Irwin v Yule - [2013] SASC 132

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
IRWIN & ANOR v YULE & ORS
[2013] SASC 132
Judgment of The Honourable Justice White
19 August 2013
CORPORATIONS - WINDING UP - OTHER GROUNDS FOR WINDING UP - JUST AND EQUITABLE - IMPOSSIBILITY OF EFFECTIVELY CARRYING ON BUSINESS
The applicants applied for an order winding up Bonshaw Pty Ltd (Bonshaw) under s 461(1)(k) of the Corporations Act 2001 (Cth), the just and equitable ground, on the basis that there had been an irretrievable breakdown in the relationships between the company's members resulting in a management deadlock - Bonshaw was the principal asset of an estate - disputes between the parties, who are the executors of the estate, concerned the proper administration of the estate.
Held:
1. The relationships between the members of the company have irretrievably broken down.
2. It is just and equitable that Bonshaw be wound up and a liquidator appointed.
Corporations Act 2001 (Cth) s 461, s 491; Income Tax Assessment Act 1936 (Cth) Div 7A, s 109D, referred to.
Re Tivoli Freeholds Ltd (1972) VR 445; Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325; Booker v You Run the Business Pty Ltd [2008] FCA 1762; Johnny Oceans Restaurant Pty Ltd v Page [2003] NSWSC 952; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343, considered.

IRWIN & ANOR v YULE & ORS
[2013] SASC 132
Miscellaneous Application

WHITE J. On 2 July 2013 I ordered the winding up of Bonshaw Pty Ltd (Bonshaw) under s 461(1)(k) of the Corporations Act 2001 (Cth) (the Act), the just and equitable ground. I said that I would publish my reasons for that order later. These are those reasons.
The application for the winding up order was made in the context of lack of agreement by the executors and beneficiaries as to the manner in which the estate of the late James Campbell Irwin (the testator), who died on 4 November 2005, is to be finalised. Bonshaw was a principal asset owned by the testator.
The executors of the estate are the deceased’s three sons James, Angus and Campbell and a solicitor, Ms Yule. It is convenient in these reasons to refer to the three sons by their given names, without thereby intending any disrespect.
The applicants for the winding up are James and the testator’s widow (Mrs Irwin). The application is supported by Angus (the second defendant). It is opposed, however, by Campbell (the third defendant).
The first defendant is Ms Yule. In addition to being an executor of the estate, she is one of the two directors of Bonshaw. Mrs Irwin is the other director. Although Ms Yule had previously given her consent to the winding up of the company, she adopted a neutral position at the hearing. That is, Ms Yule neither consented to, nor opposed, the winding up of Bonshaw.
The applicants seek the winding up of Bonshaw on the basis that there has been an irretrievable breakdown in the relationships between its members which affects its ongoing management and, in turn, is preventing the winding up of the estate. They contend, further, that Bonshaw has no ongoing purpose. Angus supports those grounds and, in addition, draws attention to the fact that no party, including Campbell, has put forward any proposition for the appropriate management of Bonshaw given the state of the members’ relationships.
James, Mrs Irwin, Ms Yule and Angus were represented at the hearing. Campbell was unrepresented. At the commencement of his submissions, Campbell submitted that some unfairness was thereby being caused to him. It is appropriate, therefore, that I record that Campbell previously had representation in the action. That was by the Melbourne firm of Richard Burn & Associates – Legal & International, through their Adelaide agents, Lempriere Abbott McLeod. Mr D Howard had been retained as counsel to appear for him. At an interlocutory hearing on 10 May 2013 I was informed by Mr Burn that the instructions of his firm had been terminated at the instigation of Campbell[1] and made an order that the Court records be altered so as to indicate that his firm no longer acted.
[1] See also the affidavit of R J Burn sworn 9 May 2013 at [3]-[4].
Campbell also acknowledged having had legal advice or representation previously in relation to the issues arising in connection with his father’s estate from several other lawyers. These were Mr Lawrie Warnick of the firm MacDonnells Law in Queensland, Mr Harry Hearn in Melbourne, Cosoff Cudmore Knox in Adelaide, and the Melbourne firm of Gadens, who acted through their Adelaide Agents, Fisher Jeffries.[2] This suggested that he was well able to obtain legal assistance as and when he thought it necessary.
[2] TX pp 84-88.
