J E Beaumont v D M Peel

[2019] NSWSC 465

Supreme Court

New South Wales

Medium Neutral Citation:	J E Beaumont v D M Peel [2019] NSWSC 465
Hearing dates:	29 March 2019
Decision date:	29 April 2019
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The First Defendant’s application be dismissed and the First Defendant pay the Plaintiff’s and Second to Tenth Defendants’ costs of the application as agreed or as assessed.
Catchwords:	CORPORATIONS – members’ rights and remedies – application for the appointment of receivers and managers – whether the appointment of receivers and managers would be appropriate relief.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) s 76 - Corporations Act 2001 (Cth) s 233(1)(h) - Evidence Act 1995 (NSW) s 136 - Supreme Court Act 1970 (NSW) s 67
Cases Cited:	- Beaumont v Peel [2018] NSWSC 95 - Sengthong v Lao Buddhist Society of NSW Inc [2016] NSWSC 1408
Category:	Procedural and other rulings
Parties:	Jayne Elizabeth Beaumont (Plaintiff) David Martin Peel (First Defendant) Len Peel Holdings Pty Ltd (Second Defendant) Peel Mungerie Pty Ltd (Third Defendant) Hambledon Park Pty Ltd (Fourth Defendant) Peel Northampton Downs Pty Ltd (Fifth Defendant) Len Peel Pty Ltd (Sixth Defendant) Kemsley Pastoral Pty Ltd (Seventh Defendant) Peel New Merrigal (Eighth Defendant) Harrock Pty Ltd (Ninth Defendant) Mrs Margaret Peel (by her tutor David John Rohr) (Tenth Defendant)
Representation:	Counsel: R A Dick SC/J T Buncle (Plaintiff) D R Pritchard (First Defendant/Applicant) P Jammy (Second – Ninth Defendants) R Forbes (Solicitor) (Tenth Defendant)   Solicitors: Maddocks (Plaintiff) Bartier Perry (First Defendant/Applicant) HWL Ebsworth (Second – Ninth Defendants) King & Wood Mallesons (Tenth Defendant)
File Number(s):	2017/142978 (005)

Judgment

1. By Notice of Motion filed on 14 December 2018 the First Defendant, Mr David Peel. sought an order for the appointment of receivers and managers to the assets and undertakings of Len Peel Holdings Pty Ltd (“LPH”) and other companies, under s 233(1)(h) of the Corporations Act 2001 (Cth) or under s 67 of the Supreme Court Act 1970 (NSW). In the course of submissions at the hearing of the motion on 29 March 2019, Mr Pritchard, who appears for Mr Peel, raised the possibility of an alternative form of order limited to a property situated at Hambledon Park, which is a commercial livestock farm comprising approximately 253 hectares in a prime location, although Mr Peel did not abandon the wider relief that was sought. The Plaintiff, Mrs Beaumont, opposes the relief sought by Mr Peel. The Tenth Defendant, Mrs Margaret Peel, represented by her tutor, Mr David Rohr, also does not support Mr Peel’s application. At the conclusion of the hearing of Mr Peel’s application on 29 March 2019, I declined to make the orders sought and indicated that I would deliver my reasons for doing so in due course. These are my reasons for reaching that result.

Chronology and affidavit evidence

2. Turning first to the chronology of events, the Peel Group, which comprises LPH and several other companies was established in 1969 by the late Mr Leonard Peel and Mrs Margaret Peel. Initially it conducted dairy farming and milk production in and around North Richmond, New South Wales, and subsequently extended it business to grazing farms in western New South Wales and Queensland. Mr Leonard Peel managed the Peel Group until about 2010, when Mrs Peel took over management of that Group. Mrs Peel withdrew from management of the Group in about 2014 as she was then suffering symptoms of dementia.

3. By proceedings brought in May 2017, the Plaintiff, Mrs Jayne Beaumont, sought the appointment of a receiver and manager to the assets and undertaking of the Peel Group, on an interlocutory basis, and sought an order that the Peel Group be wound up. Mrs Beaumont sought to establish oppression in respect of the affairs of the Group in order to support that relief.

4. The parties ultimately reached agreement to settle those proceedings. I summarised that settlement in my judgment delivered on 1 February 2018 ([2018] NSWSC 95) (“February Judgment”) (at [3]-[4]) as follows:

“The orders that are sought to be made by consent broadly provide for the resignation of each of Mrs Beaumont and Mr David Peel as directors of each of LPH and the other companies and the reconstitution of the board of LPH and those other companies. They also provide for the sale of all of the assets of LPH’s subsidiaries and of the Len Peel Group of Companies Partnership, and the distribution of the proceeds of sale to LPH, subject to qualifications that protect Mrs Peel’s interests, by preventing the sale of the property on which she is presently resident during her lifetime without her prior written consent, given by her tutor, and by ensuring that the sale of another property would preserve a right for her and her late husband’s ashes to be interred on that property, unless Mrs Peel, by her tutor, releases that right.  

