McEwen v Combined Coast Cranes Pty Ltd
[2002] NSWSC 1227
•20 December 2002
Reported Decision:
44 ACSR 244
New South Wales
Supreme Court
CITATION: McEwen v Combined Coast Cranes Pty Ltd [2002] NSWSC 1227 CURRENT JURISDICTION: Equity Division
Corporations ListFILE NUMBER(S): SC 2924/01 HEARING DATE(S): 2 & 3 December 2002 JUDGMENT DATE: 20 December 2002 PARTIES :
David Alan McEwen (P1)
Permsit Pty Limited (P2)
Combined Coast Cranes Pty Limited (D1)
Trevor John Troy (D2)
Terry Ronald Pearce (D3)
Ronald Thomas Pearce (D4)
Wyong Crane Services Pty Limited (D5)
Abbatroy Pty Limited (D6)
Tuggerah Lakes Cranes Pty Limited (D7)JUDGMENT OF: Young CJ in Eq
COUNSEL : H Packer (P)
M J Cohen (D)SOLICITORS: Finn Roache (P)
Yandell Wright Stell (D)CATCHWORDS: CORPORATIONS [34]- Oppression- Service company trustee of unit trust- Minor breaches of duty by directors- Failure to observe pre-emption provisions- Remedy available to plaintiff in compulsory buy-out provisions of trust deed- No order made. LEGISLATION CITED: Corporations Act 2001, ss 232, 233 CASES CITED: Bath v Standard Land Co Ltd [1911] 1 Ch 618
Felton v Mulligan (1971) 124 CLR 367
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688; on appeal (2001) 37 ACSR 672
Glandon Pty Ltd v Strata Consolidated Pty Ltd (No 3) (Young J, 4.6.1990)
Hurley v BGH Nominees Pty Ltd (1982) 1 ACLC 387
In re Wondoflex Textiles Pty Ltd [1951] VLR 458
Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606
Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457
Re James [1949] SASR 143
Re Polyresins Pty Ltd (1998) 145 FLR 141
Re Wakim (1999) 198 CLR 511DECISION: Proceedings to be dismissed with no order as to costs.
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST
YOUNG CJ in EQ
Friday 20 December 2002
2924/01 – McEWEN v COMBINED COAST CRANES PTY LTD
JUDGMENT
1 HIS HONOUR: The basic claim by the plaintiffs in this case is for relief under ss 232 and 233 of the Corporations Act 2001 against alleged oppression by the second to seventh defendants in connection with the affairs of the first defendant, Combined Coast Cranes Pty Ltd (the Company). The Company is a service company and a trustee company and in its latter role has issued 100 units in a unit trust. There are associated claims connected with this unit trust.
2 The plaintiffs are David McEwen (Dave) and a company currently controlled by Dave, Permsit Pty Ltd (Permsit). The second defendant is Trevor Troy (Trevor) and the company controlled by him, Abbatroy Pty Ltd (Abbatroy), the sixth defendant. The third defendant is Terry Pearce (Terry) and the seventh defendant is a company controlled by him, Tuggerah Lakes Cranes Pty Ltd. The fourth defendant is Ronald Pearce (Ron) and the company controlled by him, the fifth defendant, Wyong Crane Services Pty Ltd. Ron is the father of Terry and also of Alan Pearce (Alan).
3 It will become apparent that I have used the first names of the various actors in this case because the surnames of so many of them are the same.
4 The basal facts in this case are not really disputed. In June 1996, Dave, Trevor, Terry, Ron and Alan (to whom I will collectively refer as "the five") agreed to buy the business from the previous holder, Febpac Pty Ltd.
5 The background was that the five were all involved in crane companies which had as a substantial part of their business, sub-contracting work that came to them via Febpac Pty Ltd. The relations between the five and Febpac became a bit strained when the controller made it clear to them that he would take whatever commission he could squeeze from them and also would give them no guarantee of work. At that stage the five thought that they should be their own bosses. They met together and decided that it would be best if they could acquire the business and the goodwill associated with the name Central Coast Cranes, but if that were not possible, then they would start a new company from scratch.
6 The five obtained advice from Mr Rodney Kelly, accountant, as to how to proceed. Mr Kelly advised, and his advice was implemented, that a company should be formed or acquired which company would be the trustee of a unit trust. The shares in the trustee company and the units in the trust would be held in equal one-fifth shares by each member of the five.
