust presently occupies (and has since about 2015 occupied) the lower level of the Northmead Property as a workshop; that there is not a written lease from Tzavaras & Sons for the lower part of the Northmead Property; and that Northmead Auto Centre and NAC Trust do not pay any rent or any use and occupation fee to Tzavaras & Sons in respect of the occupation of the lower level of the Northmead Property. There is no dispute that Northmead Auto Centre, as trustee for NAC Trust, occupies and has occupied the Northmead Property on the lower level for no rent or occupation fee and does so without a written lease; and I so find.

118. Eighth, that the commercial value of the use of the lower level of the Northmead Property by Northmead Auto Centre/NAC Trust is approximately $50,000 per annum. This is more problematic. The only evidence of this is an opinion of value attached to Ms Bateman’s report but not itself the subject of expert evidence in accordance with the Expert Witness Code of Conduct. I treat it as no more than an indication of rental value (but ultimately nothing turns on this).

119. Ninth, that as at 30 June 2012 Tzavaras & Sons had two loans from AMP Bank Ltd (accounts ending #2015 and #2035) for $649,814 and $109,385 respectively; and that, by 30 June 2013 the amounts of the said loans had increased to $1,234,814.18 and $448,661.10, respectively. Again there is no dispute as to this.

120. Tenth, John seeks an inference to be drawn that the purpose for which the two loans from AMP Bank were increased was in order to recoup to Tzavaras & Sons the amount of $825,400 it had lost in connection with the proposed acquisition of the trucking business from Doumit. The increase in the loans certainly coincided (from a temporal perspective) with the increase in the AMP Bank loans. Whether the facilities were drawn down to recoup those losses is less clear.

121. As to the above matters, where they are not in dispute (as indicated above) I make the relevant findings. Where there is an issue (as noted above), I decline to make the findings sought.

122. John also seeks findings that he has (since 2001, and especially since 2012) been excluded from the management of the affairs of Tzavaras & Sons in the respects that he has contended, namely that: since Nick’s death in 2001 the affairs of Tzavaras & Sons have been exclusively managed by Bill and Kylie; John has not received notice of the convening or holding of any annual general meeting or general meeting of Tzavaras & Sons, nor any meeting of directors, since 2001; John has not attended any annual general meeting or general meeting of Tzavaras & Sons, nor any meeting of directors, since 2001; John has not received minutes of any meeting of directors of Tzavaras & Sons or of any annual general meeting or general meeting of Tzavaras & Sons since 2001; John has not received (from Bill, Peter or Kylie) any financial statements of Tzavaras & Sons or information as to its financial or taxation affairs since 2001; John was not consulted by Bill or Peter prior to the purchase of the Surfer’s Paradise Unit in May 2004; John was not consulted by Peter or Bill in relation to the proposed purchase of the trucking business from Doumit in 2012 nor the payment of $825,400 in relation thereto; John has taken no part in the management of the affairs of Tzavaras & Sons since 2001, and in particular since 2012; and John was not paid any wages by Northmead Auto Centre while working “in the family business” at the Northmead Property from 2000 to 2010.

240. I accept that the aim is to fashion relief which removes the adverse effects of the oppression has also been recognised in Shelton v NRMA, at [26], cited by Bergin J (as her Honour then was) in Backoffice Investments v Campbell (2007) 61 ACSR 144; [2007] NSWSC 161 at [93], and reaffirmed in Campbell v Backoffice Investments NSWCA at [195], [332], which was not questioned in the High Court’s decision in this matter, Campbell v Backoffice Investments HCA.

241. Further, the remedy chosen should be the least intrusive (Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452 at 475 per Hodgson J (as his Honour then was); Fexuto v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688; [1998] NSWSC 413 at 742 per Young J (as his Honour then was)) (even accepting that this does not preclude the winding up of a solvent company in appropriate circumstances).

242. In the present case, where John’s share in Tzavaras & Sons does not entitle him automatically to a one quarter share of the net assets of the trust, and where liquidation of the trustee will have consequences for the ongoing administration of an otherwise solvent trust, I do not consider that winding up would be an appropriate remedy. At most, I would have contemplated a referral out for the valuation of John’s contingent interest as a discretionary object under the Family Trust though I would have had real doubt as to whether the expense of this would be warranted in circumstances where the parties have already had ample opportunity to obtain expert evidence.