Campbell submitted that a “conspiracy” under which “the legal fraternity ... can all stick together quite well to cover something up” was in part responsible for his being unrepresented.[3] He did not, however, present any evidence of such a conspiracy, and its existence is not to be inferred. Campbell also acknowledged that he had chosen not to retain lawyers for the trial.[4]
[3] TX p 91.
[4] TX p 88.
Background
The evidence at the trial was wholly documentary. The summary which follows comprises findings of fact, to the extent necessary, on the basis of that documentary material. It is not necessary to address all the matters to which the parties’ affidavits deposed, although I have had regard to them.
The testator died on 4 November 2005. Probate of his will was granted to James, Angus, Campbell and to Ms Yule. The will provided, relevantly, for specific bequests of the testator’s interests in a fertiliser business and in certain rural land to Angus and James respectively, and for the residuary estate to be shared equally between the three sons. The shares of Angus and James in the residuary estate were to take account of the value of the specific bequests to them so that, in effect, each of the three sons would receive, whether in money or in kind, equal shares.
Apart from the interests in the fertiliser business, the rural land, a residential unit and cash, the principal assets of the estate comprised all but one of the shares in Bonshaw. Mrs Irwin holds the one Bonshaw share not held by the estate. Bonshaw is an investment company. At the time of the testator’s death, it held shares in public companies valued at more than $10m (“the Bonshaw shares”).
Regrettably, a number of disputes arose in relation to the administration and winding up of the estate. An understanding of the nature of the disputes is necessary for the determination of the present application, but it is not necessary for the Court presently to determine the merits of the positions of the respective parties, nor to attempt a resolution of those disputes. It is the circumstance that disputes have occurred which the parties have not been able to resolve which is the significant matter for the present purposes.
The disputes seem to have begun in relation to the valuation of the assets making up the sons’ shares of the estate. The testator’s will provided expressly that the interests in the fertiliser business and in the rural land were to be valued as at the date of his death, but did not stipulate the date at which the remaining assets forming part of the residuary estate were to be valued.
In November 2005, approximately one week after the testator’s death, the three sons and Ms Irwin held a meeting with the estate’s solicitors and accountants. Campbell asserts that the sons agreed at that meeting that all assets of the estate should, for the purposes of distribution, be valued as at the date of death. James at least denies that assertion.
The rural property specifically bequeathed to James is known as Kostera. As a result of his exercising a call option, James also acquired from the estate land known as the Bonshaw Land (which he acquired as part of his one third overall share). These two parcels of land were valued, as at the date of the testator’s death, by a Mr Wapper.
In May 2006, James challenged those valuations. In August, he obtained his own valuations from Knight Frank. The parties appear to have reached a compromise on the resulting dispute in early 2007, by the sons reaching agreement on valuations at the mid‑way point between the Wapper and Knight Frank valuations. Campbell says, however, that he gave his agreement on this issue only on the basis that the Bonshaw Shares were to be valued as at the date of death. He contends that the parties have now departed from that position, with the effect that his agreement with respect to the land valuations is no longer operative.
The calculation of each son’s share in the residuary estate required necessarily an assessment of the overall value of the residuary estate. In relation to the Bonshaw shares, the identification of the appropriate date for their valuation was significant as their value increased by some $2.3m between the testator’s death and April 2008.[5]
[5] Exhibit MMY3 to the affidavit of M M Yule sworn 17 September 2010. At almost $4m, the change in value was even more significant when this dispute was being agitated in September 2007.
Campbell asserted that the will contemplated that the whole of the residuary estate, including the Bonshaw shares, would be valued as at the date of the testator’s death. As already indicated, he said that agreement to this effect was reached between the parties in November 2005.
On the other hand, James asserted that the appropriate date for the valuation of the Bonshaw shares was the date on which the assets were distributed. He said that the will provided only for the assets specifically bequeathed to Angus and him to be valued at the date of death and that if the date of death was used for the valuation of all the assets, there would not be an equal distribution. Angus appears (at least initially) to have agreed with Campbell that there was inequality in James’ approach.[6] This gave rise to a second valuation dispute.
[6] Paragraph [66] of Exhibit WGB4 to the affidavit of W G Botten sworn 29 April 2013 which paragraph was admitted by James – see [66] of Exhibit MPJ3 to the affidavit of M P Jappe affirmed 8 May 2013.
