Mudgee Dolomite & Lime Pty Ltd v Murdoch

[2020] NSWSC 1510

Supreme Court

New South Wales

Medium Neutral Citation:

Mudgee Dolomite & Lime Pty Ltd v Robert Francis Murdoch; In the matter of Mudgee Dolomite & Lime Pty Ltd [2020] NSWSC 1510

Hearing dates:

18-21, 25-28 August 2020; 2 September 2020; 8 September 2020; 11 September 2020; 15-16 September 2020

Decision date:

28 October 2020

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Certain claims in relation to work done at mine site were established. Plaintiff to have opportunity to elect between account of profits and compensation under s 1317H of the Corporations Act as against Third and Fourth Defendants to Further Amended Statement of Claim. Compensation under s 1317H of the Corporations Act to be ordered against First and Second Defendants where no account of profits was sought. Mudgee Dolomite & Lime Pty Ltd wound up on the just and equitable ground. Several other claims either not established or not necessary to decide.

Catchwords:

CORPORATIONS — Directors and officers — Fiduciary duties — Conflict of duty and interest — Conflict of duty and duty — Diversion of corporate opportunity— Whether corporate opportunity within scope of company’s activities — Where other companies associated with directors took up profitable work — Where diversion occurred after shareholders intended to split up company — Split up not implemented at time of diversion — Directors’ duties where intention or understanding to split up company in future but no present implementation

CORPORATIONS — Directors and officers — Fiduciary duties — Fully informed consent — Whether sufficient disclosure to constitute fully informed consent

CORPORATIONS — Directors and officers — Liability for breach of directors’ duties — Knowing involvement — Where companies associated with directors were alter egos of the directors

CORPORATIONS — Winding up — Grounds for winding up — Just and equitable ground — Relationship between shareholders and directors irretrievably broken down — One of two directors unwilling to attend board meetings or sign financial statements — Whether less extreme remedy available — Evidence that shareholder cannot afford to buy out the other shareholder’s shares — Oppression

EQUITY — Equitable remedies — Account of profits — Whether allowance made for Defendants’ skill and effort — Discretionary nature of remedy — Where conduct involved lack of honesty

Legislation Cited:

- Evidence Act 1995 (NSW), ss 136, 140

- Corporations Act 2001 (Cth), ss 180, 181, 182, 183, 461(1)(k), 467 1317H, 1322

Cases Cited:

- Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325

- Aequitas Ltd v Sparad (No 100) Ltd (formerly Australian European Finance Corp Ltd) (2001) 19 ACLC 1006; [2001] NSWSC 14

- Ancient Order of Foresters In Victoria Friendly Society Ltd v Life Plan Australia Friendly Society Ltd (2018) 360 ALR 1; (2018) 130 ACSR 359; [2018] HCA 43

- Ashrafinia v Ashrafinia [2013] NSWSC 1442

- Asia Pacific Joint Mining v Always Resources Holdings Pty Ltd (2018) 125 ACSR 227; [2018] QCA 048

- Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd [2016] NSWCA 347

- Australian Postal Corp v Lutak (1991) 21 NSWLR 584

- Australian Securities and Investments Commission v Cassimatis (No 8) (2016) 336 ALR 209; [2016] FCA 1023

- Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; 62 ACSR 427; [2007] FCA 963

- Australian Securities and Investments Commission v Drake (No 2) (2016) 340 ALR 75; 118 ACSR 189; [2016] FCA 1552

- Australian Securities and Investments Commission v Edwards (No 3) (2006) 57 ACSR 209; [2006] NSWSC 376

- Australian Securities and Investments Commission v Flugge (2016) 342 ALR 1; [2016] VSC 779

- Australian Securities and Investments Commission v Healey (No 2) (2011) 85 ACSR 654; [2011] FCA 1003

- Australian Securities and Investments commission v King [2020] 94 ALJR 293; [2020] HCA 4

- Australian Securities and Investments Commission v MacDonald (No 12) (2009) 259 ALR 116; [2009] NSWSC 714

- Barescape Pty Ltd v Bacchus Holdings Pty Ltd (No 9) [2012] NSWSC 984

- Bhullar v Bhullar [2003] BCC 711; [2003] EWCA Civ 424

- Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384; [1929] ALR 273; [1929] HCA 24

- Boardman v Phipps [1967] 2 AC 46; [1967] 3 WLR 1009

- Breen v Williams (1996) 186 CLR 71

- Briginshaw v Briginshaw (1938) 60 CLR 336

- Calvo v Sweeney [2009] NSWSC 719

- Cassimatis v Australian Securities and Investments Commission (2020) 376 ALR 261; (2020) 144 ACSR 107; [2020] FCAFC 52

- CellOS Software Ltd v Huber (2020) 144 ACSR 267; [2020] FCA 505

- Chae v Pure Nature Sydney Pty Ltd [2018] NSWSC 914

- Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36

- Chickabo Pty Ltd v Zpher Pty Ltd (2019) 57 VR 406; [2019] VSC 73

- Commonwealth Bank of Australia v Barker (2014) 253 CLR 169; 312 ALR 356; [2014] HCA 32

- Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37

- Daly v The Sydney Stock Exchange Ltd (1985) 160 CLR 371

- Daniels v Anderson (1995) 37 NSWLR 438

- Digital Pulse Pty Ltd v Harris (2002) 40 ACSR 487; [2002] NSWSC 33

- Duncan v Independent Commission Against Corruption [2016] NSWCA 143

- EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183

- Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599

- Farah Constructions Pty Ltd v Say-De Pty Ltd (2007) 230 CLR 89

- Fox v Percy (2003) 214 CLR 118 at 129; [2003] HCA 22

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

- Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431

- Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143

- Green v Bestobell Industries Pty Ltd [1982] WAR 1; (1982) 1 ACLC 1

- Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; 287 ALR 22; 87 ACSR 260; [2012] FCAFC 6

- Guinness Plc v Saunders [1990] 2 AC 663

- Gunasegaram v Blue Visions Management Pty Ltd [2018] NSWCA 179

- Hancock Family Memorial Foundation Ltd v Porteous [2000] 22 WAR 198

- Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298; 197 ALR 626; 44 ACSR 390; [2003] NSWCA 10

- Hart Security Australia Pty Ltd v Boucousis [2016] NSWCA 307

- Holyoake Industries (Vic) Pty Ltd v V-Flow Pty Ltd (2011) 86 ACSR 393; [2011] FCA 1154

- Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64

- Howard v Commissioner of Taxation (2014) 309 ALR 1; [2014] HCA 21

- Industrial Development Consultants Pty Ltd v Cooley [1972] 1 WLR 443

- Joint v Stephens (2007) 62 ACSR 309; [2007] VSC 145

- Keech v Sandford (1726) Sel Cas T King 61

- Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1; (2012) 292 ALR 382; (2012) 90 ACSR 288; [2012] FCA 634

- Maguire v Makaronis (1997) 188 CLR 449

- Moratic Pty Ltd v Gordon [2007] NSWSC 5

- Morley vAustralian Securities and Investments Commission (2010) 274 ALR 205; [2010] NSWCA 331

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

- Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110

- Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170

- Omnilab Media Pty Ltd v Digital Cinema Network Pty Ltd (2011) 285 ALR 63; 86 ACSR 674; [2011] FCAFC 166

- One.Tel Ltd (in liq) v Rich [2005] NSWSC 226; (2005) 190 FLR 443; 53 ACSR 623

- Peninsular and Oriental Steam Navigation Co v Johnson [1938] 60 CLR 189; [1938] HCA 16

- Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165

- Primacy Underwriting Agency Pty Ltd v Kilborn [2007] NSWSC 158; (2007) 25 ACLC 160

- Queensland Mines Ltd v Hudson (1978) 18 ALR 1

- Re AJ Roberts Removals and Storage Pty Ltd [2017] NSWSC 1054

- Re Amazon Pest Control Pty Ltd [2012] NSWSC 1568

- Re Central Management (NSW) Pty Ltd [2017] NSWSC 1258

- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789

- Re FAL Healthy Beverages Pty Ltd [2017] NSWSC 476

- Re Hillsea Pty Limited [2019] NSWSC 1152

- Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914

- Re Swan Services Pty Limited (in liq) [2016] NSWSC 1724

- Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134

- Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65

- Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193

- SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552

- Shafron v Australian Securities and Investments Commission (2012) 286 ALR 612; 88 ACSR 126; [2012] HCA 18

- Spellson v George (1992) 26 NSWLR 666

- Streeter v Western Areas Exploration Pty Ltd (No 2) (2011) 278 ALR 291; 82 ACSR 1; [2011] WASCA 17

- Taxa Australia Pty Ltd v G Wang (2018) 130 ACSR 531; [2018] NSWSC 1412

- Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159

- Vadori v AAV Plumbing (2010) 77 ACSR 616; [2010] NSWSC 274

- Vanguard Financial Planners Pty Ltd v Ale [2018] NSWSC 314

- V-Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd (2013) 296 ALR 418; 93 ACSR 76; [2013] FCAFC 1

- Vrisakis v Australian Securities Commission (1993) 9 WAR 395 at 450; 11 ACSR 162

- Waltons Stores (Interstate) Ltd v Maher (1998) 164 CLR 387

- Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18

Texts Cited:

- R P Austin, “Fiduciary Accountability for Business Opportunities” in P D Finn, Equity and Commercial Relationships, Lawbook Co, 1987

Category:

Principal judgment

Parties:

Proceedings 2016/84283
Mudgee Dolomite & Lime Pty Limited (Plaintiff)
Robert Francis Murdoch (First Defendant)
Stephen Murdoch (Second Defendant)
RK Murdoch Pty Limited (an Australian company) (Third Defendant)
Tilecote Farm Pty Limited (formerly known as Bright Pear Pty Limited) (Fourth Defendant)
Kurdeez Minerals Pty Limited (Fifth Defendant)

Proceedings 2016/271516
Robert Francis Murdoch (Plaintiff)
Mudgee Dolomite & Lime Pty Limited (Defendant)

Proceedings 2016/355621
Brian Murdoch (Plaintiff)
Mudgee Dolomite & Lime Pty Ltd (First Defendant)
Robert Francis Murdoch (Second Defendant)

Proceedings 2017/377222
Robert Murdoch (First Plaintiff)
Stephen Murdoch (Second Plaintiff)
Mudgee Dolomite & Lime Pty Ltd (Third Plaintiff)
WJ Murdoch Pty Limited (Fourth Plaintiff)
Mudgee Stone Co Pty Ltd (Fifth Plaintiff)
Brian William Murdoch (First Defendant)
B Murdoch Pty Ltd (Second Defendant)
Scott Murdoch (Third Defendant)
Stoneco Pty Ltd (Fourth Defendant)

Representation:

Counsel:
V Bedrossian/M Jaireth (Brian Murdoch Interests)
J Kelly QC/H K Insall SC/Dr C Mantziaris (Robert Murdoch Interests)

Solicitors:
McPhee Kelshaw (Brian Murdoch Interests)
Hills Solicitors (Robert Murdoch Interests)

File Number(s):

2016/84283; 2016/271516; 2016/355621; 2017/377222

Judgment

Introduction

1. This judgment deals with four overlapping proceedings which were heard together. I will first outline the result that I have reached, by the application of well-established principles to facts as to which there was ultimately little controversy, before turning to a more detailed analysis of the parties’ claims, the evidence, the case law and the same outcome that follows from a more extended analysis. I will seek to focus on the issues that are necessary to decide the case.