Other terms are also agreed between the parties, which provide for steps which would be taken for Mrs Peel’s further care, and for steps which would be taken in implementing the distribution of the proceeds of sale and other cash held by the subsidiary companies, which the Court is asked to note.”

5. I also observed (February Judgment at [13]) that I was then satisfied that LPH’s affairs were then being conducted in a manner that was oppressive to its members, so far as its board (then comprised of Mrs Beaumont and Mr Peel) was deadlocked and there was a breakdown of the relationship between them, and a consequential inability to manage the companies’ affairs in a proper manner. The consent orders to which the parties agreed (“February Orders”) and particularly their agreement to appoint new nominee directors and to appoint an independent director who was capable of breaking any deadlock, were sufficient to avoid a deadlock on the companies’ boards going forward.

6. That parties’ settlement, as implemented by order 12 of the February Orders, required that the assets of LPH and other Defendant companies be sold and the net proceeds of sale ultimately distributed to LPH as soon as reasonably practicable. Under a Share Option Agreement between Mrs Beaumont, Mr Peel and Mrs Peel dated 14 August 1996, as varied by an Option Exercise Deed between Mrs Beaumont and Mr Peel entered into in October 2018, Mrs Beaumont and Mr Peel are also required to procure that LPH be wound up as soon as practicable after the same of the Peel Group’s assets in accordance with the February Orders and, in any event, no later than 27 October 2020.

7. That settlement required the Court’s approval under s 76 of the Civil Procedure Act 2005 (NSW), where Mrs Peel had been joined as a Defendant in the proceedings and her interests would potentially be adversely affected by the orders sought, and I approved that settlement by the February Judgment. Steps have since been taken, pursuant to the February Orders, to protect Mrs Peel’s interests, including establishing a trust in her name and paying a substantial amount into that trust, and granting her a life tenancy registered on the title of the property known as Kemsley Park.

8. I should now address the chronology of events subsequent to the February Orders, before turning to the parties’ affidavit evidence. Mr Pritchard points to the absence of evidence of steps taken by the board between 1 February 2018 and June 2018 in respect of the sale of the Hambledon Park property and it appears that, after the February Orders were made and a new board was constituted, it initially dealt with a range of issues other than the sale of the Hambledon Park property. It does not seem to me that it was unreasonable for the board to approach the range of issues to be addressed in that way.

9. In the second half of June 2018, the board received an unsolicited approach from a third party (to which I will refer as “Party A”) expressing interest in purchasing Hambledon Park, for a purchase price of $132 million, but subject to an option agreement with a period of 36 months and a relatively small initial deposit, having regard to the total purchase price, of $6.5 million (Marsden 6.2.19 [70]). The acceptance by the board of Party A’s first offer would likely have required variation to the February orders given the length of the option period contemplated by that offer.

10. Mrs Beaumont supported the acceptance of Party A’s offer and Mr Peel did not, suggesting that Hambledon Park be placed on the open market as ultimately occurred (Marsden 5.2.19 [71]–[78]). In particular, by letter dated 20 July 2018 (Ex J1, 322), Mr Peel’s solicitor noted that it would take three years to finalise Party A’s offer and there was no information provided as to the frequency and timing of seven instalment payments contemplated by that offer. That letter also expressed the view that:

“the market is the only true indicator of market value and in circumstances where the market has not been tested, [Mr Peel] does not see how the Board of Directors can determine that the offer is a ‘good offer’ and one that should be accepted.” (italics omitted)

Mr Peel’s lack of support for the acceptance of that offer may well have been justified, given the relatively small deposit payable and the long period of settlement contemplated by that offer. However, it undermines his criticisms of delay in the sale process that resulted from the board’s not accepting offers that he did not consider should be accepted.

11. By letter dated 2 August 2018 (Ex J1, 360; Marsden5.2.19 [74]), the solicitors acting for the board wrote to Mr Peel’s solicitors contemplating the possibility of approaching the Court to seek directions or declarations regarding Party A’s offer for Hambledon park and raising the question whether the board had standing to have the Court appoint a receiver and manager to the Group given the “current impasse” regarding the offer. It seems to me that any application to appoint a receiver and manager at that point was likely to have been unsuccessful since there was no impasse as to Party A’s offer. It was open to the board to accept that offer although, as Mr Peel’s representatives had then pointed out, it would likely have been well advised not to do so and it in fact did not do so. Mr Peel then reconfirmed, on 3 August 2018, his position that Party A’s initial offer should not properly be considered until Hambledon Park was put on the market and other expressions of interest fully explored. In the event, that is the course which the board appears to have adopted, and of which Mr Peel now complains. Mr Peel also communicated an offer made by a second party (to which I will refer as “Party B”) to the board on 3 August 2018, after he and his wife and others had met with Party B in the absence of the other directors of LPH (Marsden 5.2.19 [76]).