By February 2008, the parties appear to have reached a compromise on the second valuation dispute. The compromise contemplated a distribution using the value of the Bonshaw shares as at the date of distribution, subject to some qualifications and adjustments to the values of the fertiliser business and the rural land.
In the same month, the estate’s accountants, Ernst and Young, advised the executors as to accounting methods by which the assets of the estate could be distributed. It recommended (in ‘Option B’) that the Bonshaw shares be distributed in specie from the estate to the beneficiaries and the company then wound up. In March, the sons agreed to adopt Option B and appear to have agreed the values for various assets of the estate. The next month, however, Ernst and Young revised their advice, and suggested that the shares should be sold from Bonshaw to the beneficiaries with the company then being placed into liquidation. As I understand it, the proposal was that after attending to any outstanding taxation liabilities, Bonshaw would be liquidated and its remaining assets, including loans arising from the sale of the shares, would be distributed to the three sons. In this way, the administration of the estate could be facilitated.
The plaintiffs contend that by May 2008 the parties had agreed as to the date of valuation of the Bonshaw shares; as to the values to be attributed to the assets of the estate; as to the winding up of Bonshaw; and as to the method of effecting a final distribution of the estate to the beneficiaries.
In June 2008, the Bonshaw shares were transferred to the sons or their nominated entities. Transfers to Angus and James respectively of the estate’s interest in the fertiliser business and in the rural land were made at or around the same time. The plaintiffs contend that, by the parties’ agreement, the distributions were made in accordance with a table prepared by Ernst and Young dated 1 May 2008. The transfers occurred without any payment by the three sons.
The parties are in dispute as to whether an agreement was reached on the method of distributing the estate to the beneficiaries and whether the distribution occurred in accordance with such an agreement.
James contends, as I understand it, that, by accepting that transfer of shares, Angus and Campbell agreed to the distribution occurring on the basis of valuations of the Bonshaw shares as at the date of distribution. He contends that the parties had agreed that the transfer of shares would be conducted by way of sale and purchase, in accordance with Ernst and Young’s 1 May 2008 table. Additionally, James contends that, as the transfers of the shares occurred by way of sale and without payment, they necessarily gave rise to loans by Bonshaw to the three sons for the value of the shares transferred to each.
Ms Yule has deposed that the executors agreed that the distribution of the residuary estate would be effected by the beneficiaries purchasing the various assets owned by Bonshaw in the proportions set out in the table prepared by Ernst & Young. Once that occurred, Bonshaw was to be wound up and its assets distributed to the estate and in turn to the beneficiaries to extinguish the loans created by the purchase of the assets. In addition, there was to be a distribution of the remaining assets of the estate in accordance with a schedule prepared by Ernst & Young.[7]
[7] Affidavit of M M Yule sworn 17 September 2010 at [6].
Although it may not always have been his position, in the hearing before me, Angus supported the contentions of James. Campbell, on the other hand, asserts that the calculations in the 1 May 2008 table did not reflect accurately the agreement reached as to the proportions in which the shares would be distributed; that there had not been agreement that the transfer take place by way of sale from Bonshaw directly to the beneficiaries; and that there had not been agreement that loans be established for the value of the shares. He also challenges as a matter of fact that such loans were ever created. Campbell has raised a number of other disputes about the events leading to the transfers of the Bonshaw shares, and as to the content of agreements on those matters.
Later in 2008 and in early 2009 the disputes between the parties expanded when issues regarding the estate’s taxation obligations surfaced.
On 6 February 2009, Ms Yule wrote to the three sons. She noted that the liquidation of Bonshaw, and therefore the administration of the estate, had come to a halt because of taxation issues. Ms Yule drew attention, first, to an income tax assessment for the estate of $57,717.85. At that time, Ernst & Young held only $45,877.58 in the estate’s bank account. Ms Yule asked each of three sons to pay approximately $4,000 towards the share of the balance of $11,840.27 together with other costs likely to be incurred by the estate. Each of James and Angus paid the amount requested but Campbell did not. He declined repeated requests to make the payment and made the payment only following an order by Gray J in this Court on 22 December 2010.
In the same letter, Ms Yule sought instructions from the three sons on a proposal to address a much more significant potential tax liability. This was the foreshadowed taxation assessment on the liquidation of Bonshaw. On 27 November 2008, Ernst and Young had informed the executors that a taxation obligation of over $1.1 million would be incurred by the estate on the winding up of Bonshaw. As I understand it, this was a capital gains tax liability. In response, James’ accountant, Mr Pledge, developed a proposal, referred to by the parties as the “Ben Pledge Proposal”. It is not necessary for present purposes to outline that proposal.