7 Pursuant to this advice, the Company was incorporated on 27 June 1996 and the five became its first directors. The articles of association contained a pre-emption article, article 28, which required a member proposing to transfer shares to notify the Company which was then to offer the shares to the other holders in proportion to the existing shares held by them. Articles 63 and 67 provided that each director would hold office until removed by an ordinary resolution of the Company in general meeting or otherwise vacate an office under the Corporations Act.
8 One share was allotted to each of the five or a company controlled by those members.
9 The unit trust was constituted by a trust deed bearing date 1 July 1996. The Company was the trustee, the name of the trust was "The Combined Coast Cranes Unit Trust". One hundred units were created. The original issue of units was 20 to each of the five held by their companies, save that Permsit was at that stage controlled by two of the five and so was allotted 40 units.
10 The trust deed also contained pre-emption provisions in clause 5.11(4). These were similar to those in the articles of association. However, the clause was able to be waived by unanimous consent of the unit holders, vide clause 5.11(12).
11 On 19 July 1996, the Company acquired the business of Central Coast Cranes from Febpac Pty Ltd for $40,000. This $40,000 was raised by equal contributions from the five. It would seem that in total they each invested $8,000 though their total contribution was $10,350.
12 Dave says that the serious discussion about becoming their own bosses took place in the lunchroom of Febpac in about May or June 1996. Trevor said that the commission was getting a bit high and that the five should look at going out on their own, forming their own company and working for themselves. Everybody else agreed. There were several conversations shortly after that during which Trevor said that the five should buy a company and if possible try and buy Central Coast Cranes or Febpac which would give them a good customer list and accessory equipment to work with. Everyone else agreed. Trevor said he would get in contact with his accountant and bring him up to talk to the five as to how to go about buying the shelf company and forming up what price should be paid to Central Coast or Febpac. Trevor mentioned that the owner of Febpac was thinking of selling the company.
13 At a later discussion in Trevor's house, Trevor said that the company was a good established company which had been trading on the coast for 25 years or more and had a good customer list and that it would be a lot easier for the five to carry on with those customers than try and find fresh customers from scratch. Terry knew the business because he had worked for years and years as an allocator of jobs for Central Coast Cranes. Eventually they worked out a price would be $40,000 and they all agreed to contribute $8,000.
14 The owner of Febpac was reluctant to sell at first, but Dave said that he talked the owner whom he called "Roscoe" into the deal. He says that he went back across to the boys and said "Roscoe has agreed to accept $40,000 for the business. Trevor, you have to get in touch as soon as possible by tomorrow morning at the latest and we will be able to buy Central Coast Cranes off him." That in fact happened. The five agreed that they would reduce the commission because at that time they were paying 20% to Febpac and they agreed that in lieu they would pay a flat rate commission of $20 per hour to cover the expenses of the mother company for wages, insurance, rents etc.
15 Mr Kelly went through the accountancy side of the proposal. Originally, he had arranged for there to be four sets of 25 units as the five owned four cranes between them, but, after discussion, this was amended to five sets of 20 units, one for each member of the five. The parties reached consensus that Trevor would be the manager and that work would be shared as equally as possible. Trevor said he would try to allocate the work as evenly as possible, depending on the size of the crane and availability and everybody agreed with that. Dave said it was agreed that all got a share of the work that came in so that they would all make roughly an even amount of income.
16 There seems little doubt that there was some such conversation and oral consensus as Dave has recounted. Indeed, there was very little cross examination on the account he gave which I have just summarised.
17 However, it is disputed that that conversation amounted to a contract between the five or that it gave rise to any legitimate expectation as to how the Company would be operated.
18 To summarise what happened between 1996 and the commencement of these proceedings, Terry, who was a joint owner of Permsit with Dave, purchased Tuggerah Lakes Cranes Pty Ltd in late 1997 and resigned from Permsit. In February 1998, Tuggerah Lakes Cranes bought Permsit's 20 tonne crane and Permsit purchased a 50 tonne crane. This 50 tonne crane is known in the Company's books as crane 501. In June 2000, Abbatroy purchased a 50 tonne crane. This is known as crane 500.
19 In late August 1999, the other four directors voted Dave off the board of the Company. In September 1999, Alan agreed to sell his interest in the Company and his units in the trust to Trevor and Terry. Dave was not informed of this until two months later. In July 2000, Ron sold his interest in the Company and in the unit trust to Trevor and Terry.