12. Subsequently, from about 9 August 2018, the board conducted an informal expressions of interest campaign in respect of Hambledon Park, in which it received a substantially similar offer from Party A and met with representatives of Party B which then made no offer (Marsden 5.2.18 [79]–[81]). By letter dated 10 August 2018 (Ex J1, 386–388, Peel 14.12.18 [67]), the Board expressed the position that:

“If the shareholders cannot agree to accept any offer resulting from the Informal EOI Campaign based on the Board’s recommendation, the Board will undertake a formal expression of interest campaign through an appropriately qualified real estate agent.”

That seems to me to have been a prudent approach in the relevant circumstances. Mr Peel submits that he does not know why Hambledon Park had not been put on the market and other expressions of interest fully explored prior to August 2018. The chronology indicates that that reflects, in part, the steps taken to sell other properties in the relevant period and, in part, the informal process which was adopted before moving to an informal expressions of interest process and subsequently a formal sale process.

13. The board again solicited Mrs Beaumont’s and Mr Peel’s views in respect of an offer made by Party A during the expressions of interest campaign, where the option period contemplated by that offer would again have extended beyond the date by which LPH was to be wound up (Marsden 5.2.18 [83]). On 31 August 2018, the board expressed the position that, if shareholders did not (unanimously) agree to accept Party A’s then offer, the board would proceed to a formal expressions of interest campaign through the use of an agent (Ex J1, 424–426, Peel 14.12.18 [69]). On 3 September 2018, Mrs Beaumont indicated her support for Party A’s offer and Mr Peel expressed a preference for Party B’s offer and Mr Peel indicated his lack of support for Party A’s then offer and his support for a formal expressions of interest campaign (Ex J1, 427–429, Marsden 5.2.19 [84]–[85]). The board did not then accept Party A’s offer, consistent with Mr Peel’s preferred position, and he now complains of that course. Mr Marsden’s evidence is that Mrs Beaumont and Mr Peel were consulted during the informal expressions of interest campaign for Hambledon Park because of the value of the offers then received and the fact that option periods then proposed would have extended beyond the contemplated date for the winding up of the Peel Group, which would have required the parties’ agreement and the Court’s approval (Marsden 25.3.19 [7]).

14. From mid-September 2018, the companies entered into an exclusive agency agreement with a real estate agent. The companies thereafter received revised offers from Party A, including a lesser offer from Party A with an abridged two year settlement period and a substantial balance due in January 2021 and several offers from Party B, often allowing very short periods for acceptance by the “owners” or for the companies to obtain orders of the Court to approve them, and for amounts which increased or decreased from time to time (Marsden 5.2.19 [88]–[117]).

15. By a letter dated 3 December 2018 (Ex J1, 498), Mr Peel’s solicitors put Mr Peel’s position that:

“It appears that as a direct result of the board’s failure to properly engage with the EOI campaign, our client, Mr Peel (who ultimately will receive one third of the benefit of the sale) and Mrs Beaumont, stand to lose millions of dollars.

What is apparent is that the Board has failed to undertake the sale with due care and skill, thus resulting in a significant decrease in the sum likely to be achieved from the sale.”

Mr Peel also complained as to the timing of a board update, in circumstances where it appears that Party B had made another offer, allowing a short time for acceptance and continued that:

“Our client has lost all faith in the ability of the Board to properly exercise its duties to act in the best interest of the members, on a number of issues and especially in relation to the sale of Hambledon Park.”

16. It seems to me that the position put in this letter was not properly founded. In particular, no failure of the board to properly engage with an expressions of interest campaign is established, and no decrease in the sum “likely to be achieved from the sale” is established, where each of the early offers at high prices contemplated settlement over extended periods, were made by parties whose ability to complete them is not established, and could not have been accepted consistent with the parties’ then obligations as to the winding up of LPH. That letter, and Mr Peel’s submissions in this application, also made no adequate assessment of the value of the relevant offers, which would likely have to be discounted for the time which would be taken to receive the sale proceeds and for the completion risk in respect of those offers.