In March 2009, Ernst and Young informed the executors of a further taxation issue, namely that the loans between Bonshaw and the sons could be deemed to be dividends for the purposes of Div 7A, s 109D of the Income Tax Assessment Act 1936 (Cth) (“the ITAA”), thereby attracting a very substantial tax liability for each of the sons.
On 27 March 2009, Ms Yule wrote to the executors setting out the Ben Pledge Proposal to deal with the potential $1.1m liability, and a proposal that the potential Div 7A liability be addressed by the parties entering into loan agreements so as to comply with the ITAA. There was considerable correspondence and discussion about these issues.
James and Angus agreed to the proposal of 27 March 2009 and executed and returned the loan agreements provided by Ms Yule. It is not clear whether those agreements were executed by Bonshaw. Campbell rejected the proposals and refused to execute the loan agreement. He said that he took the view that the proposals were “akin to tax evasion”.[8] The plaintiffs contend that Campbell’s attitude has inhibited the progress of applications to the Deputy Commissioner of Taxation for tax relief.
[8] TX p 93.
The breakdown in the relationships between the parties developed during 2009 and culminated on 5 November 2009 with Campbell’s commencement of proceedings in this Court against the firm Piper Alderman, Ms Yule, James and Angus.
The amended statement of claim in Campbell’s action is a substantial document. It is not practical to summarise its contents in the present reasons. It is sufficient to note that Campbell alleged forms of maladministration of his father’s estate, breaches of contract and of professional duties by James, Ms Yule and Piper Alderman, and breaches of trust by James. He sought damages or equitable compensation in respect of losses he alleged to be caused thereby as well as directions from the Court as to the future administration of the estate.
Campbell’s proceedings remained on foot in this Court until 9 November 2012, when they were dismissed for want of prosecution. It seems that Campbell, in effect, abandoned the action.
While Campbell’s action was still current, on 22 September 2010, Ms Yule commenced proceedings seeking advice and directions from this Court in relation to the winding up of the estate. In particular, Ms Yule sought a declaration that part of the rural land previously transferred to James formed part of the distribution of the estate to James and directions as to whether she, as one of the executors of Bonshaw, could participate in a decision calling in the loans said to arise from the transfer of the Bonshaw shares to the three sons. In addition, Ms Yule reported to the Court that she considered that Campbell had, by the proceedings which he commenced in this Court, placed himself in a position of conflict between his interests as beneficiary and as executor and trustee, and as between himself as trustee and the other trustees.
On 22 December 2010, Gray J made orders in those proceedings. Those orders included directions that the legal representatives of Ms Yule and the three sons instruct a Mr Schurgott to advise with respect to the possible or likely taxation obligations of the estate and the best, proper and most tax effective means of winding up the estate. Gray J also directed that the parties appoint Edwards Marshall, Chartered Accountants, as the taxation agents for the estate of the testator in lieu of Ernst & Young, and in addition made consequential orders. I note that during those proceedings Angus applied for an order that the executors do all things necessary to cause the winding up of the company. Campbell opposed that application.

The progress of events thereafter is not entirely clear but, in any event, on 4 September 2012 Gray J made an additional order permitting any party to the proceedings for directions to issue proceedings to wind up Bonshaw on the grounds that it is just and equitable to do so. The present application followed.
James and Angus have sought a private ruling from the Australian Taxation Office (ATO) as to the extent of their liability in relation to the distribution of the estate. Specifically, they have sought a ruling that the distributions in June 2008 may be treated, for tax purposes, as loans and not dividends for the purpose of Div 7A of the ITAA. Campbell is opposed to the transfers being characterised as loans.
A letter from the ATO dated 21 January 2013 indicates that the Commissioner’s discretion would not be exercised at that time “because of a pending court case which is directly related to the matter before the Commissioner. ... [W]hen the outcome of the court case is known you may request us to proceed with your application.”[9] I understand the “pending court case” to which the Commissioner referred to be this litigation. Strictly speaking, this is an indication that the Commissioner may not determine an attitude to the applications until the present proceedings have been finalised, but it seems implied that the Commissioner wishes to have some certainty that the winding up of Bonshaw will proceed.