2. I should first identify several parties to the proceedings. Mr Brian Murdoch (to whom I will refer, with no disrespect, as “Brian”) and Mr Robert Murdoch (to whom I will refer, with no disrespect, as “Robert”) are brothers and are the two directors of and equal shareholders in Mudgee Dolomite & Lime Pty Ltd (“MDL”) and other family companies. Mr Scott Murdoch (to whom I will refer, without disrespect, as “Scott”) is Brian’s son; he has not done work for MDL for some years although he continued to be paid by it until 2015; and he is a director and shareholder of Stoneco Pty Ltd (“Stoneco”). Mr Stephen Murdoch (to whom I will refer, with no disrespect, as “Stephen”) is Robert’s son and was, at least from 2009 to 14 March 2014, employed as Production Manager at MDL. RK Murdoch Pty Limited (“RKM”) and Tilecote Farm Pty Limited (formerly known as Bright Pear Pty Limited) (“BPPL”) are companies associated with Robert and Stephen respectively, and Robert is also a director of RKM. Stephen was also the sole director and shareholder of BPPL; he is and was since at least 18 August 2010 a director of RKM and, since at least 29 June 2012, a shareholder of RKM; he is and was, at all material times, a director of RK Murdoch (NZ) Pty Ltd (“RKMNZ”); and he is and was a director and shareholder of Kurdeez Minerals Pty Limited (“Kurdeez Minerals”). I will refer to Robert, Stephen, RKM and BPPL together as the “Robert Murdoch Interests”, and to MDL, WJ Murdoch Pty Ltd (“WJM”) and Stoneco together as the “Murdoch Group”.

3. First, Brian brings a derivative claim against Robert, Stephen, RKM and BPPL. The first aspect of that claim relates to revenue derived by RKM and BPPL from the Cadia mine. This claim succeeds since I find below that Robert, in breach of statutory and fiduciary duties, made a series of decisions in conflict of duty and interest and duty and duty which deprived MDL of the opportunity to undertake substantial work at the Cadia mine and delivered substantial profits to RKM and BPPL, and Stephen was knowingly involved in those breaches and RKM and BPPL are liable as Robert’s and Stephen’s alter egos in respect of those breaches of duty. It is no answer to that claim that MDL did not then have sufficient equipment to carry out that work, not least because (adopting an approach recognised at least since Keech v Sandford (1726) Sel Cas T King 61), the Court should not neglect the reality that Robert might well have made greater efforts to buy, lease or borrow the necessary equipment for MDL, if he was not affected by conflicts of duty and interest and the opportunity of profit for RKM and BPPL. MDL is entitled to compensation (although it has not established that it has suffered any loss) or an account of profits, at its election, and the circumstances of this breach do not warrant any allowance for effort by Robert, Stephen, RKM or BPPL beyond the deduction of actual costs incurred which has already been reflected in determining the relevant profits made by RKM and BPPL from the work at the Cadia mine.

4. The second aspect of this claim relates to a mine situated at Timboon, Victoria. This claim fails because the business of MDL and associated companies had been conducted, for a considerable time, on the basis that Brian, Robert and their sons could and did acquire quarries outside MDL, and the opportunity to acquire the Timboon quarry did not come to Robert or Stephen in any capacity associated with MDL. The acquisition of this mine was not within the scope of the duties owed by Robert and Stephen to MDL.

5. Second, Robert and Stephen caused MDL and two other companies within the Murdoch Group to bring a derivative action against Brian, Scott and their associated companies (“Brian Murdoch Interests”) in respect of the acquisition of other quarries by Scott and Stoneco and other matters. The Brian Murdoch Interests made a conditional concession that that claim would succeed against Scott and that company, if their claim against the Robert Murdoch Interests in respect of the Timboon quarry succeeded. That claim did not succeed and that condition is not satisfied. This claim fails so far as the Robert Murdoch Interests seek to establish a wider partnership and joint venture, and then show its termination in November 2009 when a separation of the parties’ business interests was discussed, broadly agreed without any identification of how it would be implemented, and then not implemented. This claim also fails, so far as it turns upon a fiduciary duty arising from the pleaded partnership or joint venture, which was not established, and an allegation that Scott owed statutory duties as an “officer” to the relevant companies.

6. Brian also brings an oppression claim which relies on the matters on which the Brian Murdoch Interests relied in the first derivative claim and other claims. Although oppression would likely have been established, at least on the basis of the conduct in respect of the Cadia mine, the Brian Murdoch Interests no longer press their claim for an order that Robert sell his shares in MDL to Brian, where Brian accepted in cross-examination that he cannot afford to buy those shares, and accepted that a winding up (which is also sought by Robert) is the appropriate relief. Robert in turn brings a winding up claim in respect of MDL. This claim succeeds on the just and equitable ground, where MDL was a closely held family company and the relationship between Robert and Brian, its directors and shareholders, and indeed their respective sons, has irretrievably broken down.

Affidavit evidence and credit

7. Before turning to the affidavit evidence on which the parties rely, I should address the principles to which the Court should have regard in assessing the affidavit and oral evidence. Given the passage of time between the events and the hearing, I have placed primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence: Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 at [15]; Fox v Percy (2003) 214 CLR 118 at 129; [2003] HCA 22; Re Hillsea Pty Limited [2019] NSWSC 1152 at [16]ff. I also have regard to the fact that the allegations of breach of statutory directors duties which the Brian Murdoch Interests and the Robert Murdoch Interests have each made against the other raise serious matters, in determining whether those matters are proved to the civil standard under s 140 of the Evidence Act, reflecting the principle in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; see also Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 170-171. I note that some of the matters to which the parties’ affidavits refer are peripheral, although illustrative of the extent of the dispute and ill-feeling which now exist between Brian and Scott on the one hand and Robert and Stephen on the other.

8. The Brian Murdoch Interests relied on several affidavits of Brian, and he was cross-examined at some length. In his first affidavit dated 6 July 2017, Brian referred to the origins of the Murdoch Group business and to his background and work experience. He left school without completing secondary education and he had no formal education after that time, but he has worked in the operations area within the Murdoch Group’s businesses throughout his career, and he obviously has extensive experience in quarrying. It is common ground that the management of the offices and finances of the Murdoch Group were Robert’s rather than Brian’s responsibility, and I refer to Robert’s evidence in that regard below. Brian addresses the purchase of assets from Industrial Minerals Australia Pty Ltd (“IMA”) in about 1996/1997, a matter that is also addressed in Robert’s evidence. Brian also refers to the circumstances in which the acquisition of assets from IMA was financed, which is also addressed in Robert’s evidence, although I do not need to determine the disputes about it in order to determine these proceedings. Brian also refers to the diversification of the Murdoch Group’s business, its previous involvement in another business called Hi Tech Concrete with two other persons, and the range of assets owned by MDL, including the Buckaroo quarry site acquired from IMA near Mudgee at which a dolomite quarry is operated, other land on which its processing plant and office complex are located, and other property and assets. Brian also referred, in this affidavit, to financial assistance that he had provided to Scott (Brian 6.7.17 [135]), and addressed equipment owned by MDL and the use of the “MDL” name. I will address other aspects of Brian’s evidence in respect of specific issues below.

9. In his second affidavit dated 28 March 2018, Brian gave evidence that he had a first stroke on 22 June 2015 and a second stroke in July 2015 and that his memory is now worse because of the stroke, that sometimes a memory will come to him after “a little while”, and that “struggling to recall details that are not immediately able to be recalled is frustrating and tiring”. His evidence is that he had had Robert’s first affidavit read to him and he had reviewed many of its exhibits but not all of them, and he there responds to that affidavit. Brian also there responds to Stephen’s affidavit dated 20 November 2017, to Ms Sullivan’s affidavit dated 20 November 2017; and to other affidavits of Ms Murkins dated 19 November 2017; Ms Austin dated 17 November 2017; Mr Streeter sworn 27 October 2017; Mr Kemp dated 27 October 2017; Mr Boag dated 9 November 2017 and Mr Goodwin dated 26 October 2017. I will address aspects of Brian’s evidence in this affidavit in respect of specific issues below. By a third affidavit dated 15 June 2018, Brian responded to Robert’s further affidavit dated 2 May 2018. The matters addressed in that affidavit are not material to a determination of the proceedings.

7. In closing submissions, Mr Kelly, who appears with Mr Insall and Dr Mantziaris for the Robert Murdoch Interests submitted, and I accept, that it is likely that Brian was affected by some cognitive difficulties and also some eyesight difficulties in cross-examination, and his evidence was at times lucid and at times confused. Mr Kelly accepted that Brian’s understanding of financial concepts and technology was limited, at least at the time of his cross-examination, although Mr Kelly also points to some evidence that suggests that Brian may have had an understanding of basic accounting information at the time of the events in issue and before his strokes.

8. Brian’s cross-examination was conducted in short periods, with intervening breaks, to accommodate health concerns, but there were still real difficulties in testing his evidence by cross-examination since, as I noted above, he has had at least a two strokes and he was not able to read, or comprehend, many documents put before him in cross-examination. I accept that difficulty was genuine and that Brian gave evidence honestly and to the best of his recollection, but it is plain that at least some aspects of his recollection of events are now poor. For example, Brian was not sure whether it was the case that he had declined to sign financial statements for MDL since 2014 and could not remember which financial statements he last signed, and he observed that his wife handles those matters and tells him when such a document has arrived (T100). Brian did not appear to have a clear understanding of the matters in issue in the proceedings, and I will refer below to difficulties which emerged in that respect, particularly in respect of the relief that he sought in his oppression case.