17. Turning now to the affidavit evidence, Mr Peel relied on his affidavit dated 14 December 2018 in support of the motion. I will refer to aspects of his evidence in dealing with the several matters said to support the appointment of a receiver and manager below. Mr Peel also tendered several earlier affidavits of Mrs Beaumont dated 12 May 2017, 28 June 2017, 6 December 2017 and 14 December 2017, which were filed in support of her original application for the appointment of a receiver and manager. Those affidavits seem to me to be of limited relevance, since they were directed to the position where LPH’s board was comprised of Mrs Beaumont and Mr Peel, and was plainly in deadlock, and not the position which now exists following the February Orders and the reconstitution of LPH’s board with an independent director who can resolve any deadlock arising between directors appointed by Mr Peel and Mrs Beaumont.

18. Mrs Beaumont relied on the affidavit dated 13 February 2019 of her solicitor, Mr Newman, which addressed correspondence between the parties in respect of the application. The Defendant companies relied on affidavits dated 5 February 2019 and 25 March 2019 of Mr Marsden, who is an independent director of the Defendant companies. I will refer to aspects of Ms Marsden’s evidence as to specific matters below. In his affidavit dated 5 February 2019, Mr Marsden also expressed the view, in evidence admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) as evidence of his understanding and as submission, that it would not be in the best interests of LPH or the other Defendant companies to appoint receivers and managers, given the amount of work the board has undertaken to date; the board’s level of familiarity with the companies’ affairs; the likely significant costs that would be incurred by receivers and managers acquainting themselves with the companies’ affairs and then selling remaining assets, resulting in a duplication for cost; and the potential that the sale price of Hambledon Park would be negatively impacted if the market understood the appointment of receivers and managers to indicate that the sale was a forced sale. There seems to me significant force in each of these matters, albeit understood as matters of submission. By his further affidavit dated 25 March 2019, Mr Marsden addressed the position in respect of sale of assets of LPH and other Defendant companies. Mr Marsden was cross-examined and presented as a thoughtful and credible witness.

Allegations as to sale process for the Hambledon Park property

19. In his affidavit dated 14 December 2018, Mr Peel led evidence of the numerous steps that have been taken to implement the February Orders and associated agreement between the parties, which include the resignation of Mr Peel and Mrs Beaumont as directors of companies within the Peel Group and the appointment of a board of directors constituting Mr Peel’s wife, Mrs Lynnette Peel, a representative of Mrs Beaumont, Mr Stephen Wolstenholme, and Mr Peter Marsden as an independent director. Several properties have been sold for substantial amounts and steps have been taken to protect Mrs Peel’s position in accordance with the February Orders. Mr Peel also points out that the matter has been listed before the Court on several occasions since February 2018, in respect of issues in contest or for applications for judicial advice. It does not seem to me that that matter gives rise to any particular difficulty, given the complexity of the arrangements.

20. Mr Peel’s detailed criticisms in that affidavit of the process of the sale of Hambledon Park appeared to represent the primary basis on which Mr Peel’s application for the appointment of receivers and managers to the companies or at least in respect of Hambledon Park was pressed. Mr Peel’s evidence was also that he did not want the assets of the Peel Group to be sold in a “fire sale” and that he wished to have the matter “finally dealt with” since he no longer wished to deal with the proceedings or with Mrs Beaumont. There was a substantial degree of inconsistency between Mr Peel’s expressed wish that the Peel Group’s properties not be sold in a fire sale; his previous opposition at various times to various proposals for the sale of Hambledon Park; and the complaints now advanced as to the delay in the sale of Hambledon Park. Mr Peel also expressed concern in that affidavit that Mrs Beaumont and he would not be able to agree on a way forward in relation to a sale of Hambledon Park. That concern may be well-founded and may have the result that some of the proposals for which the directors sought and did not receive shareholder (or at least Mr Peel’s) support would not be achievable. It is, however, plain that the directors do not require shareholder approval for a sale of Hambledon Park on the open market, in accordance with professional advice, and that process is now under way.

19. In his affidavit dated 5 February 2019, Mr Marsden in turn refers to the steps which have been taken by the Defendant companies in compliance with the February Orders and the agreement between the parties which they reflected, and also outlines the process adopted in respect of the sale of Hambledon Park.

20. In the outline of submissions, Mr Pritchard fairly acknowledged that several sales of properties, plant and equipment and livestock had occurred, generating significant receipts for the Defendant companies. Mr Pritchard submitted that the board’s failure to achieve a sale of Hambledon Park, “notwithstanding prior substantive opportunities to do so”, was Mr Peel’s primary concern. Mr Pritchard set out, in submissions and in a chronology, a detailed outline of the attempts to sell Hambledon Park. It is not necessary for me to deal with those attempts in detail, in order to determine this application, and I have set them out in a summary way in the chronology that appears above.