20 Effectively this meant that as at the date that the proceedings were instituted, 4 June 2001, Trevor and Terry owned 80 units and four shares between them, and the other share and 20 units were held by Dave.
21 Putting aside the question as to whether the conversations related by Dave amounted to a binding agreement, there were difficulties in sharing work equally. This is because the four cranes (later the five or six cranes), involved in the business were of different capacities. To start with, Permsit had a 20 tonne crane which passed to Tuggerah Lakes Cranes, Abbatroy had a 41 tonne crane and later also a 50 tonne crane, Pearce Cranes had a 16 tonne crane and Wyong Cranes had a 12 tonne crane. Each of the cranes was suitable for different types of work, though a 50 tonne crane could usually do the work that a 12 tonne crane could do, but not vice versa. Furthermore, some customers were particularly impressed with the safety record of particular crane crews and would request that that crew do their work. Again, there were problems with any attempt to allocate equal work because of the temporary unavailability of some cranes because they were doing other jobs and with sicknesses of crane crews etc.
22 Up until July 1998, Trevor, the manager, handed out print-outs showing work allocations and income earned by each of the five, though there is some evidence that these print-outs were collected at the end of the meeting. After this date, no print-outs were handed out. Trevor says that this was to avoid competitors having access to confidential information as to the Company's results. Dave, on the other hand, says that it was part of a deliberate ploy so that Trevor and his cronies could allocate to themselves the disproportionate share of the work without the other members of the five knowing what was going on.
23 I have already mentioned that in August 1999 Dave was voted off the board. It would seem that even his friends voted with Trevor to remove Dave. Trevor's reason for the action was that Dave was a disruptive influence, he would mostly get intoxicated at directors' meetings, and would generally disrupt the meeting. Dave denies this and says that his removal from the board was also part of a plan to starve him out.
24 The "starve you out" fear commenced when Terry became intoxicated after a meeting in July 1998 and said to Dave, "We are going to starve you out of the business". Dave assumed that Trevor was the organiser of this and that Terry in his cups had made the secret purpose plain. Dave looks at what actually happened about the cessation of the print-outs, his being voted off the board and subsequent events as being part of this grand plan. On the other hand, Trevor completely denies that there was ever any plan to starve Dave out of the business and that Terry's remarks, if made, were merely the remarks of a man who had too much to drink.
25 There is no doubt that the transfer of Alan's and Ron's shares and units to Trevor and Terry was in breach of the pre-emption articles and the pre-emption provisions of the trust deed. In the witness box Trevor and Terry said that this occurred because they both were of the view that the constitution of the Company and the trust deed meant that they could only sell their shares and units within the group, they did not realise that they had to offer them equally to the other share or unit holders. This statement was not the subject of cross examination, and accordingly, I feel I must accept it. There was thus a breach of contract, a breach possibly of a fiduciary duty from shareholder to shareholder if such existed, but there was no fraudulent intent behind the move.
26 A major customer of the business was Energy Australia. None of the five were on Energy Australia's preferred tendering list, but Dave became allied with a company that was on that list and as that company's Central Coast agent, obtained work in its name. The responsible officer for allocating contracts gave evidence before me and said, and I accept, that he was impressed with the work done by Dave's crew who had a very good safety record in handling what could be quite dangerous work. Trevor would have me accept that Energy Australia was in some conspiracy with Dave so that Dave's work would be handled separately from the Company so that Dave was really in competition with the Company. He used that theory as a good reason why Dave should not as well get an equal allocation of work from the Company with the other unit holders. Dave, on the other hand, says that he reported the jobs he was doing for Energy Australia so that the Company took its commission.
27 By July to September 2000, Energy Australia jobs had dried up. Dave was getting little work from the Company. On 15 November 2000 Dave received a notice from Trevor and Terry that as from 30 November 2000 he would receive no more work through Central Coast Cranes. He was told this face to face at a Christmas Party on 1 December 2000.
28 In March 2001, Dave requested equipment from Central Coast Crane's yard, but was refused by Trevor. Dave said that it was a fundamental term of the arrangement that the ancillary equipment owned by the Company would be made available to each of the five for their own purposes whenever reasonably required.
29 The proceedings were commenced in June 2001.
30 Although I may have over-simplified some of the facts, what I have set out above basically sets the scene from which Dave says that I should draw the inference that he has been oppressed.