9. There were times that Brian either did not understand a question or was significantly mistaken in the timing of events. For example, he gave evidence, in the present tense, that he fixes the machinery and does the welding every day for MDL (T107), although then seeming to recognise that he had not done so for six years since his stroke (T108). There were other points in his cross-examination when Brian appeared to be mistaken as to uncontentious issues, including whether Scott was involved with the purchase of the Timor quarry in the Hunter Valley through Stoneco (T111). At points in his cross-examination, he indicated, even in response to relatively straightforward questions, that the questions and “this paperwork total confuse” him (T114). He did not recall having received documents relating to the proposed split of assets in MDL (T119) although there is little doubt that he had received them.

10. The Brian Murdoch Interests also rely on Scott’s first affidavit dated 6 July 2017, where Scott refers, inter alia, to his work history which involved several periods working outside and then inside the Murdoch Group business and addressed other issues to which I return below. In his second affidavit dated 29 March 2018, Scott responds to Robert’s and Stephen’s affidavits dated 20 November 2017. He there addresses disputes as to many issues, many of which need not be resolved to determine these proceedings. That affidavit also addresses aspects of tensions between Stephen and Scott, which also evidence the breakdown of relationships between family members. Scott also responds to aspects of Stephen’s criticisms of Scott’s work in the Murdoch Group business and it is not necessary to determine the merit of those criticisms or Scott’s response to them, beyond noting that they again demonstrate the breakdown of relationships within the family. Scott also responds to aspects of Ms Murkins’ affidavit dated 19 November 2017 and Mr Kemp’s affidavit dated 27 October 2017, both dealing with matters which are not material to the determination of the proceedings. I deal below with other matters addressed by Scott’s affidavits in respect of the chronology of events and specific issues.

11. In closing submissions, Mr Kelly criticised Scott’s use of terms such as “diverting funds” and “disclosure” of opportunities and his reference to events that were not in MDL’s “best interest” in the course of his cross-examination (T140, 146, 150). It seems to me that it is not surprising, or a matter for criticism, that Scott understands events in those terms given the issues which have arisen in these proceedings and the length of time with which the parties have been involved with the proceedings. Mr Kelly submits, and I accept, that it is likely that Scott's evidence was influenced by a degree of “rivalry”, for want of a better word, with Stephen and previous conflicts with Robert in respect of the management of MDL.

12. The Brian Murdoch Interests also rely on the affidavit dated 6 July 2017 of Mr Erwin Bouverie, who was the sole director of Kurdeez Lime Pty Ltd (“Kurdeez Lime”) which conducted the Timboon quarry business, before that company and Victorian Agricultural Lime Pty Ltd (“VAL”) which owned the land at Timboon were placed in voluntary administration. I will refer to his evidence in relation to the acquisition of the Timboon quarry in dealing with that issue below.

13. The Robert Murdoch Interests rely on a lengthy affidavit of Robert dated 20 November 2017, of some 150 pages and 1,055 paragraphs, which canvasses many matters that have limited relevance to the proceedings, other than to indicate the adverse view that he now takes of Brian and Scott. Significant parts of that affidavit were not admissible and were not read; some parts of it was objected to and not admitted; and more of it was not admissible and would not have been admitted had it been objected to. Robert there refers, at length, to the history of the Murdoch Group and the family business, and refers to the circumstances of the acquisition of IMA to which I refer below.

14. Robert’s evidence in his first affidavit (Robert 20.11.17 [71]) is that, shortly after the acquisition of the business of Industrial Minerals Australia Pty Ltd (“IMA”) by MDL, he took over the role of General Manager of the Murdoch Group, although it appears there was no meeting or discussion as to that matter, and Brian assumed the role of Operations Manager and Productions Manager. Robert refers (Robert 20.11.17 [73]) to his perception, emphasised throughout his evidence, that the breadth and scope of his involvement in the business was greater and broader than Brian’s involvement in the business and he sets out, at length, his contributions to the business, and also indicates his perception that Brian’s role “was restricted to operations at the different quarries where he was not required to make any major or strategic decisions affecting any of the companies” and that Brian “did not contribute to bringing business opportunities forward nor did he have ideas for the development of the business or its direction” (Robert 20.11.17 [87]). It seems to me that Robert’s belief that he has been the primary contributor to the success of the Murdoch Group, and that Brian has made a limited contribution to the Group, provides at least part of the explanation for his and Stephen’s later willingness to divert revenue to RKM and BPPL, once the prospect of a separation of Murdoch Group emerged. Robert also gives evidence, to similar effect, that he was responsible for “deciding and driving the strategic direction of the company” and of his lack of recollection that Brian made suggestions in respect of business opportunities for MDL or the Murdoch Group (Robert 20.11.17 [90]). His evidence is that it was nonetheless common practice for Brian and him to have discussions regarding the business activities of the Murdoch Group, although these meetings became less regular as a result of Robert’s cancer treatment in 2010 and 2011 (Robert 20.11.17 [93]).

15. Robert’s evidence is also that he and Brian undertook activities outside the Murdoch Group, through personal partnerships or partnerships through RKM and B Murdoch Pty Ltd (“BMPL”) (a company associated with Brian), including their acquisition of an interest in Hi-Tech Concrete and, later, in 2006 and 2007, their involvement in residential subdivisions and other investments (Robert 20.11.17 [109]-[111]). Robert also refers to the circumstances in which Stephen and Scott were introduced as shareholders in another company in the Murdoch Group, Mudgee Stone Co Pty Ltd (“MSC”), without making any financial contribution to the acquisition of an interest in MSC or the Oberon quarry which it operated (Robert 20.11.17 [112]ff), and he also refers to Scott’s and Stephen’s involvement in the business and to Stephen’s incorporation of BPPL in 2003 and Complete Crushing Services Pty Ltd (“CCS”), which now conducts a mobile crushing business, in 2014, after Stephen had resigned from MDL. Robert also refers to the range of rock types and products lines for the main Murdoch Group quarries (Robert 20.11.17 [119]), in evidence that I address below, and to the movement of equipment between companies within the Murdoch Group (Robert 20.11.17 [120]ff). Robert also refers to Brian’s involvement in property subdivision from 2006 (Robert 20.11.17 [151]ff).

16. Robert’s evidence also addresses, at length, his dissatisfaction with aspects of Scott’s work in the Murdoch Group dating back to 2008 (Robert 20.11.17 [199]ff). His evidence as to those matters seems to me to have little relevance to the proceedings, other than again to emphasise the breakdown of relationship between the parties. Robert also addresses the circumstances in which Scott purchased a mobile crusher outside the Murdoch Group in about July 2009 (Robert 20.11.17 [209]), to which I refer below. Robert addresses, at substantial length, a number of other aspects of the disputes between the parties, in a manner that again demonstrates the breakdown of their relationship. Robert also responds at length to Brian’s and Scott’s affidavits sworn 6 July 2017, addressing substantially the same topics that are addressed in his evidence in chief in that affidavit. Again, it is not necessary to address many of these matters to determine the issues in these proceedings.

17. By a further affidavit dated 2 May 2018 Robert addressed issues arising in the second derivative proceedings including the sublease of and later the acquisition by Stoneco of the Braeside and Robertson’s Knob quarry and the circumstances in which Brian and Robert personally acquired an interest in the Bylong quarry. I will address other aspects of Robert’s evidence in these affidavits in dealing with specific issues below.

18. Robert’s evidence in cross-examination was characterised by his confidence in the rightness of his cause, even when dealing with conduct that involved plain conflicts between his duties owed to MDL and his personal interests or the interests of the companies with which he and Stephen were associated, RKM and BPPL. That evidence was largely consistent with his evidence in chief, although there are areas of contradiction, for example, whether a jaw crusher purchased for MDL in the United Kingdom in April 2010 was specifically purchased so that MDL could perform work at the Cadia mine (T280).

19. Robert was cross-examined, inter alia, as to his and Stephen’s roles in the management of MDL. While Robert’s affidavit evidence was that he made decisions about the deployment of plant and machinery, his evidence in cross-examination was that others were involved, at least in the sense that they could ask for plant and equipment, and it seemed to me likely that Robert or Stephen made a decision whether that request would be met. Robert also accepted in cross-examination that Brian did not make major or strategic decisions affecting the companies, although his position was that he did not make such decisions on his own, at least in the sense that Brian was informed of them (T250). Robert accepted in cross-examination that, from 2009 to March 2014, he and Stephen together formed the senior management team for MDL (T252). Robert also accepted in cross-examination that Stephen was, from 2009 to early 2014, the most senior MDL employee on site at the Cadia mine (T250), although he was not on site for the whole of that period. I think it likely that Robert did understand, as he contended in cross-examination (T273), that either the discussions as to the potential split of the company or the fact that both sides of the family had outside investments, justified Robert, Stephen and their associated companies in pursuing personal profits outside of MDL rather than through MDL and in respect of the Cadia mine in an area that was within the scope of MDL’s business. However, that was not the position in law, as will emerge below.

20. I bear in mind that Robert’s evidence in cross-examination was that RKM was (or, more precisely, was intended to become) Stephen’s company, in the sense that Stephen was intended to end up with it in succession planning (T282). Robert’s evidence in cross-examination was also that RKM owned relevant crushing and other equipment and hired it to BPPL, and subsequently to CCS (also owned by Stephen) which worked the equipment, paid the expenses and paid monies back to RKM (T303); there is no documentation in evidence of such a system, other than an equipment rental agreement between BPPL and RKM (Ex J1, B1045) which I address below; Robert’s evidence, and later Stephen’s evidence, was that that system was intended to limit liability to RKM if an accident happened at the Cadia mine (T304). The unsigned financial statements for RKM during the 2009 and 2010 years are not consistent with that explanation, since they do not record equipment hire earnings, but record “crushing income” (T304-305). RKM’s financial statements for the year ended 30 June 2011 record a substantial item described as “royalty revenue” of approximately $1.864 million, which Robert suggested was likely to be the income from the hire of RKM equipment to BPPL or CCS (T306), although it is not a transparent description of such income. A similar expense item is recorded in BPPL’s accounts for the financial year ended July 2011, with the consequence that a significant part of the income from the work done at the Cadia mine was passed back by BPPL to RKM (T307). In the 2012 financial year, an amount of $3.894 million, now described as “Crushing income – Cadia” comprised revenue from equipment hire by RKM to BPPL (T308).