Claim for winding up on the just and equitable ground

246. In the alternative, John seeks a winding up of Tzavaras & Sons on the just and equitable ground pursuant to s 461(1)(e) and/or s 461(1)(k) of the Corporations Act.

247. Sub-section 461(1)(e) of the Corporations Act provides that the Court may order the winding up of a company if the directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members. Sub-section 461(1)(k) of the Corporations Act provides that the Court may order the winding up of a company if the Court is of the opinion that it is just and equitable that the company be wound up.

248. It is noted that an order for winding up under the just and equitable ground may be made by reason of mismanagement, misconduct or lack confidence in the conduct and management of the company’s affairs (see Australian Securities and Investments Commission v Letten (No 10) [2011] FCA 498 at [13] per Gordon J, sitting in the Federal Court as her Honour then was); and also, if a company was based on an association formed on the basis of a personal relationship involving mutual confidence, where that confidence has broken down (see Ledir Enterprises at [251] per Black J); or where a shareholder has been denied access to information or excluded from major decisions (McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603 at 619 per Beazley J, as Her Excellency then was). John relies upon the same evidence in this context as is relied upon in relation to his primary oppression claim.

249. The defendants say that the alternative basis for the winding up claim also fails since it is based on the same grounds that are here relied upon as for the oppression claim. Further, as adverted to above, the defendants say that this is not here truly a quasi-partnership since, when Tzavaras & Sons was established by Nick, he had control of the company (and the sons have in effect simply acquired their interests in the father’s company). That is, the defendants say that the company was not formed on the basis of a relationship of mutual trust and confidence as between the Tzavaras brothers but, rather, was formed by their father, Nick; and that the brothers’ relationship only took on importance vis-à-vis the company following Nick’s death.

250. In Ebrahimi v Westbourne Galleries at 374, 379 Lord Wilberforce said the following as to the principles applicable to winding up on the just and equitable ground:

… [T[here has been a tendency to create categories or headings under which cases must be brought if the clause is to apply. This is wrong. Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances.…It would be impossible, and wholly undesirable, to define the circumstances in which these considerations may arise. Certainly the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down in the articles. The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence — this element will often be found where a pre-existing partnership has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be “sleeping” members), of the shareholders shall participate in the conduct of the business; (iii) restriction upon the transfer of the members’ interest in the company — so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.

251. Following Lord Wilberforce’s pronouncements in Ebrahimi v Westbourne Galleries, domestic jurisprudence on the just and equitable ground has made it clear that a court’s power to make a winding up order on the just and equitable ground is not to be limited to particular closed categories of case (see Thomas v McKay Investments Pty Ltd (1996) 22 ACSR 294 at 300 per Owen J (Thomas v McKay Investments); Australian Securities and Investment Commission v Storm Financial Ltd (2009) 71 ACSR 81; [2009] FCA 269 at [65] per Logan J; In the matter of Amazon Pest Control Pty Ltd [2012] NSWSC 1568 at [17] per Black J). An applicant may rely on all relevant circumstances of justice or equity that affect the applicant’s relationship with the company in support of the application for winding up on the just and equitable ground (In the matter of Catombal Investments Pty Ltd [2012] NSWSC 775 at [20] per Brereton J as his Honour then was; In the matter of AJ Roberts Removals & Storage Pty Ltd [2017] NSWSC 1054 at [72] per Black J (AJ Roberts Removals)).

252. This is not to say that there are no archetypical examples of case in which an order for winding up on the just and equitable ground may be justified. It has also been recognised that there is utility in discussing the cases that fall within these recognised categories when considering making an order for winding up in novel circumstances (as long as it is borne in mind that this does not constrain the discretion to make the order in other categories of cases - see Re Straw Products Pty Ltd [1942] VLR 222; [1942] ALR 361 at 363 per Mann CJ).