21. Mr Pritchard points, first, to delay in the sale of the Hambledon Park property. Mr Pritchard submits that that property remains the primary assets of the Defendant companies and has not been sold, despite the fact that the February Orders required that it be sold as soon as practicable. It seems to me that an apparently ordered process has been adopted for sale of the relevant properties, having regard to the size and value of the Hambledon Park property in particular. Mr Pritchard also submits that commercial opportunities to sell Hambledon Park pursuant to the various offers have come and gone. The complaint as to that matter needs to be approached with a degree of caution, where Mr Peel in particular opposed the sale of that property in response to earlier offers. Mr Pritchard points out that those offers have decreased over time without acceptance. I give little weight to that matter, since it seems to me that the board could not prudently have accepted those offers without a formal sale or expressions of interest process and without professional assistance, unless the shareholders had unanimously consented to its doing so.

22. Mr Pritchard accepted, in oral submissions, that Mr Peel did not put that the board should have, but did not, take any particular step in respect of any offer made by any party in respect of the Hambledon Park property, including accepting that offer over Mr Peel’s opposition. Mr Pritchard submits (T46) that he does not need to make such a submission and instead contests the board’s failure to make a decision. Mr Dick, who appears with Ms Buncle for the Plaintiff, in turn submits that there is no basis to infer that the board would not accept an offer that is suitable for acceptance, where no submission is put by Mr Peel that any offer that has not yet been accepted should in fact have been accepted (T52). It seems to me that Mr Peel’s approach has the difficulty that the board cannot logically be criticised for a failure to make a decision, being a decision to accept a particular offer, where it is not contended that that offer should in fact have been accepted. To put it another way, there would be no element of failure by the board in not accepting a series of offers, and continuing the sale process for Hambledon Park in order to seek to obtain a better offer, where it is not suggested that any of those offers should in fact have been accepted.

23. Mr Jammy, who appears for LPH and the other Defendant companies, instructed by their board, responds to Mr Pritchard’s complaint as to the time taken by the board for the sale process by pointing to the fact that the board has, since February 2018, achieved the sales of two rural properties, plant and equipment, an apartment and industrial units and has taken significant steps toward the sale of the Hambledon Park property. Mr Jammy submits that criticism of the delay in sale of the Hambledon Park property is without foundation, given the nature of the property and the complications involved in finding a purchaser for a property of that kind. In oral submissions, Mr Jammy rightly pointed out that the suggestion that the board had delayed in the sale of Hambledon Park should be assessed in the context of the steps taken by the board to address the sale of a number of properties and the administration of the affairs of the relevant companies during that period (T66). Mr Jammy also pointed to the fact that, at least since June 2018, the board has been taking significant steps towards the sale of the Hambledon Park property, albeit those steps commenced with informal negotiations with potential buyers, and have subsequently progressed toward more formal arrangements (T67).

24. Second, Mr Pritchard points to a suggested unwillingness of the board to complete a sale of the Hambledon Park property without shareholder consent. Mr Pritchard submits that, although the board is tasked with the obligation to sell Hambledon Park, it has made clear to members that it will not do so, unless there is unanimous consent of the members. Mr Pritchard refers to several letters from the solicitors representing LPH which, at various times, have sought shareholder consent to approaches other than a formal expressions of interest campaign undertaken through a real estate agent. I recognise that there are occasions on which the board appears to have treated itself as having something of an advisory role in respect of shareholders, albeit that seems to have occurred in respect of offers which could not sensibly have been accepted by the board without shareholder support. A striking example is a letter dated 31 August 2018 from the solicitors for the Defendant companies to the solicitors for Mrs Beaumont and Mr Peel (Ex J1, 424) which observed, in respect of a substantial offer by Party A that:

“Given the Board has contacted all parties who had previously expressed any interest in purchasing the Property in an informal EOI campaign, the Board by a majority recommends that the [Party A] Offer be accepted (subject to obtaining suitable Court approval with respect to the timing of the settlement period …). We note that the [Party A] offer remains open for acceptance until 5pm on 7 September 2018. …

In the event that the shareholders agree to accept the [Party A] Offer, the Board will apply to the Court seeking the declarations as previously set out in our letters dated 13 July 2018 and 2 August 2018.

In the event that the shareholders do not agree to accept the [Party A] Offer, the Board will proceed to a formal expression of interest campaign through the use of an agent. The Board has already approved an agent for that purpose.”