[9] Exhibit WGB1 to the affidavit of W G Botten sworn 29 April 2013.
I note that Thomsons Lawyers, in a letter dated 26 April 2013, informed the respective solicitors for the plaintiffs and Angus that:
[T]he ATO informed us that it will not rule until the applicants can confirm that the liquidation of Bonshaw is proceeding and there is some degree of certainty as to the resolution of the arrangement giving rise to the Division 7A issues.[10]
This evidence was of a hearsay kind and I am reluctant to attach much significance to it. However, Thomson Lawyers’ letter is consistent with the content of the ATO letter of 21 January 2013.
[10] Exhibit WGB1 to the affidavit of W G Botten sworn 29 April 2013.
Perhaps of more significance in this respect is the advice given by Edwards Marshall, the estate’s accountants, on 8 May 2013. Their letter included the following:
[P]lease note that there is one substantial matter that may have a material impact on the financial statements [prepared for the years ended 30 June 2009 to 30 June 2012] and resultant income tax payable and that relates to a determination yet to be made by the Commissioner of Taxation in respect of certain Division 7A loans made in earlier years by the company to associated persons. Until we are aware of the Commissioner’s determination it is not possible for us to finalise the financial statements and income tax returns.
It is our understanding that until the Commissioner of Taxation is confident that the company will be imminently wound up, no determination will be forthcoming.[11]
This advice confirms the interrelationship between a winding up of Bonshaw, on the one hand, and resolution of its taxation liabilities, and those of the beneficiaries, on the other.
[11] Exhibit MPJ4 to the affidavit of M P Jappe affirmed 8 May 2013.
As I understand it, a favourable ruling by the ATO will be of considerable benefit to each of the three sons, even though Campbell does not seek the ruling and, it seems, opposes its issue.
Campbell has deposed to his own communications directly with the ATO, on an unknown date, in which he says he was told that by the distribution of the Bonshaw shares he has received an unfranked dividend. He contends that the course his brothers are pursuing in seeking the private rulings is dishonest.
This is a broad summary only of the principal matters in dispute between the parties.
Appropriate Legal Principles
The approach of the Court to the winding up of a company on the just and equitable ground is well established. Menhennitt J observed in Re Tivoli Freeholds Ltd:[12]
The ground is that it is just and equitable to wind up the company. These are well‑known words and there is no adequate equivalent for them. They give the Court a wide discretion which must, of course, be exercised judicially ... The question involved is basically a question of fact and all the circumstances must be looked at ...[13]
(Citations omitted)
[12] (1972) VR 445.
[13] Ibid at 468.
An irretrievable breakdown in the relationship between the members of the company is a recognised circumstance in which it may be appropriate to order winding up on the just and equitable ground. Dodds‑Streeton JA explained the rationale in this circumstance in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd:[14]
Winding up is the characteristic remedy in circumstances where a working relationship predicated on mutual cooperation, trust and confidence has broken down. Equity would not ordinarily order the continuation of such an association where it would be a futility, would require continuing supervision or would be tantamount to specific enforcement of a contract of personal services.[15]
[14] [2008] VSCA 86; (2008) 66 ACSR 325.
[15] Ibid at [119], 341.
In Booker v You Run the Business Pty Ltd,[16] Finkelstein J made an order that the respondent company be wound up on the just and equitable ground because:
[A]llegations regarding a range of issues have been made on a regular basis by one side against the other. Each allegation has in turn been denied. The only thing that is clear from the allegations and counter‑allegations that have been made is that the parties simply cannot work together. The ill‑will that exists between them will never end.
...
In this case it is not necessary for me to resolve all the issues in dispute between the parties. Nor is it necessary to determine who, if anyone, is to blame for bringing about the current impasse between the Bookers and the Coslovichs. What is clear is that the present situation cannot be allowed to continue. It is neither fair nor reasonable from anyone’s perspective, especially that of the Bookers.[17]
[16] [2008] FCA 1762.
[17] Ibid at [6]-[10].
In Johnny Oceans Restaurant Pty Ltd v Page,[18] the shareholders in a company (restauranteurs, on the one hand, and investors, on the other) had come to dislike and distrust one another. Palmer J wound up the company on the just and equitable ground, holding:
It seems clear to me from the history of the relationship that there is no real prospect that the parties can work together sensibly to reach the necessary agreement to be able to conduct the company’s business successfully in the future. In short, I am satisfied that there is now a complete deadlock between the two opposing camps, that there has been an irretrievable breakdown in the relationships between the members of the company, and that the company’s operations in the future will, therefore, not be able to be conducted in a commercially viable and sensible way.[19]
[18] [2003] NSWSC 952.