253. The irremediable breakdown of the relationship between persons in control of a company is a common instance in which the discretion to make an order for winding up on the just and equitable ground will be enlivened. Such a breakdown must generally be of a nature or degree that it materially frustrates the commercial operations of the company (see Tomanovic at [50]). A useful discussion of the circumstances attending an irremediable breakdown of a personal relationship between shareholders may be found in the judgment of Black J in AJ Roberts Removals at [72]:

Such an order [pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth)] can be made where a company was formed on the basis of a personal relationship involving mutual confidence or requiring material co-operation between the shareholders, and that confidence or co-operation has broken down: Ebrahimi v Westbourne Galleries Ltd [1973] AC 360; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd above; Re Amazon Pest Control Pty Ltd [2012] NSWSC 1568 at [17]–[19]. In Re Catombal Investments Pty Ltd [2012] NSWSC 775 at [19], Brereton J observed that a deadlock or disagreement in the management of the company’s affairs was a common case for a winding up on this basis, and also that the words "just and equitable" were general words and an applicant could rely on any circumstances of justice or equity that affect him or her in his or her relationships with a company in support of such an application.

254. In the cases in which a winding up order has been made on the basis of the breakdown of a personal relationship, particular emphasis has been placed on the formation of the company on the basis of that personal relationship (see, for example, In the matter of Matrix Global Investment Group Sydney Pty Ltd (ACN 614 718 399) [2021] NSWSC 80 at [41] per Williams J; AJ Roberts Removals at [72] per Black J). While generally the relevant personal relationship has existed at the time of the formation of the company in question, and has been integral to that formation, (and bearing in mind that the categories of case in which an order on the just and equitable ground may be made are not closed). I do not consider that the power to make such an order would not be enlivened (in otherwise appropriate circumstances) simply because the relevant relationship (and its bearing on the company) emerged subsequent to the formation of the company. Rather, the task of the court is to examine the entirety of the factual matrix in order to form a view as to whether it is just and equitable (in all the circumstances) for the company to be wound up (see Australian Securities and Investments Commission v Green Pacific Energy Ltd (2006) 59 ACSR 142; [2006] FCA 1254 at [139] per Greenwood J).

255. It is, however, worth nothing that relief is less likely to be granted on the basis of the just and equitable ground where the person was and himself or herself responsible for the breakdown of the relationship. In Fexuto Spigelman CJ said at [90]:

There will be circumstances in which the emergence of irreconcilable differences will cause the court to conclude that an understanding or expectation as to participation in management should be taken to have ceased, in a manner not entitling the person excluded from such participation to relief under the statutory provisions. That would be so where the Court decides that it is the person excluded who is responsible for the breakdown in the relationship.

256. I accept that there has been a breakdown in the personal relationship between the brothers and that John wishes (and has since 2012 expressed the wish) to “sever his ties” with Tzavaras & Sons, and wishes to be bought out of his interests in the company and the Family Trust (albeit at a price that he considers reflects his entitlements). I do not suggest by this that John is the cause or sole cause of the breakdown in the brothers’ relationship. Nevertheless, it seems on the evidence that he is at least equally complicit in the determination in their personal relationship remaining unrepaired (since he seems to have no interest in any form of reconciliation with his brothers).

257. However in circumstances where there is no position of deadlock in the company; and John seems to have been able to co-exist in joint ownership of the Georges Hall Shopping Centre for some time. I do not consider that the position (in light of all the circumstances) is such that a winding up order is here warranted. At most I would have referred the matter to a referee for a determination as to the amount at which John’s interest would be valued and would order a buy out of his interests on that basis. In circumstances where that seems unlikely to produce a substantial result for John (and he has eschewed a compulsory purchase order) I do not consider the expense of such a process is warranted (especially where the parties have already incurred expense in a valuation exercise of that kind).

258. Therefore, I dismiss the claim for a winding up order on this alternative ground.

Section 66G claim

259. As to the separate claim under s 66G of the Conveyancing Act in respect of the Maroubra Property, as noted above John and Peter are the registered proprietors of the Maroubra Property as tenants in common in equal shares. The Maroubra Property was purchased at auction on 20 January 1997 for the price of $610,000. Settlement occurred on 25 June 1997. John says that he contributed $125,000 from his own funds towards the purchase price; that Peter contributed $90,000; that a loan was obtained from Westpac for $200,000 (secured by mortgage over the property); and that Nick contributed the balance of $195,000.

260. Also as noted above, on 23 January 2003, Peter made a payment in the sum of $125,000 to John. John asserts that the payment of $125,000 was only a partial payment by Peter towards John’s interest in the Maroubra Property. Peter, on the other hand, asserts that the payment was in full satisfaction of John’s interest and has not paid any further amount to John since that date.