27. Another example of the use of language of recommendation is an update report to members dated 27 November 2018, (Ex J1, 484), where the board recorded that they could not recommend Party A’s offer to the board, where Party A had been requested to provide details of its consortium members and information that would allow the board to properly assess its ability to complete the transaction and had not done so, and that the board “is not in a position to recommend any of the current offers to the shareholders”. However, that language was adopted in circumstances that the form of Party A’s offer was again inconsistent with the requirement to wind up LPH by November 2020, and would likely have required shareholders’ consent to acceptance. By way of another example, on 18 January 2019 (Ex J1, 525), the board provided an update to members, on which Mr Pritchard relies, indicating inter alia:

“… the Board notes that its recommendation to members to consider an amendment to the current court order, to allow a settlement period beyond October 2020, was rejected by one of the shareholders, despite the Boards [sic] assessment that such an extension would likely generate a higher sale price for the property. Accordingly, having regard for that position, the Board now considers it appropriate to instruct [real estate agents] to advise purchasers on Tuesday 22 January 2019 that the Hambledon Park property be listed for sale as follows: [specified price] with settlement by October 2020.”

28. On other occasions, the board sought shareholders’ views as to steps which had identified disadvantages, and which it did not itself recommend, leaving open the possibility that those steps might be taken with shareholders’ unanimous consent (for example, Ex J1, 514) or indicated a course that it would adopt, while allowing shareholders an opportunity to object to it (for example, Ex J1, 515). There seems to me nothing inappropriate with that approach.

29. Mr Marsden rejected the proposition that the board of the Defendant companies would not accept an offer without shareholder or Court approval in cross-examination. I accept Mr Marsden’s evidence in that respect, which I understand as directed to the position where an offer was both commercially acceptable and capable of acceptance without extending the time for the winding up of LPH. That evidence is not falsified by the fact that the board has to date not accepted offers which are either not commercially acceptable or not capable of acceptance without extending the time for the winding up of LPH or both. It seems to me that Mr Marsden rightly distinguished between the position where shareholder support or approval was likely to be necessary, including where an application to the Court would need to be made to extend the time for the winding up of LPH, and a situation where that was not the case, because an offer could be accepted without variation of the existing arrangements between the parties.

30. Mr Dick submits that the new board appointed pursuant to the February Orders has successfully undertaken several steps contemplated by those orders and that there is presently no deadlock at board level. He submits, and I accept, that it is not to the point that, as Mr Peel contends, Mr Peel and Mrs Beaumont may be unable to agree the steps necessary for the sale of the Hambledon Park property, where there is no requirement that they reach agreement in that respect (Marsden 25.3.19 [5]–[6]). In oral submissions (T61), Mr Dick submitted that the evidence indicated that the board would accept an offer with respect to the purchase and sale of Hambledon Park that it considered appropriate, with the qualification that, if the settlement date extended beyond the date by which LPH was required to be wound up, it would be appropriate for the board to seek shareholders’ views as to whether they would agree to an extension of that date and take that into account.

31. Mr Jammy responds to the submission that the board is not prepared to sell the Hambledon Park property without members’ agreement and consent by pointing to the fact that the board has canvassed the attitude of members to the acceptance of offers which were made without a formal expressions of interest campaign, and acceptance of which would have required an extension of the date set for the winding up of LPH, and possibly a variation of order 12 of the Court’s February Orders which required the board to realise the assets of LPH “as soon as reasonably practicable”. Mr Jammy also points out that acceptance of the first offer of Party A made in June 2018, with a three year option period, may not have been considered to be a sale of the property “as soon as reasonably practicable” within the February Orders; may have required the extension of the winding up date of LPH; and that the board appropriately canvassed members’ views in that regard. I accept that submission, since it seems to me that there would have been significant risk in LPH entering a sale of the property, which could only be completed if the Court varied the February Orders, in circumstances that one or both shareholders might oppose a variation of those orders. Mr Jammy also submits, and I accept, that the board could not reasonably have accepted the various offers made by Party A, with extended settlement dates, in the absence of agreement by the members to extend the date for winding up of LPH. Mr Jammy points out that receivers and managers who were now appointed by the Court would not be in a better position in that respect, since they also could not accept offers with extended completion dates, without a variation of the Court orders which might not be achieved if it was opposed by one or both shareholders.

32. Mr Jammy also submitted, and I have accepted above, that the various communications on which Mr Peel relied did not indicate a position that the board would not sell the Hambledon Park property without the unanimous consent of the members, as distinct from an understandable position that it would not sell that property, other than by a market sale with professional assistance, without shareholders’ consent (T70). Mr Jammy submitted that the board’s position was that it would not sell that property with a longer term for settlement, without shareholders’ consent, because it could not do so given the timing requirements as to LPH’s winding up, and was proceeding to sale with a shorter period for settlement, in the absence of shareholder consent to any other approach (T70).