31 Section 232 of the Corporations Act provides that the Court may make an order under s 233 if, inter alia, (a) the conduct of a company's affairs … is either: (d) contrary to the interests of the members as a whole; or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
32 Section 233 of the Act empowers the Court to wind the company up, modify the company's constitution, regulate the conduct of the company's affairs in the future, order a compulsory sale or purchase of shares or grant injunctions preventing or requiring people to do specified acts.
33 The pleadings in this case are unusual. The first document filed was an originating process and later amended documents bearing this title were filed. However, Palmer J ordered conventional pleadings and this saw the filing of a series of statements of claim. The plaintiffs' claim is thus contained in the further amended originating process and further amended statement of claim, both filed in Court on 2 December 2002. The orders sought, apart from declarations, are for "such sum of damages as the Court shall determine", the determination to be referred to a Master in Equity. There is no claim for winding up or for a compulsory sale or purchase.
34 The statement of claim, and by this I mean the final version, contains counts in contract, breach of fiduciary duties in respect of the Company's duties as trustee of the unit trust and by Trevor and Terry as directors of the trustee, oppression under the Corporations Act 2001 and damages for false representations under the Fair Trading Act 1987.
35 I can dispose of that last claim quickly. It was virtually conceded in closing addresses that there was just not the material to support it. I did not call upon the defendants to answer the claim and it can be dismissed.
36 As to the remaining claims, Mr M Cohen of counsel for the defendants, says that because I am exercising the judicial power of the Commonwealth and dealing with a Federal matter under the Corporations Act I can only deal with that matter and am without any jurisdiction to deal with the matters arising under the trust deed or the contract.
37 The proceedings were heard before me on 2 December 2002. I was almost ready to give an oral judgment the following day, but this submission of Mr Cohen's came to me as if it were out of left field and I thought that I should give further consideration to the matter, particularly that submission, though I must confess it appeared to me to be without any foundation at all. Having considered the matter now, I am firmly of that belief.
38 Mr Cohen commences with reliance on the judgment of the High Court in Re Wakim (1999) 198 CLR 511, boosted by a paper intituled "Federal Jurisdiction and the Jurisdiction of the Federal Court of Australia in 2002" prepared by Justice James Allsop of the Federal Court on 10 September 2002.
39 As I understand it, the argument goes like this:
(1) The Corporations Act 2001 is a Federal Act.
(2) Therefore, when a court is considering an application under s 232 of that Act it is exercising Federal jurisdiction.
(3) Whenever a court is exercising Federal jurisdiction all the matters before it are within the Federal jurisdiction. It is not consistent with authority to say that a court exercises State jurisdiction with respect to part of a case and Federal jurisdiction with respect to another part; see eg Felton v Mulligan (1971) 124 CLR 367, 412-413 and Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 471 and 479.
(5) As the Court is exercising Federal jurisdiction it thus cannot entertain anything that is not Federal jurisdiction.(4) There is no Federal jurisdiction with respect to deciding questions of dispute amongst private trusts.
40 The argument is quite misdirected. It gains no support from Justice Allsop's paper.
41 All that exercising Federal jurisdiction means is that any appeal from any part of the case is to be dealt with as if it were wholly a Federal matter so that as the two cases I have just cited state, there can be no appeal to the Privy Council even before such appeals were generally abolished. Furthermore, the provisions of ss 79 and 80 of the Judiciary Act 1903 need to be taken into account. However, no-one on either side has raised any significance that those sections would have for the current litigation.
42 It should be observed that in cases such as the Philip Morris case the Supreme Court did in fact deal with matters of contract and tort and purely State questions and the High Court threw no doubt at all as to its ability to have dealt with those questions.
43 Accordingly I reject this preliminary submission.
44 It is now necessary to deal with the principal matter raised for decision, namely, the applicability of ss 232 to 233 of the Corporations Act on the facts of this case.
45 At first blush, this would seem to be a plain case for the application of the section. The five entered into the deal on the basis that there would be a service company functioning in all their interests and in which they would all have an equal share, yet today the benefits of the venture are wholly devoted to the interests of Trevor and Terry.
46 The matter is not so simply solved. The sections are directed to the conduct of a company's affairs. It is well established that where oppression has occurred in a company which holds all its assets on trust, there is no diminution in value of the plaintiff's share in the company despite the oppressions: Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; Re Polyresins Pty Ltd (1998) 145 FLR 141. In that latter case, Chesterman J said that the Court could not in an application under these sections deal with equitable interests conferred by a trust of which the company is trustee, see page 156.