261. John says that he has never signed (nor has he been requested to sign) any document to transfer his interest in the Maroubra Property to Peter (reference being made to s 54A of the Conveyancing Act in this regard) and notes that he remains registered on its title. (As noted above, John has signed the mortgage to AMP Bank as co-registered proprietor.)

262. John submits that the surrounding facts and circumstances support John’s version of these events (rather than Peter’s). John says it was quite clear in his mind, and he made it known to Peter, that he regarded half of the monies provided by his father of $200,000 as his. John maintains that he had a share or interest in the Maroubra Property above that of the $125,000 that he himself had provided towards its purchase price, by reason of Nick having provided the sum of approximately $200,000 towards its purchase. (John consistently maintained this stance in cross-examination.)

263. John says that the sum of $200,000 provided by Nick should be regarded as a gift, in equal measure, to his sons Peter and John. It is noted that, according to Peter’s evidence he regarded this as something provided by his father “to help towards the house”. John says that there is no evidence that Nick retained any interest in the Maroubra Property by way of resulting trust (and even if there were, that presumption is rebutted by the evidence that his father intended it to help towards the house). It is submitted that half of the sum of $200,000 (namely $100,000) was a gift to him by his father (and thus in effect he maintains that he contributed some $225,000 to the house purchase). John submits that he is therefore the equitable owner of a one-sixth share of the Maroubra Property (reflecting the $100,000 given to him by his father as a gift, which represented one sixth of the purchase price of the Maroubra Property).

264. It is submitted that the surrounding and subsequent facts are consistent with John’s evidence and support the inference that Peter and Bill recognised that John had a continuing interest in the Maroubra Property. For these reasons it is submitted that John’s evidence is to be preferred to that of Peter.

265. From this, it is said that it follows that John’s equitable interest in the Maroubra Property was not extinguished in 2003 by the payment of $125,000 to him by Peter; and, accordingly, John retains an equitable interest to support his legal interest as registered proprietor of the Maroubra Property as tenant in common with Peter, which in turn supports his application for orders under s 66G of the Conveyancing Act.

266. John seeks, pursuant to s 66G of the Conveyancing Act, the orders in prayers 4-11 of the amended originating process for the appointment of trustees for sale of the Maroubra Property and consequential orders. John further seeks an order in prayer 12 of the amended originating process that Peter pay mesne profits in respect of his occupation of the Maroubra Property, at the rate of $1,400 per week since 2014 (or in such other amount as may be determined), 50% thereof to be payable to John.

267. John says (and I accept) that there is very little discretion when an application is made under s 66G of the Conveyancing Act and that, in general, a co-owner of property may use the s 66G procedure to realise his or her interest irrespective of the wishes of the other co-owner. John says that there is no general discretion to refuse an application on such grounds as hardship or unfairness; and that, unless it is shown that it may involve a breach of a fiduciary obligation, breach of trust or breach of a contractual obligation on the part of the applicant, an order under s 66G should not be refused.

Defendants’ submissions

268. As to the s 66G claim, the defendants do not cavil with the principles applicable on such an application but they say that the issue here is whether the interests that Peter and John held in the Maroubra Property were settled by agreement between them in 2002 when Peter “bought out” John’s interest in that investment.

269. The defendants accept that John contributed $125,000 towards the purchase price of the Maroubra Property in 1997 and that title was taken by Peter and John as tenants in common in equal shares. It is noted that John proposed that the Maroubra Property be sold in 2002, which Peter declined because the property was used as security for borrowings by Tzavaras & Sons to fund the development of the Northmead Property.

270. The defendants say that the issue is whether the brothers settled their differences on terms that Peter would pay John his $125,000 contribution and obtain all of the beneficial interest in the house. Peter’s evidence is that John said “Just give me the money I put into the property ... Just give me my money, that’s all I want. The house is all yours”; that Peter paid John the $125,000; and that Peter has resided in the house ever since.

271. It is noted that the legal title to the Maroubra Property is still in the names of Peter and John, but that it is subject to the AMP Mortgage to support borrowings by Tzavaras & Sons. It is said that, if John is not prepared to honour his agreement with Peter, then it is appropriate to appoint trustees of the Maroubra Property under s 66G of the Conveyancing Act upon terms that the property be conveyed to Peter subject to the existing encumbrance. It is said that the costs of the application, including any costs of the trustees, should be paid by John. Insofar as prayers 11 and 12 of the originating process seek orders that Tzavaras & Sons pay John an amount equivalent to half the amount required to discharge the AMP Mortgage and that Peter pay John mesne profits in respect of his sole occupation of the Maroubra Property, the defendants say that no basis for either of those claims has been pleaded (so it is assumed that they have been abandoned) but that, if that assumption be incorrect, the claims fail for lack of legal basis and evidence in support.