[19] Ibid at [32].
Finally, I note that in Nassar v Innovative Precasters Group Pty Ltd,[20] relationships between some of the shareholders had deteriorated to the point that some were involved in a physical alteration. Two shareholders wished to buy the third shareholder out, whereas the latter sought the dissolution of the companies and the distribution of their assets. Barrett J described the scenario as “a classic case for the making of a winding up order on the ground that an irretrievable breakdown of the relationship between the members makes winding up just and equitable”.[21]
[20] [2009] NSWSC 342; (2009) 71 ACSR 343.
[21] Ibid at [132], 366.
Campbell’s Objections
It is not altogether easy to identify and summarise the basis of Campbell’s objection to the making of a winding up order.
At a general level, Campbell contends that the distribution of the Bonshaw shares was not carried out in accordance with the terms then agreed between the parties, did not give rise to loans from Bonshaw to the sons, and, further, that James and Angus in particular, are seeking to alter retrospectively the true characterisation of the events which did occur. Campbell’s complaints extend more generally to the administration of the estate and to the valuation placed on the Bonshaw land which was transferred to James and treated as part of his share in the residuary estate.
Campbell has also voiced concerns about the manner in which a liquidation may be carried out. This is evident in the following passage of the submission at the trial:
Campbell:Liquidating the company will extinguish and hide these loans, so everything we’ve said, your Honour, will go into a void, liquidation happens, everything we’ve said will be given away, that’s the end of it, this is our last chance.
HH:Why is that?
Campbell:Because when you go into a forensic liquidator which I believe is the person that will be appointed is, they can hide things like this, where [they can] be identified now.
HH:What do you mean, that you’re concerned that the liquidator will set out to hide things, rather than carrying out the liquidation in accordance with the law? Is that the concern?
Campbell:Yes.[22]
[22] TX p 137.
I record immediately my satisfaction that there is nothing in this concern. There is no reason to suppose that a liquidation of Bonshaw, if that occurs, would not be carried out in accordance with the law and in accordance with the proper discharge by the liquidator of his or her duties.
Campbell also said:
I do not know how the taxation, income and assets of Bonshaw are to be dealt with.[23]
On a number of other occasions he complained of having insufficient information about the estate’s financial position.[24] Campbell also expressed concern about the effects on his own personal taxation liability in the event that the liquidation proceeded.[25]
[23] Fourth affidavit of C C Irwin affirrmed 9 May 2013 at [1].
[24] Ibid at [3]; fifth affidavit of C C Irwin affirmed 20 May 2013 at [25].
[25] TX p 97.
Next, Campbell referred to a number of matters in the administration of the estate which he contended were inappropriate. This was so despite the fact that he is one of the executors of the estate. He is concerned that if the liquidation proceeds he will be precluded from raising his challenges about these matters and, further, will suffer some inequity in the distribution of the testator’s estate.
Finally, it was apparent that the proposed liquidation of Bonshaw offended Campbell’s sense of righteousness in that he considers that, in some way not identified, the liquidation of Bonshaw will preclude a proper assessment of the events which have occurred and of the liabilities, particularly the taxation liabilities, to which they give rise.
Consideration
The principles stated in the authorities just outlined are applicable presently.
I am satisfied that the parties are effectively at an impasse. They have entrenched opposing views as to the proper approach to the administration of the estate as well as to the manner in which the administration has been carried out to date. The allegations made by Campbell using terms such as “conspiracy”, “criminal or fraudulent conduct”, “wilfully untruthful” and “perjury” indicate the extent to which relationships have deteriorated.[26] There have been a number of periods in which communications between the parties have gone unanswered.
[26] Sixth affidavit of C C Irwin affirmed 2 June 2013 at [1]-[3].