47 However, in the instant case, the statement of claim primarily seeks equitable damages in contract, breach of trust or ss 232 to 233 of the Corporations Act.
48 Mr Cohen says that it is to be noted that the proceedings were commenced by originating process under the Corporations Act rules and that the primary relief sought was under ss 232 to 233 of the Corporations Act.
49 It seems to me, however, that the peculiar pleadings in this case and the way it was presented make it open to the Court to deal with the questions involving contract and trust.
50 So far as contract is concerned, Dave relies on the statements that were made before the trust was set up. I think the answer to this claim is fairly simple. Either the words spoken were not spoken with any intention to create a contract, or alternatively, they were consummated in the trust deed which was eventually drawn up. This latter is more probably the case and this view is reinforced by the fact that there has never been any complaint as to the form of the trust deed. Rather, the claim has been that the legitimate expectations of Dave have not been fulfilled in either the Company or the trust.
51 Accordingly, it seems to me that there is no need to consider the case in contract further.
52 This leads me to the case of the trust.
53 Various breaches of trust are alleged including taking the use of all of the Company's property for personal use, breach of the pre-emption articles, failure to involve Dave in management and the distribution of work.
54 Of course there is the problem as to how far the directors of the trustee or how far Trevor and Terry could be personally liable if there was a liability in this connection. The stronger view appears to be that it is only in very rare circumstances that the directors of a trustee company being agents of the company are personally liable for the defaults; see eg Bath v Standard Land Co Ltd [1911] 1 Ch 618; Hurley v BGH Nominees Pty Ltd (1982) 1 ACLC 387; Re James [1949] SASR 143, my decision in Glandon Pty Ltd v Strata Consolidated Pty Ltd (No 3) – 4 June 1990, unreported, p 58 and the paper by Ford and Hardingham "Trading Trusts: Rights and Liabilities of Beneficiaries" in Finn's Equity and Commercial Relationships (Law Book Company, Sydney, 1987) 48 at 60 and following.
55 As to the matter of the transfer of Alan's and Ron's units to Trevor and Terry contrary to the pre-emption provisions of the trust deed and the articles of association, one does not have to focus on the value of the units at that time because both Alan and Ron seem satisfied with the $10,000 they received for their one share and 20 units. However, Dave was entitled to be offered the units and he was entitled to be allotted his fair share of the units. He thus should have acquired five of Alan's units and six of Ron's for which he would have had to pay $2,500 and $3,333 respectively. These monies would have been paid out in September 1999 and July 2000 respectively so that there would need to be three or two years' interest notionally added to the $5,833 which, if one took the average court rate for two and a half years would be $1,458.
56 Accordingly, the only time Dave would suffer damage is if the units as at the date of breach were worth more than $10,000 for 20. As I have said, the factors favouring this are that today they would appear to be more than this. However, in 1999 and 2000 even though Ron and Alan were close relations of Terry's, there is very little to suggest that the transactions were not an arm's length transaction.
57 Accordingly, it seems to me that the most that, on the evidence that I have, Dave would be entitled to receive by way of damages if he was entitled to anything, would be a nominal $100.
58 There is then the matter of legitimate expectation within the trust. Where a company is concerned, questions of legitimate expectation (though this may be an unfortunate phrase), are entitled to be considered; see eg Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 and on appeal, (2001) 37 ACSR 672. Those legitimate expectations may be found either in an understanding reached when the enterprise was set up, or by a process of inference.
59 However, in the case of a trust, the position is not at all clear. There is nothing in the trust deed itself dealing with the management of the trust or of the rights, if any, of the unit holders to be given any work by the trust or to be involved in the trust's day to day activities.
60 There is probably no reason in principle why the "legitimate expectation" learning in connection with oppression in companies should not apply in the case of trusts because equity is flexible enough to deal with unconscionable conduct in any appropriate way. If conduct is unconscionable by the standards of a statute in the Corporations Act, there is a lot to be said for the proposition that it would be unconscionable as a matter of general equity; see eg the remarks of Spigelman CJ in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672, 679.
61 However, it must be remembered that when dealing with so-called legitimate expectation, "One cannot infer the right to have a status quo continue merely from the fact that it is a status quo. Something more is needed in order to establish a right or expectation that it would continue. That will usually take the form of an agreement or understanding between parties or an expectation induced by the conduct of the business." (Fexuto op cit at 683).