272. The defendants say that Peter’s evidence of the conversation concerning the Maroubra Property should be preferred to the evidence of John not only because they submit Peter was the more credible witness but also because of what they maintain is the sheer improbability that the transaction which undoubtedly occurred on the occasion in question (the payment of $125,000) was not a transaction in which Peter paid $125,000 to buy his brother out of their jointly owned property but rather was a transaction in which Peter did nothing more than make part payment of a price (which John himself says had not been agreed).

273. It is noted that, on John’s version of the conversation, Peter’s alleged response to a (relatively anodyne) question from John as to the Maroubra Property was an extraordinary response. It is said that this is especially so in a context in which John then deposes that the conversation proceeded (very shortly afterwards) to the point at which Peter then said he could only pay $125,000 and John accepted this (albeit that John says he added “we can sort the rest out later”).

268. Noting that at that time (the end of 2002) the $1.9 million mortgage was on the title to the Maroubra Property to secure the funds advanced to construct the new service station, the defendants say that it is inherently more probable that Peter said “We can’t (sell the Maroubra Property) as you know its tied up as security for the petrol station”.

269. The defendants say that there is no doubt that John was wanting to get his money out of the Maroubra Property (there being a very large mortgage on that property and with John not living in Maroubra) and that it is highly likely that John would have been prepared to compromise his claim and take what he could get for his interest in the property, since otherwise his $125,000 might be tied up for years while Tzavaras & Sons paid off the cost of developing the Northmead Property.

270. It is submitted that Peter’s evidence that there were two conversations (not one) is also more probable than one conversation in which an angry man went from threatening murder to handing over all the money he said he could within the one short conversation. Peter’s evidence is that, a week later, John said “Just give me the money that I put into the property” to which he responded “If I give it to you, you are just going to waste it on racing cars”. Peter says that John then said “Just give me my money, that’s all I want. The house is all yours”. It is noted that at the time John was 33, living at home with his mother and was pursuing his hobby of racing cars; and Peter had been living in the Maroubra Property since 1997. Therefore, it is submitted that it is highly likely that John would have wanted to take his investment out of Maroubra and put it to use elsewhere.

271. The defendants say that the fact that nearly 20 years went by without either of Peter or John revisiting the matter, strongly suggests that a concluded deal had been done in 2002, not a deal in which a part payment had been made in relation to some other unascertained sum.

272. Thus, while John is still on the title to the Maroubra Property and therefore a co-owner at law, Peter says that the effect of the agreement that was reached is that John has released any claim to the property in favour of Peter. Accordingly, it is said that the terms on which it has now become necessary for a trustee for sale to be appointed should include provision for a transfer to Peter subject to the existing encumbrance, or other terms which are moulded to give effect to the agreement.

Determination

Relevant legislative provisions

279. Section 66G(1) of the Conveyancing Act provides as follows:

(1)   Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.

280. “Co-owner” is defined in s 66F to mean a co-owner of either a legal or equitable interest. A person must be a co-owner at the time of making the application (see Darrington v Caldbeck (1990) 20 NSWLR 212 at 215 per Young J, as his Honour then was).

281. It is now clear (despite earlier authority to the contrary) that s 66G imposes no obligation upon a court to make an order for sale (or partition) but rather is discretionary in nature (see Forgeard v Shanahan (1994) 35 NSWLR 206 at 213 per Kirby P, as his Honour then was (Forgeard v Shanahan); Williams v Legg (1993) 29 NSWLR 687 at 692-693 per the Court).

282. Peter (as the party opposing the sale) bears the onus of dissuading the Court from ordering such a sale (see Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685 at 14,701).

Relevant principles

283. The principles in relation to resulting trusts are well known (see the summary in Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 at [145]-[168]; and see Guirguis v Girgis [2021] NSWCA 156 at [53] per White JA by reference to Foundas v Arambatzis [2020] NSWCA 479 at [47]-[50]).