33. Mrs Peel’s submissions, by her tutor Mr Rohr, indicate that she is satisfied that the board can, and will continue to take all necessary steps to realise the remaining assets of the relevant companies and, should they consider it appropriate to do so, will consult Mrs Beaumont, Mr Peel and Mr Rohr, as tutor for Mrs Peel, concerning the sale process. In oral submission, Mr Forbes, who appeared for Mrs Peel, submitted that the Court should not conclude, on the evidence before it, that the board was unable or unwilling to make decisions without shareholder approval (T71).

34. I do not accept Mr Peel’s contention that the board will not proceed without shareholders reaching agreement as to the way forward. It seems to me that the board could appropriately seek shareholder consent to any sale process that did not involve a formal expressions of interest process, or the engagement of a real estate agent, given the value of the Hambledon Park property, and the correspondence from the board has always indicated that it would adopt a formal sale process unless such consent was forthcoming. That is the process which it has now adopted, and it seems to me that that is a proper course. It seems to me that the evidence supports a conclusion that the board would likely seek shareholders’ views in respect of any extension of the date for the winding up of LPH. That is also a proper course, since there is a real question whether the Court would have power to vary the contractual arrangements between the parties without their consent, or would exercise any discretion to vary the consent orders made between the parties without their agreement. To put that proposition another way, the board can reasonably decline to commit the Defendant companies to a sale agreement which contemplates a variation of the existing arrangements, unless it can be comfortable that the parties to those arrangements would consent to that variation or would at least not oppose the making of any Court order necessary to effect a variation, which may well not be made over their opposition. These approaches do not have the consequence that the board could not, or would not, accept the best available offer for Hambledon Park, which provides for settlement within the time agreed between the parties for the winding up of LPH and the distribution of the value of its assets, without requiring both shareholders’ consent to that course.

35. For these reasons, and the reasons set out above in dealing with the parties’ submissions r, I am not satisfied that the process adopted for the sale of the Hambledon Park property, or the time taken for that sale, or the approach adopted by the board to consultation with shareholders, supports an order for the appointment of receivers and managers to the Defendant companies or the Hambledon Park property at this point.

Costs incurred by the directors and their advisers and attendances at Court

36. In his affidavit dated 14 December 2018, Mr Peel also led evidence that the directors and their advisers had incurred substantial costs and claimed to have understood that the representatives of the shareholders on the board of directors would serve without remuneration. If Mr Peel had that understanding, it did not seem to me to have basis in the February Orders or associated terms of the settlement agreed between the parties. In his affidavit dated 5 February 2019, Mr Marsden deals with the questions of the board’s remuneration and outlines the work which has been undertaken by the board for which it has been remunerated and also addresses the circumstances of the appointments of alternate directors for each of the present directors at various times.

37. In his outline of submissions, Mr Pritchard also referred to the costs incurred by the board and its legal representatives, which included significant remuneration and costs payable to Mr Peel’s wife and her solicitor. Mr Pritchard points to costs incurred to date, which are substantial, although a relatively small proportion of the value of assets sold to date, still less the value of the total assets of the Defendant companies. In oral submissions, Mr Pritchard made clear that Mr Peel did not submit that the quantum of remuneration claimed by the board or its advisers was unreasonable, as distinct from simply large (T47). Mr Dick responds that any concern as to costs will not be cured by the appointment of receivers and managers, which would also have to be remunerated for its services and indemnified for costs. Mr Jammy also responds to the criticism as to the costs incurred by pointing to the board’s understanding of the nature of the property and its value, derived from the steps which they have undertaken to date, and the fact that the appointment of receivers and managers to now deal with the sale of that property would result in a duplication of costs.

38. It seems to me that little turns on the submission that significant costs have been incurred to date, where there is no reason to think that a receiver and manager and its legal advisers, which would now be appointed without familiarity with steps taken to date, would be any less expensive in completing the sale of the Hambledon Park property. Mr Pritchard also points out that the parties have appeared before the Court on several occasions since the making of the February Orders. I have noted above that there seems to me nothing inappropriate about that process, given the nature of the applications and the complexity of the issues. These matters do not, alone or with other matters, warrant the relief sought.

Other matters on which Mr Peel relies

39. In his affidavit dated 14 December 2018, Mr Peel also led evidence that Mr David Kerr had been appointed as an alternate director for Mr Peter Marsden, during part of the period in which significant events took place. It appears that personal issues, which the parties did not identify, affected Mr Marsden’s ability to act as a director for part of the period and have now been resolved. There was no suggestion that Mr David Kerr was not properly qualified to act as an alternate director and such an appointment is recognised by the Corporations Act as an appropriate course where a director is unable to act. I have also referred to the appointment of alternate directors for the other directors above.