21. Robert’s position in cross-examination was that RKM purchased crushers for the purposes of resale rather than the provision of mining services; however, contrary information was provided to the Australian Taxation Office in respect of its GST audit, where the Australian Taxation Office was advised that RKM’s business was “mining” rather than the resale of equipment and that the crushers were purchased for a mining contract (T314-315). Robert did not accept that position in cross-examination and contended that the crushers were bought to resell and not to perform work at the Cadia mine (T315-316). I am unable to reach a determination as to which explanation is correct, given the inconsistency in these characterisations. Robert denied in cross-examination that he spoke to Stephen about a plan to acquire the equipment used at the Cadia mine in order to allow RKM to perform the work and hire equipment there or that he intended to put RKM or BPPL in the position to earn money that would otherwise have gone to MDL or that he understood that Stephen was cooperating with him in facilitating that plan from early 2010 (T316). It was at least apparent, and essentially conceded in paragraph 692 of Robert’s affidavit, that he considered that MDL should not acquire equipment once the discussion of the split of assets emerged, unless MDL already had a contract for use of the equipment in place, and he considered it preferable to “subcontract” the work to a “third party”. It was apparent from Robert’s cross-examination that the parties to which the work would be contracted was BPPL or CCS (T317); and those entities are not third parties, but related companies to Robert and Stephen, placing Robert in a position of conflict of duty and duty and duty and interest in any such subcontracting decision.

22. The Robert Murdoch Interests also relied on a lengthy affidavit of Stephen dated 20 November 2017, which addressed his role in the Murdoch Group and also referred to the history of that Group and the organisation of its business. Stephen gave evidence as to the steps taken by Robert towards the acquisition of IMA in 1997 (Stephen 20.11.17 [34]ff) and noted that WJM and MDL were managed together after MDL purchased the IMA site, those companies would share orders and information and equipment and employees were also shared between them (Stephen 20.11.17 [43], [45]]. Stephen there noted that MDL’s main business consisted of quarrying, crushing and grinding stone at the Buckaroo site near Mudgee and later crushing stone at other sites using mobile crushing equipment (20.11.17 [47]). That description of the scope of MDL’s business is significant for the issues that I address below in respect of work done by RKM and BPPL at the Cadia mine. He also referred to the circumstances in which the Oberon quarry was acquired and MSC was incorporated, with Robert, Brian, Scott and Stephen as shareholders, and observed that MSC’s main business consisted of supplying crushed granite and other materials to the local area (Scott 20.11.17 [55]-[56]). Stephen also addressed the several quarries owned by the Murdoch Group in his evidence (Stephen 20.11.17 [75]).

23. Stephen also addressed Brian’s management capacity, referring to his view that Brian could not make decisions about the Murdoch Group and its operations and left decision-making to Robert or others (Stephen 20.11.17 [131]); whether or not that impression was rightly formed, Brian was an equal shareholder in MDL and one of the two directors of that company. Stephen also noted that the companies within the Murdoch Group did not have formal shareholder or directors meetings (Stephen 20.11.17 [141]ff). Stephen also addressed Scott’s work within the Murdoch Group (Stephen 20.11.17 [155]ff) and the periods in which Scott had worked outside the Group. Stephen also refers to Scott and Stoneco’s use of equipment of MDL and Murdoch Group to perform work for Stoneco and accepts that it is common for the Murdoch Group companies and family members to put items on MDL’s accounts, and then to be invoiced for them, but says that Scott would not pay such invoices (Stephen 20.11.17 [215]-[216]). While these matters may have been a further source of irritation within the relationship between Robert and Stephen on the one hand and Brian and Scott on the other, they are not material for the determination of these proceedings.

24. Stephen also addresses the circumstances in which he set up a business of buying and selling crushing machines from 2010, although he says these purchases were made through RKM which was then associated with Robert (Stephen 20.11.17 [270]ff). He also addresses the circumstances in which a jaw crusher was purchased for MDL, two other jaw crushers were purchased for RKM on a trip to the United Kingdom in 2010, and RKM subsequently purchased three flood-damaged crushers (referred to as the “swamped” crushers) which I address further below (Stephen 20.11.17 [281]ff). Stephen also refers to adverse events within his family from early 2010 and affecting Robert’s health from late 2010. I address other aspects of Stephen’s evidence in dealing with the chronology of events and with specific issues below.

25. By his second affidavit dated 17 February 2020, Stephen gives further evidence addressing the income derived by RKM, BPPL and Kurdeez Minerals, which appears to be intended to support the expert evidence led in the proceedings. Broadly, that evidence relates to work performed at the Cadia mine, machinery associated with that work, the allocation of expenses and the use of equipment by Kurdeez Minerals. Stephen also there addresses issues in respect of the supply of equipment by RKM and BPPL to MDL and crushing and loading services during the years 2010-2011; RKM’s completing variations 6-8 of the Cadia East/Fluor Contract from September 2011 to February 2012; RKM’s providing steel sorting services to Cadia Valley Operations (“CVO”) from February 2012 to April 2013; and RKM’s supply of equipment and crushing and loading services to CVO from July 2011 to January 2014.

7. Stephen was cross-examined as to the role of a production manager and accepted that he was production manager for MDL in respect of its main quarry site at Buckaroo Road, but not in respect of the Cadia mine site (T410). He accepted that he had authority to direct that employees of MDL worked at particular quarries or contracted crushing sites and also had that authority more broadly in relation to the Murdoch Group, because they were a small family company (T410). He accepted that he also had authority to move mobile crushing equipment from site to site in that capacity (T411). His evidence was that he and others, including an employee who filled in as production manager when Stephen was working on the Cadia mine site, made decisions on behalf of MDL and that he had no more authority that Scott in respect of MDL’s business (T412). (Plainly, Scott’s influence was limited from the point in which he left the Murdoch Group, in about April 2011.) Stephen accepted that his authority extended to day-to-day activities of MDL such as directing staff and purchasing equipment, but denied that he had the same authority as Robert did between 2009 and 2014, when decisions were always passed through Robert or Brian (T413). There were occasions, in that evidence, where he described decisions as made by “Robert and Brian” (T414) which were likely made by Robert alone. Stephen accepted that he assumed greater responsibilities on behalf of MDL and the Murdoch Group from October 2010 until about May 2012, after Robert had been diagnosed with cancer, but emphasised that he relied on Brian more than he normally would have in that period (T415).

8. Mr Kelly submitted, in closing submissions, that Robert should be accepted as a witness of truth, recognising that the events in issue occurred nearly a decade ago. Mr Bedrossian, with whom Mr Jaireth appears for the Brian Murdoch Interests, submitted that neither Robert nor Stephen were witnesses of credit, and that both deviated from their affidavit evidence in cross-examination and “invent[ed]” evidence to advance positions which they considered advantageous. I do not reach that finding, although it did seem to me that Robert and Stephen’s evidence in cross-examination was significantly affected by their belief in the rightness of their position and the level of hostility which had now developed between the Robert Murdoch Interests and the Brian Murdoch Interests. While there were occasions on which Robert responded to questioning in an aggressive way, or referred to other persons as having knowledge of relevant matters, it seemed to me that at least the former reflected his resistance to any challenge to his decisions in cross-examination, rather than any strategic attempt to avoid questioning on those matters.

9. The Robert Murdoch Interests also relied on a lengthy affidavit dated 20 November 2017 of Ms Sullivan, who is (or was) an accountant and bookkeeper employed by MDL. (Robert’s evidence in cross-examination is that Ms Sullivan no longer works for MDL because of commitments elsewhere (T252)). Ms Sullivan addressed the accounting for RKM’s crusher purchases in the United Kingdom; invoicing for work done at the Cadia mine; documentation for the movement and use of MDL’s and RKM’s equipment; and other aspects of dealings between Robert and Brian and MDL’s income. By a further affidavit dated 17 February 2020, Ms Sullivan led evidence to address certain categories of work which were in dispute in the proceedings. Ms Sullivan was not required for cross-examination and it is not necessary to summarise her evidence at length.

10. The Robert Murdoch Interests also relied on the affidavit dated 19 November 2017 of Ms Murkins, an executive assistant and bookkeeper with MDL. Ms Murkins has worked with the Murdoch Group since 1998, now on a part-time basis, and is related to Robert’s wife. She addresses Robert’s role in MDL, the development of tensions between Robert and Brian as long ago as 2007, when Brian and Scott purchased a block of industrial land next to Hi Tech Concrete; Scott’s work at the Murdoch Group and the circumstances in which Scott and Stephen commenced taking on activities outside the Group and her knowledge of discussions concerning the split of the companies from November 2009. Ms Murkins also refers to an altercation between Robert and Brian in August 2011, which is relevant only to show the breakdown of the parties’ relationship; her evidence is that she typed up a document which appears to have become the basis of a communication from Stephen to Brian in respect of the split of assets in late 2011; and she refers to the creation of a “machinery schedule” identifying where MDL’s machinery was in 2010-2012. Ms Murkins was also not required for cross-examination.

11. The Robert Murdoch Interests read an affidavit dated 26 October 2017 of Mr Goodwin, who gave evidence as to the purchase of crushers for MDL and for RKM from the United Kingdom in April 2010, the purchase of the “swamped” crushers for RKM, and the relationship between Brian and Stephen. Mr Kelly submits, and I accept, that Mr Goodwin’s testimony was truthful and there was no reason not to accept it, I interpolate, within the limits of his recollection. Mr Goodwin also gave evidence of an occasion between 2010-2012 when he observed a conversation with a third party, where that person had observed that Stephen was “working his own machines”, implicitly at the Cadia mine, and Brian said that:

“I’m OK with Stephen working his own machines there. Scott’s developing his quarry at Scone and working for himself.” (Goodwin 26.10.17 [73]).

34. Mr Goodwin was briefly cross-examined as to that conversation, and I am satisfied that it occurred and related to the Cadia mine. It does not assist the Robert Murdoch Interests, since RKM (rather than BPPL or Stephen) largely owned and ultimately derived much of the revenue and profit from the equipment used at the Cadia mine, and that conversation falls well short of full and fair disclosure to Brian of the nature of the arrangements involving MDL, RKM and BPPL at the Cadia mine and does not disclose the financial aspects of those arrangements. Mr Goodwin also refers to having inspected the equipment at the Timboon quarry, in early February 2011, when Robert and Stephen were looking to acquire that mine, and he notes that he did not bill for that inspection and billed Kurdeez Minerals (as distinct from MDL) for subsequent work on the machines at the Timboon quarry.