Ms Yule is not willing to take any steps in her capacity as one of Bonshaw’s two directors unless her actions have the unanimous consent of the executors or are sanctioned by an order of the Court. Given the history of discord between the executors, this attitude is understandable. It means, however, that little is being done in the continued management of Bonshaw, or to finalise its affairs in order that the estate in turn may be finalised. Mrs Irwin has deposed that there have been no meetings of the directors of Bonshaw for “several years”. The last directors’ meeting mentioned in the correspondence in evidence at trial was that planned to occur in September 2008. Ms Yule does not contend that there have been any more recent meetings. It is evident that the dispute between the three sons is producing a stalemate in the affairs of Bonshaw and in particular in the distribution of its assets so that the estate can be finalised.
A mediation of the issues before Mr Walsh QC on 4 November 201l failed to achieve a resolution. Campbell abandoned, in effect, proceedings in this Court which may have led to a determination of many of the matters giving rise to his dissatisfaction with the administration of the estate.
The plaintiffs contend that the only way to move towards finalising the estate at this point is to wind up Bonshaw. That cannot be achieved by a members’ voluntary liquidation, pursuant to s 491 of the Act. That is because the requisite 75 per cent majority could be reached on a winding up motion only if the estate voted in favour of it. Campbell’s stance is an obstacle to a resolution of that kind.
As an alternative to this Court ordering that the company be wound up, Campbell advanced the proposal that the full financial records of Bonshaw be provided to him and that the company and the beneficiaries then pay the full tax obligations, including the foreshadowed Div 7A liabilities. However, Campbell did not present a proposal as to how the management of the company can be conducted effectively given the breakdown in the parties’ relationships. Further still, the correspondence concerning the application to the ATO to which I referred earlier indicates the interrelationship between the winding up of Bonshaw, or at least an order for its winding up, on one hand, and the resolution of its taxation liabilities, on the other. The winding up of Bonshaw will facilitate the determination of its taxation liabilities, as well as those of its beneficiaries.
The purpose of Bonshaw is almost at an end. It now conducts no business and no longer makes or holds investments. Its continued existence is holding up the finalisation of the testator’s estate. Once its assets have been distributed to the residuary beneficiaries, Bonshaw will have no ongoing purpose.
The liquidation of Bonshaw was contemplated by the agreement seemingly reached by the parties in May 2008 and, in any event, has been actively canvassed and discussed since. No party disputed Ms Yule’s assertion that the sole purpose of her appointment in May 2008 as a director of Bonshaw was to attend to the company’s winding up.[27] Campbell himself has previously acknowledged that Bonshaw should be liquidated.
[27] Affidavits of M M Yule sworn 6 May 2013 at [5].
All parties other than Campbell and Ms Yule seek the winding up order. Ms Yule’s position is neutral, although she has previously indicated her support for the winding up. Given the differences between the beneficiaries, it is understandable that Ms Yule is now adopting a neutral position.
I am satisfied that if the winding up is ordered, the effect of the liquidator taking control of Bonshaw will be to resolve the present management deadlock. Any disputes about what has occurred in the past can be addressed in the context of the liquidation, whether in adversary litigation, or by the liquidator seeking advice and directions from this Court.
Upon the liquidation of Bonshaw, it is to be expected that the loans to the sons, if they exist, will be extinguished. This will enable this aspect of the estate to be concluded.
The attitude of the ATO, as indicated in the correspondence set out earlier in these reasons, points in favour of a winding up order.
The matters raised by Campbell by way of objection do not, in my opinion, weigh heavily in the scales against the making of a winding up order. As an executor, it is open to Campbell to seek access to the financial records of the estate. I add that the material before me indicates that Campbell does in fact have access to a significant amount of the estate’s financial records out of the advice which the executors have received. It is sufficient for me to record, however, that Campbell’s desire to receive further information is not of itself a reason not to order the winding up of Bonshaw.
Campbell’s concerns about the manner of administration of the estate can, to the extent to which they bear upon events concerning Bonshaw and not other matters, be addressed in the context of the liquidation. Of course, account may have to be taken in any such litigation of the circumstance that Campbell abandoned litigation in which several of his complaints could have been addressed and determined.
The other matters raised by Campbell do not, in my opinion, outweigh the considerations pointing in favour of the making of a winding up order. I am satisfied that it is just and equitable, in the relevant sense, for Bonshaw to be wound up.
Conclusion
Mr Mark Christopher Hall, of Level 4, 12 Gilles Street, Adelaide SA 5000, has consented to being appointed as liquidator of Bonshaw. He is a suitable person to be appointed liquidator.
For these reasons, I ordered on 2 July 2013 that Bonshaw be wound up and that Mr Hall be appointed as its liquidator.