62 In the present case there was insufficient evidence of any contract and any understanding was of a fairly nebulous kind. What is more, it must be remembered that any such understanding that one is to be involved in the management of a trading trust or company or other enterprise is that that is only to continue so long as that right is compatible with the general operation of the enterprise.
63 There is an amount of evidence in the instant case, some of which at least must be accepted that Dave was a disruptive influence at meetings. There is also some evidence that his activities with Energy Australia were leading to the view amongst the other members of the five, or those that remained, that he was getting the best of both worlds. He was a competitor with respect to the work of Energy Australia; he was letting his crane out on preferred jobs which could have been done by a smaller crane; and that it was not appropriate that he should also participate in the trust.
64 In any event, the failure, if it be a failure, is one which is hard to remedy with equitable damages or compensation. If a person sees that he or she is being starved out of an enterprise then the prime remedy is injunction. The alternate remedy is at that stage to elect to get out of the enterprise, and as I have already said this is possible in the instant case by giving a notice of being desirous of transferring the units. It is rather difficult both to remain in the enterprise, receive equitable compensation and then allow the conduct to continue whilst still a member.
65 It seems to me that the real position is that the fruits of any oppressive conduct will be reflected in the capital value of the units so that again the remedy is that at any time to put into play the notice of transfer procedure. I realise this is only effective when there are willing buyers, but that would appear to be so in the instant case.
66 As I remarked in Kizquari, where a person has the right to offer his or her units in a trust to the other members, prima facie, if the value of the trust property is not alleged to have been affected by the activities of the defendants, putting in train the pre-emption procedure will normally give the plaintiff sufficient relief, at least if there are buyers for his units. In the instant case, Trevor and Terry have made it quite clear that they are prepared to purchase Dave's units. They put the purchase price at $10,000 which Dave considers is far too little. Trevor's answer that he would not take $10,000 for his interest in Central Coast Cranes tends to confirm this as being a correct view.
67 There is no clear evidence as to the value of the assets held in the Company's name. However it would appear that its business has been successful. It purchased the goodwill of the business for $40,000 six years ago and with inflation and accretions to the goodwill one would expect the value of all the units to be at least $50,000 or $10,000 for 20. However, how much more is impossible for me to say.
68 Thus it would seem that the offer to purchase is pitched at too low a figure.
69 Clause 5.11 of the trust deed provides that a unit holder proposing to realise his units shall give a transfer notice and specify what he considers to be the fair value. However, under clause 5.11(9), the proposed purchaser can require the trustees to have the fair value fixed by an independent valuer nominated by the chairman for the time being of the NSW branch of the Australian Institute of Chartered Accountants, or in certain cases, the President of the NSW Law Society. The valuer is to value the assets of the trust fund and make a valuation of the units on such basis as he considers appropriate.
70 Accordingly, as any increased capital value because of the activities of the defendant will be reflected in the value of the units, Dave has not suffered any damage to the value of his units in the trust.
71 Accordingly, the only damage for which Dave could get equitable compensation, assuming he can get equitable compensation at all, is for any distribution of income that may have been made unfairly to Trevor and/or Terry. However, there is absolutely no evidence of any such distributions.
72 It is useful to compare the current situation with an application to wind up under the "just and equitable" ground. Ordinarily, if there is a fair machinery for the plaintiff to exit the company by being bought out, and winding up is opposed, no winding up order will be made; see eg In re Wondoflex Textiles Pty Ltd [1951] VLR 458, 465.
73 Having taken this view, it is unnecessary to consider whether the pleadings in this case support the claim in any event.
74 The appropriate course for Dave to take is to elect whether he will stay with or exit the Company. If the latter election is made, he will need to put in place the buy-out provisions to recover the current value of his investment.
75 Accordingly, the plaintiffs' claim virtually fails. The plaintiffs are, at least theoretically, entitled to a small amount of nominal damages. Furthermore the defendants' conduct is clearly in breach of trust to some extent and we have the situation where, without compensation, the controllers of the first defendant company, Trevor and Terry, have effectively excluded the first plaintiff from participation in everything except dividends and retaining the capital value of his units.
76 I believe the appropriate order to make is simply to dismiss the suit but make no order as to costs. However, because this aspect of the matter has not been argued, I will merely publish my reasons and give liberty to the parties to approach my Associate in the new term if they wish to have the matter listed for short argument as to what are the appropriate orders. Failing any such approach by 4 pm on 11 February 2003, the orders may be taken out as I have just noted them.
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