40. In his affidavit dated 14 December 2018, Mr Peel sought to establish that the boards of directors of the relevant companies (presumably, including his wife) had also taken actions in breach of the February Orders. In his affidavit dated 5 February 2019, Mr Marsden deals with the suggested breaches of the February orders to which Mr Peel had referred in his affidavit. I did not understand Mr Pritchard to seek to establish that allegation at the hearing before me and it does not seem to me to have been established. In his affidavit dated 14 December 2018, Mr Peel also led evidence concerning the engagement of a particular person to provide taxation advice, which appeared to imply a complaint that the companies’ boards had not acted in accordance with a request that that person be engaged, although that person was in fact engaged to provide such advice after a relatively short delay.

39. These matters do not, alone or together with other matters, warrant the relief sought.

Other considerations as to the appointment of a receiver and manager

42. Mr Dick submits, and I accept, that relief could not be granted under s 233(1)(h) of the Corporations Act in the present circumstances, where Mr Peel does not seek relief for oppression on a final basis. In any event, it does not seem to me that any of the matters which I have addressed above are capable of establishing oppression, so as to support relief on that basis. Mr Dick accepts that the Court would have jurisdiction to grant relief under s 67 of the Supreme Court Act by appointing a receiver and manager in an appropriate case. He points out, and I accept, that the appointment of a receiver and manager under that section is a remedy which would only be exercised with caution: Sengthong v Lao Buddhist Society of NSW Inc [2016] NSWSC 1408 at [185]–[189].

43. Mr Dick submits that the appointment of a receiver and manager would be inappropriate and not in the best interests of members of the Peel Group or Mrs Peel. Mr Dick also submits that the appointment of receiver and manager would likely result in a significant decrease in the value of the Peel Group’s remaining assets, especially Hambledon Park, if it were construed by purchasers as indicating that the sale was by a vendor under economic pressure, and would delay the sale process while the receiver and manager took steps to value and understand the Peel Group’s interests and liabilities. There seems to me to be substantial force in that submission.

44. In oral submissions, Mr Dick also submitted that the foundation for the present application was hypothetical (T62), presumably in the sense that no reasonably acceptable offer for Hambledon Park had yet been made, and no question of the board turning down such an offer had arisen. It at least seems to me that the application may at least be premature, since there is no strong case for the Court to appoint a receiver and manager now, where the occasion of the board not accepting such an offer has not arisen, it would have power to appoint a receiver and manager if that occasion in future did arise.

45. Mr Jammy also submits that Mr Peel has not established that the board has failed to act in members’ best interests; has incurred unnecessary costs or has caused unnecessary delay; and that there would be no advantage in the appointment of receivers and managers at this point, where they would be in no better position than the board to sell Hambledon Park, and that appointment would likely result in a duplication of costs and further delays.

46. In his outline of submissions, Mr Rohr, as tutor for Mrs Peel, indicates that, having carefully considered the evidence and submissions filed by Mr Peel and Mrs Beaumont, he:

“is not satisfied that the grant of orders sought by [Mr Peel] would advance the interests of [Mrs Peel], particularly having regard to the additional cost, delay and impact on sale prices which might flow from the making of any such orders and the timeframe currently imposed by the [obligation to wind up LPH by 27 October 2020].”

47. In oral submissions, Mr Forbes (who appears for Mrs Peel) also submitted that there was a current sale process in place, which would allow the board to make a decision as to the sale of the property; and the appointment of a receiver and manager would interfere with and likely delay that sale process; and that, in any event, the matters on which Mr Peel relied would go no further than to support the appointment of a receiver and manager to Hambledon Park or to the company that owns that asset, and should not extend to the property at Kemsley Park which is occupied by Mrs Peel in accordance with the February Orders and arrangements between the parties (T72). Mr Dick also submits that the fact that Mrs Peel, by her tutor Mr Rohr, continues to support the existing process for sale of Hambledon Park, and opposes the appointment of a receiver and manager, is a significant discretionary consideration (T63). It seems to me that Mrs Peel’s views have weight, where she is a party to the arrangements which provide for the winding up of LPH by a specified date; has a significant economic interest in LPH and her view reflects the independent assessment of her tutor, who rightly adopts a neutral position in respect of the disputes between Mrs Beaumont and Mr Peel.

48. These matters would have provided strong discretionary reasons not to appoint a receiver and manager to the Defendant companies or the Hambledon Park property even if, contrary to the view I have reached, a factual basis for that appointment was established.

Orders

49. For these reasons, I made orders at the conclusion of the hearing dismissing Mr Peel’s application for the appointment of a receiver and manager and that Mr Peel pay the Plaintiffs’ and Second to Tenth Defendants’ costs of the application as agreed or as assessed.

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Decision last updated: 30 April 2019