35. The Robert Murdoch Interests also read an affidavit dated 27 October 2017 of Mr Streeter, who was an employee of MDL and is now a permanent casual employee at MDL, and also does work at a company associated with Stephen. Mr Streeter addresses the manner in which work was done at the Cadia mine, maintenance issues in respect of machinery at the Cadia mine, difficulties with use of older machinery at that mine, the transfer of MDL’s equipment from the Cadia mine so that it could be used on the RTA contract at Aaron’s Pass, and the acquisition of equipment by Stephen (which, I interpolate, was in fact likely acquired by RKM, or possibly BPPL). Mr Streeter also refers to conversations with Brian in which Mr Streeter had referred to Stephen having acquired equipment that was being used at the Cadia mine. I accept that those conversations occurred, but they also fall well short of full and fair disclosure, where Mr Streeter plainly did not know the commercial arrangements involving RKM and BPPL so as to disclose them to Brian. Mr Streeter was not required for cross-examination.

36. The Robert Murdoch Interests also read an affidavit dated 9 November 2017 of Mr Boag, who was a plant operator with MDL, who refers to the transport of equipment to the Cadia mine, the use of equipment which he believed belonged to Stephen (but which in fact belonged to RKM or possibly BPPL) at the Cadia mine, and conversations which he had with Brian about the machines which he understood were used by Stephen (but were in fact provided by RKM or BPPL) at the Cadia mine. Mr Boag was not required for cross-examination. The Robert Murdoch interests also read an affidavit dated 27 October 2017 of Mr Kemp, who was employed by RKM and also addressed crushing work undertaken by MDL at the Cadia mine and the transfer of MDL’s equipment from the Cadia mine for use in the RTA contract at Aaron’s Pass. Mr Kemp was also not required for cross-examination.

37. The Robert Murdoch Interests also read an affidavit dated 17 November 2017 of Ms Austin, a former employee of MDL, who referred to the level of communication between Brian and Robert, her negative impression of Scott, the dispute between Stephen and Scott arising from Stephen’s purchase of the fuel truck, and the movement of equipment between companies within the Murdoch Group. Ms Austin’s evidence does not significantly advance matters, and she was not required for cross-examination. The Robert Murdoch Interests read a further affidavit dated 18 November 2018 of Ms Rhonda Murdoch who referred to her relationship with her brothers, Brian and Robert, the deterioration in their relationship and the steps taken prior to the commencement of the proceedings. Ms Murdoch was also not required for cross-examination.

38. The parties also led expert evidence. The Brian Murdoch Interests rely on expert evidence of Mr Michael Hocking, who was a valuer of real property including mining assets and licensed real estate agent. Aspects of Mr Hocking’s evidence travelled well beyond his professional expertise and were not read or not admitted. The Brian Murdoch Interests initially relied primarily on a balance sheet valuation of MDL, not supported by expert evidence, in respect of their claim for an order that Robert sell his shares to Brian, which is no longer pressed. However, they also relied on the affidavit evidence and expert reports of Mr Ashby, a chartered accountant, in response to expert accounting evidence led by the Robert Murdoch Interests. The Robert Murdoch Interests relied on the evidence of Mr Dupont, who is a valuer specialising in mines and the extractive industry, in respect of their claims in respect of the Braeside and Robertson’s Knob mines in the Second Derivative Claim and in respect of the Timboon quarry. I will address that evidence below, to the extent it is necessary to do so, in dealing with the particular issues in dispute.

Chronology of events

39. I now turn to the chronology of events, which is in part a history of the success of the Murdoch family and their business in the period before the relations between family members deteriorated, and in part a history of the matters which led to the deterioration of that relationship and the commencement of the litigation. I have drawn partly upon admitted facts in the pleadings and partly upon the affidavit evidence and cross-examination. I will refer to aspects of the witnesses’ evidence here and other aspects of that evidence in dealing with particular claims below.

40. In the 1950s, the late Mr Tim Murdoch, Brian’s and Robert’s father, established a business under the business name “WJ Murdoch & Co” involving the quarrying, crushing and milling of dolomite located near Mudgee in New South Wales and, in the early 1960s, Brian and Robert commenced working in the business. WJM was incorporated on 2 May 1983 with Brian and Robert as its directors and, along with Mr Tim Murdoch, equal shareholders. Mr Tim Murdoch then gifted the business at Mt Knowles to WJM and it came under Brian’s and Robert’s control. From that time until 1996, the business conducted by WJM consisted of crushing, milling and bagging dolomite from the Mt Knowles quarry site. In about 1987, Stephen and Scott became employees of WJM. On or about 21 December 1989, WJM purchased the freehold land on which a quarry site at Mt Knowles near Mudgee is situated.

41. MDL was incorporated on 8 November 1996 and, in about May 1997, MDL purchased IMA’s business, assets and operations with funds borrowed from a bank. It appears that Robert procured the loan facility and granted a mortgage over his personal real property assets to do so. There is a dispute, which it is not necessary to resolve, whether Brian would also have been willing to provide a guarantee or personal assets as security for that loan. Brian and Robert have each been a director of and an equal shareholder in MDL. MDL subsequently acquired further land at Mudgee in 1997, and between 1997 and 2002 conducted a quarry at that site (”Bara quarry”) extracting rhyolite. There is a dispute as to whether MSC operated the Bara quarry from 2002 to 2014, or as to the terms on which it did so, which it is not necessary to determine.

42. Robert’s evidence is that, in 2002, Brian and Robert acquired interests outside MDL in a company which, in a joint venture with a third party entity, owned and operated a limestone quarry at Parkes, although it appears that MDL paid costs in respect of the venture (Robert 20.11.17 [118]). MSC was also incorporated on 19 June 2002 and Brian, Scott, Robert and Stephen have been the directors of that company and BMPL, Stoneco, RKM and BPPL are its shareholders. That company acquired land at Oberon and developed a business thereon for quarrying, crushing and screening another mineral, alaskalite there. In 2006, Brian and Robert sold their interest in the Hi Tech Concrete business on favourable terms, and it appears that that sale allowed funds for the pursuit of other business opportunities.

43. In June 2007, MDL first contracted for work for Cadia Holdings Pty Limited or CVO for the Cadia mine. I refer to the terms of that contract in dealing with the issue relating to work at the Cadia mine below.

44. In October 2007, Scott disclosed an opportunity to acquire an interest in the Timor quarry in the Hunter Valley to MDL, or Robert and Brian, and, after Robert showed no interest in that opportunity, Scott pursued it through his company Stoneco. In his first affidavit, Scott refers to the circumstances in which he became aware of that opportunity in 2007 (Scott 6.7.17 [61]ff) and to Robert’s lack of interest in it (Scott 6.7.17 [67]ff), although his evidence does not establish any formal consent by MDL to his pursuing that project, and he also refers to the work which he subsequently undertook in respect of that quarry. Scott’s evidence is that the Timor quarry supplies limestone to the Hunter Valley and that quarries in the central west have a greater impact on the Murdoch Group’s quarries than that quarry (Scott 6.7.17 [91]). There was a considerable delay in the commencement of work at the Timor quarry, after Stoneco acquired an interest in it, because of issues relating to the development consent which resulted in proceedings in the Land and Environment Court (Scott 6.7.17 [72]ff).

45. Robert’s first affidavit dated 20 November 2017 also addresses Scott’s involvement with the Timor quarry (Robert 20.11.17 [142]ff). He refers to having been sent information concerning the opportunity to acquire and develop that quarry and to his conclusion that it would be too costly for MDL to do so (Robert 20.11.17 [144]), to Scott having disclosed his interest in setting up a quarry at Timor in October 2007 and to Robert having responded in a manner that indicated his lack of enthusiasm for the venture (Robert 20.11.17 [146]). Stephen also gave evidence of a discussion with Scott in late September or early October 2007 about the possibility of acquiring the Timor quarry, and of the further conversation in mid-October 2007 when Scott sought to persuade MDL to acquire that quarry; Robert did not agree to that suggestion; and Stephen subsequently suggested to Robert that Scott should “leave the family business and go it alone” and that Scott’s acquisition of Timor “could cause conflict within the companies” and again expressed the view that “Scott should leave the company and be paid out” (Stephen 20.11.17 [168]-[169]), in a further indication of the tensions then developing between him and Scott. There is no suggestion in these proceedings that Scott breached his duty in respect of that acquisition, although the evidence does not establish that MDL or Robert expressly consented to (as distinct from not objecting to) Scott’s acquisition of that quarry.

46. In late 2007, Stephen bought and then sold a fuel truck at a profit, in a transaction to which at least Scott and possibly also Brian took objection. In his affidavit evidence, Stephen addressed the circumstances in which he acquired that fuel truck and subsequently resold it within a short time for a substantial profit; that matter gave rise to a conflict with Scott; and Robert supported Stephen’s conduct of the transaction in a discussion with Brian on the basis that “it is only fair because Scott is off doing his own thing and [Stephen is] working hard for the company” (Stephen 20.11.17 [171]ff). Scott was cross-examined as to that matter and his evidence was that he perceived that Stephen had not dealt with the transaction appropriately and raised a challenge to it with Robert. Scott also perceived that the transaction was within the “company boundary” and his evidence was that Robert refused to do anything about it (T147).

47. In 2008, Brian and Robert travelled to New Zealand to explore a possible business opportunity and, in the course of that trip, identified a possible limestone deposit at Spring Junction, which was later acquired by RK Murdoch New Zealand Pty Ltd (“RKMNZ”), a company associated with Robert and Stephen. Robert’s first affidavit (Robert 20.11.17 [162]ff) addresses the circumstances in which he and Brian saw the Spring Junction land during the trip to New Zealand in 2008. Robert’s evidence (Robert 20.11.17 [180]) is that he disclosed to Brian that Stephen “might have a go” at the Spring Junction land in May 2009. He refers to the circumstances in which RKMNZ acquired that property during 2009 and 2010. He also refers to subsequent difficulties with the development of that land and his evidence is that he would be obliged to sell it in 2018 (Robert 20.11.17 [186]). Robert confirmed in cross-examination that RKMNZ acquired the Spring Junction land with a view to establishing a quarry, but that ultimately no quarry was established (T260). Stephen’s evidence also addresses the acquisition of that land (Stephen 20.11.17 [530]ff).