284. Of the types of resulting trust, here what is involved is what is commonly referred to as a purchase money resulting trust (see Hancock Family Memorial Foundation Ltd v Porteous (1999) 32 ACSR 124 at [68] per Anderson J). The purchase money was contributed from a number of sources (not only John and Peter – in differing amounts; but also Nick, perhaps jointly out of funds held with Jenny; and also Tzavaras & Sons via the finance it obtained). The property was registered in the names of John and Peter only. The classic authority for this type of resulting trust is Dyer v Dyer (1788) 2 Cox Eq Cas 92 at 93 per Eyre LCB:

The clear result of all the cases, without a single exception, is, that the trust of a legal estate, whether freehold, copyhold, or leasehold; whether taken in the names of the purchasers and others jointly, or in the name of others without that of the purchaser; whether in one name or several; whether jointly or successive, results to the man who advances the purchase money. This is a general proposition supported by all the cases, and there is nothing to contradict it; and it goes on a strict analogy to the rule of the common law, that where a feoffment is made without consideration, the use results to the feoffor.

285. That this is the position in contemporary Australia has been confirmed by the High Court in Napier v Public Trustee (WA) (1980) 32 ALR 153 (per Aickin J). As to the position vis-à-vis contribution to the purchase price by two or more people in circumstances where the property is conveyed in the name of only some of the purchasers, see Delehunt v Carmody (1986) 161 CLR 464; [1986] HCA 67 at 472–3 (per Gibbs CJ).

286. Therefore, the application of the presumption of a resulting trust (unless rebutted by evidence of actual intention or excluded by operation of the presumption of advancement) would be that John and Peter hold their respective interests in the property on resulting trust for themselves and the other contributors in the proportions in which they each contributed to the purchase price.

287. The presumption may be rebutted by evidence as to actual intentions (though not yielding to slight circumstances); and a presumption of advancement may well also apply (see Nelson v Nelson (1995) 184 CLR 538; [1995] HCA 25 at 584 per Toohey J that “the presumption of advancement between father and child remains intact”, in that case the Court recognising the presumption of advancement as between a mother and her adult children).

288. It does not appear to be disputed that Nick (and/or Jenny) wished to assist Peter and John to buy the Maroubra Property (in which they were at that stage both to live). However, there may be a difference between whether the $200,000 was a gift to Peter and John (notionally contributed by each to the purchase price) – such that Peter would be said to have contributed $90,000 + $100,000 (being $190,000) and John $125,000 + $100,000 (being $225,000). This, it seems is the basis of the calculations put forward by John. Alternatively, it could be approached on the basis that Nick (and/or Jenny)’s contribution gave rise to a presumption of advancement so as to rebut the presumption of resulting trust that would otherwise arise; such that as between the parents and their sons the title would remain as it is (though this does not take into account the interest of Tzavaras & Sons).

289. I do not include any reference to Bill’s alleged contribution of moneys he says were paid when a family home unit was sold because that evidence is vague and it seemed to relate to the time at which the mortgage(s) were discharged or refinanced.

290. Whatever the position as to John’s interest prior to the arrangement with Peter (when John was paid the sum of $125,000), the real question is what was the tenor of that arrangement. This turns on whose version of the conversation(s) is to be accepted.

291. John’s version suffers from the implausibility to which the defendants point (that Peter went from threatening to put a bullet in John’s head to offering within a short time in the same conversation to pay a sum of $125,000 and to “sort things out later”). (This version of the conversation is vague to say the least.) It is possible that a person of volatile personality might swing between two such extremes but Peter’s demeanour in the witness box was laconic and not suggestive of this.

292. I agree that it is more likely that there were two conversations, though ultimately it is not necessary to make such a finding.

293. The real issue is whether the agreement was that Peter would pay $125,000 as some kind of part payment or “stop gap” arrangement until such time that the brothers were able to sort things out as to the balance of any sum to reflect any additional interest by John in the property beyond the amount he personally contributed. It is not implausible that there could have been some sort of stop gap arrangement put in place (for example, to placate John and stop him pressing for sale at that stage, when that would presumably have required discharge or valuation of the mortgage which was collateral security for the borrowings in respect of the Northmead Property). However, what is implausible is that, if this was the case, John then did nothing to “sort things out” for many years.