48. Brian’s evidence is that he travelled with Robert to New Zealand to inspect a limestone quarry site as a possible purchase for the Murdoch Group (I interpolate, as distinct from MDL) in early 2009 (although he appears to be in error as to the date of that trip) and to Robert having expressed the view that the Murdoch Group should not purchase that site, because there were limited opportunities for that operation in New Zealand, and MDL would be a foreign investor for New Zealand purposes (Brian 8.7.17 [92]). Brian's evidence is that, but for that conversation, he would have supported a decision that MDL acquire that site. Brian also refers to Robert having later advised that Stephen and Robert had decided to go ahead with the acquisition of that site on their own (Brian 8.7.17 [94]).

49. Brian was cross-examined at some length as to the New Zealand trip, although he said that he had only a vague recollection of it (T227). Brian had difficulty in responding in cross-examination to a question concerning any consent to Stephen being involved with the New Zealand quarry and appears to have misunderstood that question as involving a splitting of the companies (T233). Nothing turns on that where the level of disclosure made by Robert and Stephen in respect of RKMNZ’s acquisition of the New Zealand quarry would not have amounted to a narrowing of the scope of the duty or to ratification, had a breach of duty otherwise been established. I address the claim in respect of that acquisition below.

50. In July 2009, Scott purchased a mobile crusher outside the Murdoch Group and made that available to a third party for some crushing work in South Australia. Robert addresses this issue in his first affidavit (Robert 20.11.17 [209]). Scott’s evidence in his second affidavit is that crushing equipment that he acquired for the Timor mine was used for the South Australian project and he denies that he was seeking to establish a crushing business rather than to undertake crushing at the Timor mine (Scott 29.3.18 [78]-[79]). Scott was cross-examined as to Stoneco’s acquisition of that crusher (T129ff) and his evidence was that that crusher was acquired for the Timor mine rather than to be made available for contracting use. Scott’s evidence in cross-examination was also that he had disclosed the opportunity for crushing work in South Australia to Stephen, and sought to have MDL or MSC do that work in order to assist the client, but that Stephen considered the equipment should not be sent from New South Wales to South Australia to crush a relatively small volume of granite (T154). Robert’s evidence in cross-examination was that Brian discussed that work with him and that he approved it in any event (T274). I accept that matter had been sufficiently disclosed to MDL, and the fact that Stoneco then took up that opportunity, after MDL rejected it, does not provide any basis for any narrowing of the scope of MDL’s crushing business or for RKM or BPPL to take up other opportunities within the scope of MDL’s business without full and fair disclosure.

39. In late September 2009 or October 2009, Brian and Robert acquired a half interest in the Bylong quarry and, importantly, did so for themselves and not for MDL (Robert 20.11.17 [222]ff). That evidence is significant, so far as that acquisition did not take place within MDL or indeed in any company in the Murdoch Group.

40. It now appears to be common ground that, on 20 November 2009, Brian, Robert, Scott and Stephen met and agreed, at least in principle, to split their respective interests, although no attempt was made to identify how that would be implemented or who would take particular assets and that split was not later agreed or implemented. Robert’s evidence is that Scott and Brian both indicated at that meeting that they wanted to split the company, Brian indicated a perception that he and Scott “aren’t in the loop” and Robert indicated that he was “happy to” take the course of splitting the company. Robert also refers to his diary entry which records:

“Meeting Robert Brian Scott Stephen resolved that we split the companies up. Scott needs the equipment & the money to Fund Scone contact quality valuer surveyors ...’

53. That entry appears to support Robert’s evidence of this meeting, although his evidence is that it was his note of how the split of the company might be done rather than a record of the conversation (Robert 20.11.17 [246]-[247]). Robert also refers (Robert 20.11.17 [249]) to his understanding and belief that Brian and he shared the view, from that date, that the Murdoch Group had to be divided between Brian and Scott on the one hand and Stephen and Robert on the other, and to a number of factors that delayed the implementation of that transaction (Robert 20.11.17 [249]-[250]).

54. Robert’s evidence (Robert 20.11.17 [253]) is also that he had no doubt as a result of that meeting “that the family business relationship had come to an end” and to his perception that he was “freed from the relationship so that Stephen and [he] could do our own thing” (Robert 20.11.17 [254]). Robert does not explain as to how that could have occurred, where the split of assets had not then been implemented, and has still not been implemented. It is not necessary to determine whether Robert had that perception, as a matter of fact; to the extent that he had such a perception, it was not reasonably based where the relevant companies still held substantial assets and that perception did not narrow or extinguish his duties to those companies. Notwithstanding the emphasis that is placed on this matter by the Robert Murdoch Interests, it seems to me that it was never seriously arguable that a discussion of a split of the Murdoch Group, where the manner in which it was to be implemented was not resolved and where it was not in fact implemented, gave rise to any narrowing of the duties owed to the companies by Robert or Brian, or by Scott or Stephen as employees of the companies.

55. In an earlier affidavit filed in the proceedings, which was not read by the Robert Murdoch Interests but was put to Robert in cross-examination, his evidence was that he understood that Brian and he shared the view that the Murdoch Group was to be divided since November 2009 but that there had never been an agreement between the parties as to how and when that would occur or who may acquire which shares or assets of the entities within the Murdoch Group (T264). It seemed to me that that evidence accurately recorded the position and, after some hesitation, Robert conceded that matter in cross-examination (T265). Robert also characterised the split of assets in his affidavit dated 20 November 2017, again correctly in my view, as a “possibility” (Robert 20.11.17 [691]). It seems to me that that both parties likely accepted the desirability of that course, but there were real practical difficulties in its implementation, as events have demonstrated. Again, Robert essentially conceded that matter in cross-examination (T266).

56. Stephen also gave evidence of the November conversation, after first referring to Robert’s and his discontent with Scott’s lack of involvement with the Murdoch Group. His evidence was that Scott said that “We want to split the companies up. It’s not working” and Robert responded “that’s fine by me” (Stephen 20.11.17 [182]ff); he also referred to Brian and Scott’s appearing “happy” with Robert’s response, and to his conversation with Robert in which they also welcomed that position (Stephen 20.11.17 [197]-[198]).

57. Brian did not accept the fact of that meeting in his earlier evidence. He initially denied, in first his affidavit dated 6 July 2017, that there was a meeting in November 2009 in which Robert and he “agreed” that the business, including WJM and MDL, should be divided and his evidence there was that:

“There has never been such a meeting and we have never agreed to divide up the family business and to conduct separate businesses.”

He there acknowledged that there had been discussions over several years since 2012 about separating the businesses and his evidence was that there “certainly was no such discussion in 2009”. In his second affidavit dated 28 March 2018, Brian again denied that a meeting took place on 20 November 2009 and denied that he would have said to split up the company (Brian 28.3.18 [12]). I am satisfied that Brian was in error in this recollection and that the separation of the business was discussed at a meeting in November 2009, although no agreement was then reached as to the details of how a separation of the business could be implemented and it was not in fact implemented thereafter. I am conscious that Brian’s denial of this meeting undermines the reliability of his evidence.

58. In March 2010, MDL and CVO entered a further contract in respect of the Cadia mine,    referred to as the Fluor Contract, to which I return below. In April 2010, Robert, Stephen and Mr Goodwin travelled to the United Kingdom and Ireland to purchase crushers for MDL and also for RKM. Later in April 2010, RKM also acquired three flood-damaged crushers (referred to as the “swamped” crushers) from another quarry, which are the subject of a claim in the proceedings that I address below. The Brian Murdoch Interests now appear to accept that acquisition was by RKM and not by MDL, although it was originally treated in MDL’s accounts as an acquisition by MDL, apparently in error, and that treatment was later sought to be reversed by a record of a “sale” of the crushers to RKM.

59. In May 2010, an issue arose at the Cadia mine (which has been described in the proceedings as to “Cadia emergency”) and a further issue in respect of block caving subsequently arose at the Cadia mine. MDL provided additional crushing services to CVO, initially on a short term basis and then on an extended basis, through a series of successive purchase orders, but a significant amount of the work was subcontracted to, or equipment was hired from, RKM and BPPL in a manner that ultimately diverted a large part of the revenue and profit from that work to RKM or BPPL.

60. Some attempt was made to progress the suggested separation of assets with the Murdoch Group between Brain and Robert and, on 6 July 2010, a valuer advised Scott Murdoch that he would be able to undertake a valuation of various properties and quarries held by MDL and WJM and indicated the information that would be required for that valuation (Ex J1, B960).

61. As I noted above, in October 2010, Stoneco purchased a second hand jaw crusher and then provided some crushing services to a third party South Australia. By late 2010 or possibly 2011, Scott appears to have recognised that crushers supplied by Stephen (although in fact owned by RKM) were being used at the Cadia mine.

62. In January 2011, Stephen and Robert inspected a quarry at Timboon in Victoria and RKM later acquired the Timboon quarry. I address the evidence as to that transaction below.

63. At about the same time, Scott inspected the Braeside quarry near Scone in New South Wales and Stoneco later acquired the Braeside quarry and, in an associated transaction, the Robertson’s Knob quarry. In his first affidavit, Scott refers to the circumstances of his taking over the lease at the Braeside and Robertson’s Knob quarries and he contends that neither competes with the Murdoch Group’s operations (Scott 6.7.17 [84]). Again, his evidence does not suggest that he obtained any formal consent was obtained from MDL to his acquiring those leases, and he acknowledges that there was an occasion on which he successfully tendered to supply the Australian Rail Track Corporation from the Braeside quarry, in competition with MDL’s Bylong quarry (Scott 6.7.17 [88]). Scott’s evidence, and that of several other witnesses, does not clearly distinguish between steps which he took personally and steps undertaken by Stoneco, the company which he controls, in that regard.

64. Robert also gives evidence of the circumstances in which he became aware of Scott’s acquisition of the Braeside quarry (Robert 20.11.17 [406]ff); his evidence, to which no objection was taken, is that but for the decision to split the Murdoch Group, that quarry could have added “significant value” to the Murdoch Group. It seems to me that, although Robert seeks to link this matter with the discussion of splitting the Murdoch Group, it is primarily significant for establishing, consistent with the parties’ earlier behaviour, that they, including Scott and Brian, did not then have any understanding that the scope of MDL’s activities extended to the acquisition of other quarries or that they were not free to acquire such quarries for themselves or associated companies. I address the challenge to this transaction in the second derivative action brought by the Robert Murdoch Interests below.

65. On 30 March 2011, to which Scott referred as “D-day”, he decided to cease working for the Murdoch Group and undertake a separate business (Scott 29.3.18 [61]), although he continued to receive a salary from the Murdoch Group, a matter that was in dispute but is no longer pressed. Scott there attributes his decision to leave the Murdoch Group to his belief that Robert and Stephen were “doing the wrong thing” by Brian. He gave more nuanced evidence in cross-examination that his leaving the Group related to “a matter between the parties” and the a “working environment” which I understand to be a reference to difficulties in the working relationship, although he also pointed to his concerns as to the fuel truck that had been acquired by Stephen and then sold and the work that was being done (I interpolate, apparently by Stephen but in fact primarily using RKM equipment) at the Cadia mine (T140).

66. Scott’s evidence (Scott 29.3.18 [63]) is that, in April 2011, he identified amounts paid to entities that he did not recognise as part of the Murdoch Group, from MYOB files for the Murdoch Group that were provided to him in electronic form by the Group‘s accountant, Mr Portelli. Scott’s second affidavit also refers to a meeting with Mr Portelli in mid-2011 to review the MYOB accounts, where he noted payments to BPPL and RKM of which he was not previously aware, and saw a reference to the business name “MDL Crushing” which he subsequently found was owned by RKM (Scott 29.3.18 [112]). Scott, in cross-examination, rightly recognised the difference between third party subcontracting to MDL and subcontracting by companies associated with shareholders and directors (T149), where the latter plainly raises a risk of transfer of value which arms’ length transactions with third parties do not. Scott also referred, in cross-examination, to his “shock” that RKM and BPPL had become the supplier of a product that MDL’s “core business does” and said that he raised his concern that money was being “diverted” from MDL in this fashion with Brian (T150).

67. It appears that the information made available to Scott in April 2011 included a supplier’s payment register which indicated that, by that time, an amount of $1,464,529 had already been paid by MDL to BPPL for work done at the Cadia mine (T201). At about that time, Scott raised that matter with Stephen and suggested that BPPL had taken $1.5 million out of MDL and that “we are not happy” (Robert 20.11.17 [403]; Scott 29.3.18 [55]; T201). Although Scott was cross-examined at some length as to whether his comment was intended to suggest that BPPL had “taken” $1.5 million as distinct from doing $1.5 million worth of work (T201), it seems to me that Scott had then recognised, correctly, that the opportunity to do work valued at nearly $1.5 million had been diverted from MDL to BPPL. Scott confirmed in cross-examination that he recalled speaking to Stephen and indicating that he was not happy that that amount of money had been taken from MDL (T205). Scott’s evidence is that he and Brian had viewed the supplier’s payment ledger at his house and it was Scott and Brian’s shared opinion that BPPL had taken that amount out of MDL (T207). Scott was also cross-examined as to the extent to which he informed Brian of his concerns and his evidence was that Brian was “fairly understanding of the matters” but was “lost to know what to do” before advice was sought from solicitors. That evidence seemed to me to be consistent with the probabilities.

68. In mid-2011, MDL contracted with the Roads and Traffic Authority to provide crushing services for roadwork at Aaron’s Pass, where work commenced in the week of 13 July 2011 and continued until December 2011. The Robert Murdoch Interests rely on this matter to demonstrate that MDL did not have equipment available to perform the work at the Cadia mine, although I will return below to the well-established position that that is not an answer to a claim for breach of fiduciary duty arising from the conflict or no profit rules, particularly where an account of profits is sought.

69. Scott’s evidence is that, in late 2011, he raised with Stephen the fact that Stephen’s crushers were being used at the Cadia mine and suggested that he should have the same opportunity (Scott 29.3.18 [79], T197). Again, that conversation did not recognise that RKM’s equipment was primarily used at the Cadia mine and it derived much of the profit from the work done there.

70. In mid-November 2011, Robert, who was then undergoing treatment for cancer, made a first detailed offer as to the terms of a split of the Murdoch Group which did not address the position in respect of the shares in MDL (Ex J1, 1601; Robert 20.11.17 [435]ff). Robert accepted in cross-examination (T267) that that proposal was rejected by Brian. Stephen sent a second offer to split the Murdoch Group, apparently at Brian’s request, in December 2011 (Robert 20.11.17 [451]ff). Robert accepted in cross-examination that that second proposal was sent with his approval and authorisation (T269). Robert’s evidence is that Stephen then advised him that Brian had said that he would take the offer, if it was reversed so that he acquired the assets which Robert and Stephen had proposed to keep. Robert did not accept that counter-proposal.

71. Further work was done at the Cadia mine in February 2012, under Fluor Contract variations 6–8, and in mid-March 2012, RKM or BPPL commenced steel–sorting work at Cadia, hiring some equipment from MDL to do so. I address the issues as to that work below.

72. Brian and Robert attended a meeting with a solicitor who had done work for them and the Murdoch group to discuss the splitting of the Murdoch Group in March 2012. A letter prepared by Scott, based on Brian’s recollection, and sent to Brian’s solicitor on 18 March 2012 (Ex J1, B1739) recorded what occurred at that meeting as follows:

“Bob said to [the solicitor] that [I] had something to say. [I] then said I wanted to have the companies assets valued with the view to Splitting them, Robert agreed at this point, [the solicitor] then proceeded to explain the Valuation, Tax etc costs required to do this, at which point Robert then was not in agreement to getting a valuation, he made some suggestion re Shares and this was discussed amongst us all, [MDL’s solicitor] didn’t feel this was Suitable for a family company, [the solicitor] said to Robert what did he feel the Companies Value Was and he said 14million, [the solicitor] commented that does this include Business good will Bob said no as We have no current contracts and he felt there was no good will value ???” [question marks in original]

73. That letter also records discussion of the Rylstone quarry at that meeting and Brian then records that:

“I discussed with Robert part of my reasons for splitting including the fact I am not being told everything that is happening and not being given bank account balances and that he was signing Cheques without me Agreeing. [I didn’t discuss the full details of my knowledge of his activities.]

At this point he commented you can come out to the office and sit there for 5 days a week if that’s what you want, I conveyed that this is not the information I am requiring. Robert then said and I am thinking about not going out there anymore myself anyway.

The meeting ended with [the solicitor] saying that no partner can make the other sell or split their interests.”

That letter also recorded Robert having said to Brian, after the meeting with the solicitor had ended, that he and Stephen “are thinking about closing MDL down as they have other things to do”. That letter highlighted the difficulty that Brian then faced in addressing these issues, which I accept was real, by observing that he was looking to the solicitor now retained in these proceedings for guidance and that:

“[The solicitor’s] comments re Splitting made me feel a lot helpless, I understand he is not aware of Roberts activities and he made it clear to me he could not advise us separately.”

74. Correspondence between the parties’ solicitors as to the issues raised in these proceedings commenced by 25 May 2012 (Ex J1, B17825) and, from mid-2012, Brian did not attend a proposed directors’ meeting and management meeting of the Murdoch Group companies.

75. Stephen subsequently resigned as production manager at MDL on 28 February 2014, by letter sent to Robert (Ex J1, B2105). Brian commenced the proceedings to which I refer as the “First Derivative Claim” in March 2016 and the several other proceedings followed.

First Derivative Claim

Claim against Robert in respect of work done at the Cadia mine

76. As I noted above, by an Originating Process filed on 20 January 2016 and a Further Amended Statement of Claim filed on 14 August 2019 (“FASC”), Brian seeks certain orders on behalf of MDL in derivative proceedings. The First Defendant in this claim is Robert; the Second, Third, Fourth and Fifth Defendants (as identified in the FASC, but not the Originating Process) are Stephen, RKM, BPPL and Kurdeez Minerals respectively. Two aspects of this claim, relating to work done by RKM at the Cadia mine and the acquisition of the Timboon quarry are pressed, and other matters were not pressed at the hearing. It will be convenient to deal with these issues in turn, dealing with the relevant legal issues in respect of the Cadia claim and not repeating that analysis in respect of the claim relating to the Timboon quarry.

77. MDL pleads [FASC [5]) that, in the financial years ending 30 June 2008 and 30 June 2009, MDL successfully tendered for and subsequently performed crushing, grinding and associated work at the Cadia mine for Cadia Holdings Pty Limited and CVO or other entities engaged in the conduct of the Cadia mine. The Robert Murdoch Interests plead (Defence [5]) the entry into several contracts relating to the Cadia mine and otherwise deny the paragraph. MDL also pleads (FASC [6]) that, in the financial years ending 30 June 2009, 30 June 2010 and 30 June 2011, MDL successfully obtained, through contracts and variations to contracts with CVO, ongoing opportunities and entitlements to perform remunerated work and deliver remunerated services comprising of, or in relation to crushing and grinding work at the Cadia mine. The Robert Murdoch Interests again plead (Defence [6]) the entry into a further contract and several variations relating to the mine and otherwise deny the paragraph.

Claim in respect of Buckaroo Road property

270. Next, Brian relies on an allegation that Robert omitted, in or about early November 2016, to cause MDL to acquire a property located at Buckaroo Lane or Buckaroo Road near Mudgee (“Buckaroo Road Property”), and contends that such an acquisition was within MDL’s financial means and within its interests and that Robert caused or permitted or assisted a third party to purchase that property.

271. Brian contends (POC [43]) that, by about August or September 2016, the Buckaroo Road Property which was in close proximity to MDL’s quarry property in Mudgee was available for sale and (POC [44]) that, at or about that same time, namely in about August or September 2016, or by no later than October 2016, Robert and Stephen knew about the availability or likely availability of that property for purchase. Brian contends (POC [45]) that the Buckaroo Road Property was an asset, the acquisition of which MDL had or would have had a “legitimate interest” in at that time and the acquisition of which would have been beneficial to MDL and (POC [46]) that neither Robert nor Stephen informed Brian, or otherwise separately and fully informed MDL, of the availability of the Buckaroo Road property for purchase. Brian also contends (POC [47]) that, by no later than 27 October 2016, Stephen had commenced, or had been requested by Robert (in his capacity as a director of MDL) and had agreed shortly to commence, employment as a senior manager at MDL.