294. In contrast, it is not implausible that no steps were taken to remove John’s name from the title to the property – since this would presumably have required the mortgagee’s consent (and the family members seem hardly to have been concerned about formal documentation of arrangements in that regard).

295. Peter’s version makes more sense logically, i.e., that this was a means of buying John out of the Maroubra Property to recompense John for his cash contribution (and without the parties seemingly referring to the contribution by Nick). (Indeed, though I do not place weight on this, it might be said to be consistent with John’s behaviour in relation to the family business itself – i.e., that he would simply be prepared to walk away from it altogether.)

296. The fact that John took no steps whatsoever to press for a resolution of the claimed part payment still to be made (or, indeed, even agreed) is in my view a telling indication that this was not the arrangement. The fact that John’s signature was later required on mortgage documents or the like is consistent with him simply remaining on the title in a legal sense and recognising that he had no more than bare legal title at that point. John certainly did not consider himself obliged to join in the personal guarantees sought by AMP Bank in 2019, though I note that John did provide a persona guarantee in 2011.

297. Accordingly, I find that on the balance of probabilities, Peter’s version of the conversation is to be preferred and hence that the orders for sale should largely be as the defendants suggest; that is, that the property be conveyed to Peter subject to the existing encumbrance for no consideration. As to the costs of the s 66G application, I accept that those costs should be paid by John as he has substantially failed in what was sought but I consider that the costs of the trustees for sale (if any) should be jointly borne by Peter and John (since they are necessitated by the fact of the joint ownership of the title and not the application per se), on the assumption that those costs would be limited to matters such as preparation of the transfer and obtaining any necessary consent from the mortgagee.

298. Further, as to the claim for an occupation fee or mesne profits (which does not appear to have been pressed), had it been maintained it would have failed for the following reasons.

299. The overarching principle of co-ownership is that each co-owner has unity of possession and is entitled to occupation of the whole land (Nullagine Investments Pty Ltd v Western Australia Club Inc (1993) 177 CLR 635; [1993] HCA 45). On this basis, a co-owner who exercises its right to use and occupy the land cannot be held liable to pay an occupation fee to a non-occupying co-owner merely because the non-occupying co-owner has declined to do so itself (Forgeard v Shanahan at 221-223 per Mahoney JA).

300. The relevant exception is where there has been an ouster of the non-occupying co-owner from the premises by the occupying co-owner (Forgeard v Shanahan at 223). This requires the non-occupying co-owner to have been wrongfully excluded from exercising its own right of occupation. In other words, there must be conduct sufficient to infer a denial of the non-occupying owner’s title (Luke v Luke (1936) SR (NSW) 310; affirmed in Biviano v Natoli (1998) 43 NSWLR 695 at 701 per Beazley JA (as Her Excellency then was) (Biviano v Natoli)).

301. Thus, ouster may either be “actual”, in the sense that a co-owner is physically excluded from the property (e.g., by violence, threats or denial of access (see Ryan v Dries (2002) 10 BPR 19,497; [2002] NSWCA 3)), or “constructive”, as in the express denial of the co-owner’s interest in the property (see, for example, Biviano v Natoli at 703).

302. Further, where there is an actual agreement that an occupying co-owner will pay an occupation fee or rent, clearly the general principle is overridden, and the occupying co-owner has incurred a personal liability (Leigh v Dickeson (1884) 15 QBD 60).

303. The evidence does not support a claim for an occupation fees or mesne profits on any of the bases considered above as there has been no ouster, whether actual or constructive; and no agreement for any such liability.

Conclusion

304. For the above reasons, I make the following orders:

1. Dismiss the plaintiff’s claims for the winding up of the first defendant with costs.

2. Order pursuant to s 66G of the Conveyancing Act 1919 (NSW) that Brian Raymond Silvia and Geoffrey Peter Granger be appointed as trustees for the sale of the property referred to in these reasons as the Maroubra Property, such transfer to be to the third defendant for no consideration but subject to the existing encumbrances.

3. Order the plaintiff to pay the third defendant’s costs of the application pursuant to s 66G of the Conveyancing Act, 1919 (NSW) other than the costs (if any) of the trustees for sale appointed pursuant to order 2 (with a view to those costs being borne jointly by the plaintiff and the third defendant).

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Amendments

05 April 2022 - Addition of counsel on coversheet

Decision last updated: 05 April 2022