272. Brian contends (POC [48]) that, by no later than about early November 2016, Robert and/or Stephen decided to take steps to acquire, whether in their own names or in the name of a corporate entity in which they had an ownership interest or over which they had control, the Buckaroo Road Property and (POC [49]), in or about early November 2016, Stephen attended a public auction of the Buckaroo Road Property for the purpose of bidding for and thus attempting to purchase that property; that (POC [50]) Robert knew that Stephen was intending to attend at and participate in the process of bidding at the auction of the Buckaroo Road Property; and that (POC [51]), in or about early 2016, Stephen, either in his own interests and/or on behalf of Robert or one of the corporate entities related to Stephen or Robert, successfully bid at the auction of the Buckaroo Road Property, executed and then exchanged a contract for the purchase of the property.

273. Brian contends (POC [52]) that, in taking any and all of the pleaded steps (and in failing to give MDL the opportunity to take, or failing to cause MDL to take, the pleaded steps, including by fully informing Brian, Robert breached his fiduciary duties to MDL and his duties to MDL pursuant to sections 180-183 of the Corporations Act and Stephen breached his fiduciary duties to MDL and his duties to MDL pursuant to sections 180-183 of the Corporations Act and his contractual duties to MDL; that (POC [53]), by reason of MDL not itself acquiring the Buckaroo Road Property, it has suffered loss and damage; and the pleaded conduct of MDL’s affairs and the acts or omissions by or on behalf of MDL were contrary to the interest of the members as a whole of MDL and oppressive to, unfairly prejudicial to, and unfairly discriminatory against Brian in his capacity as a shareholder; and give rise to an entitlement on the part of Brian to seek the relief sought in these proceedings.

274. Turning to the affidavit evidence, Brian addressed the purchase of the Buckaroo Road Property and expressed the opinion that MDL should have purchased that property when it came onto the market, and his evidence is that he was not told that property became available for sale by either Robert or Stephen (Brian 6.7.17 [119]), and first became aware that it had been sold on market and purchased by Stephen after a public auction (Brian 6.7.17 [122]). I accept Brian’s evidence as to when he became aware of the sale of the property. Robert’s evidence also addresses the acquisition of the Buckaroo Road Property by Stephen, and his evidence was that he had never been inclined to purchase that property on behalf of MDL for several reasons (Robert 20.11.17 [551]). Robert was emphatic in cross-examination that, although MDL could have purchased the Buckaroo Road Property, there was no need for it to do so, including for use as a buffer area in respect of MDL’s Buckaroo Road quarry (T365). Stephen’s affidavit evidence also addresses the purchase of the Buckaroo Road Property (Stephen [564]ff).

275. The Brian Murdoch Interests did not tender a report of Mr Hocking dealing with this claim, but tendered aspects of the joint expert report of Mr Hocking and Mr Cooper, reflecting the views of Mr Cooper, subject to a limiting order under s 136 of the Evidence Act (Ex P4). The joint report refers to MDL’s operation of the Buckaroo Road quarry and associated processing facilities and to an associated mining lease, and noted that the mining licence area and main processing plant site are separated by land held by outside parties, so that the delivery of material from the extraction area to the processing plant depends upon those parties’ continued consent. The joint report also refers to the circumstances of the sale of the Buckaroo Road Property. The parts of the joint report which were tendered, in respect of Mr Cooper’s view, noted his agreement that, if current arrangements for internal access between MDL’s extraction pits and MDL’s Buckaroo Road processing plant were not available in the future, then the use of an alternative access route by Buckaroo Road would trigger a change to the mine operating plan and likely a planning approval requirement through the local council; and haulage vehicles used by MDL would then need to be road registered. Mr Cooper also agreed that MDL’s blasting activities were regulated by reference to disturbance criteria, including ground vibration and air blast over-pressure and not merely by physical distance. Mr Cooper accepted that the continued availability of access was important to the operation of MDL’s Buckaroo Road quarry, although it was unclear from the joint report which access was referred to, and he did not agree that the operations of that quarry would necessarily become unviable if other access arrangements were no longer possible but approval to cart quarried materials in road registered trucks was obtained.

276. In any event, Mr Cooper made the more fundamental point that that same situation would exist, in respect of gaining approvals, whether access to Buckaroo Road was from lot 103 or lot 153, with the implication that the acquisition of the Buckaroo Road Property would not improve MDL’s position in that respect. Mr Cooper also pointed out, cogently in my view, that the acquisition of a single property would make only a marginal difference to the risk of any objections to MDL using road access to transport limestone and dolomite, where other properties in the area would be impacted by any increased heavy traffic movements on Buckaroo Road. It seems to me that, so far as the Brian Murdoch Interests sought to establish, by the tender of the joint report, that the acquisition of the Buckaroo Road Property was necessary to secure an alternative means of access between MDL’s Buckaroo Road quarry and MBL’s production plant, by road access through Buckaroo Road, that proposition is not established.

277. The Robert Murdoch Interests in turn tendered Mr Cooper’s report dated 30 January 2020 dealing with the acquisition of the Buckaroo Road Property (Ex D7). Mr Cooper there noted that one of four land parcels already owned by MDL as freehold had partial direct frontage and access rights to Buckaroo Road. Mr Cooper addressed issues as to the potential expansion of MDL’s Buckaroo Road quarry, the current working life of that quarry, investigations as to the expansion of that quarry and the costs of an assessment as to the expansion of that quarry, which do not appear to be raised by any evidence on which the Brian Murdoch Interests now rely. Mr Cooper also addressed the question of road access to current and future quarrying operations on the site, which is addressed by that part of the joint report which is now tendered by the Brian Murdoch Interests, to which I referred above.

278. Mr Cooper also addressed the question of a buffer zone for drilling and blasting activities and concluded that there would be little material benefit to MDL in acquiring the Buckaroo Road Property to provide a further buffer zone, for several reasons, including that there was already a sufficient buffer distance within MDL’s current land holding and that the utility of any increase in the buffer zone would be reduced by the fact the landholdings would not be contiguous and continuous. Mr Cooper also expressed the view that MDL already had legal access from its land holdings to Buckaroo Road, or the Buckaroo Road crown road reserve, and there was little material benefit in MDL acquiring the Buckaroo Road Property against the contingency that internal haul road arrangements would be terminated. Mr Cooper also noted that the acquisition of that property was not necessary to address the distance between quarry operations and the residence and buildings on that property, which was “comfortable” in the context of typical hard rock quarry operations. I accept Mr Cooper’s evidence as to these matters, in his initial report and as confirmed by the joint report, and it does not seem to me that the joint report assists the Brian Murdoch Interests in respect of this claim.

279. Had it been necessary to determine Brian’s oppression claim, I would not have been persuaded by the evidence to which I have referred that the purchase of the Buckaroo Road Property as a “buffer” for the quarry or to provide an alternate means of access would have been of any real advantage to MDL or that the purchase of residential properties was generally within the scope of MDL’s business; the opportunity to purchase that property did not come to Robert or Stephen as a director, officer or employee of MDL; and I am not persuaded that MDL suffered any loss by not acquiring that property. I am not persuaded that there was anything oppressive about Robert or Stephen (or, for that matter, Brian) not causing MDL to acquire that property. This claim would not have supported Brian’s oppression claim, had it been necessary to determine that claim.

Claim in respect of the “MDL Crushing” name

280. Brian also alleges that Robert caused or permitted RKM to register and use the business name “MDL Crushing”. Brian contends (POC [70]) that MDL had developed and held a reputation and had become known by reference to the description “MDL”; that (POC [71]) MDL, by a meeting of its directors, had not licenced, authorised or permitted RKM or any other company in which neither MDL itself nor Brian have a direct ownership interest, to use the name “MDL” in its business or commercial activities; that (POC [71]) Robert caused or allowed RKM to register and use, for its own commercial purposes, the business name and the description “MDL Crushing” and did so without MDL’s authorisation and without informing Brian; that (POC [72]) Robert thereby caused or permitted a separate corporate entity to derive a direct or indirect commercial benefit by purporting to have an association with MDL which it did not have; and (POC [73]) that conduct was contrary to the interest of MDL’s members as a whole and oppressive to, unfairly prejudicial to, and unfairly discriminatory against Brian in his capacity as a shareholder; and gives rise to an entitlement on the part of Brian Murdoch to seek the relief sought in these proceedings.

281. RKM registered the business name “MDL Crushing” from 13 October 2011 (Ex J1, B1496). Robert’s first affidavit addresses (Robert 20.11.17 [546]ff) the acquisition of the “MDL Crushing” business name, without providing any real explanation of that acquisition. Robert’s evidence in cross-examination was that he registered the “MDL Crushing” name as a “tit for tat” response to Scott’s use of the name “Stoneco”. He acknowledged that MDL’s accountant, Mr Portelli, had (rightly) advised him that registering that name was not a good idea but expressed the view that Mr Portelli should have given that advice more firmly (T366). It seems to me that Robert likely realised that the name “MDL Crushing” could be used for work undertaken by RKM and BPPL in the same field as MDL and that firm was in fact used for invoices issued by those companies for work done at the Cadia mine (T365-366). I recognise that Robert denied that he registered “MDL Crushing” as a business name as part of a plan to divert revenue and opportunities in relation to Cadia work away from MDL (T368); while that evidence may have been correct as a matter of subjective motivation, it seems to me that the use of that name in respect of the Cadia mine had that effect.

282. In closing submissions, Mr Kelly submits that (as Robert had said in his evidence noted above) RKM had registered the name “MDL Crushing” in response to Scott having caused his company to change its name to Stoneco Pty Ltd, which was similar to the name of MSC, “Mudgee Stone Co Pty Ltd” and that “[t]hat sort of tit for tat behaviour by parties in dispute does not rise high enough” to constitute oppression. If it were necessary to determine Brian’s oppression claim, I would have held that this conduct, exacerbated by the use of that name in work at the Cadia mine, amounted to oppression although it would not, without more, have warranted the relief previously sought by Brian and now abandoned.

Acquisition of New Zealand land for quarrying

283. Brian also relies on Robert’s omitting, in or about 2009, to cause MDL to acquire land in New Zealand which was suitable for a limestone quarry for the benefit of the MDL, and later causing or permitting that land to be acquired by persons or entities related to or associated with him. In opening submissions, Mr Bedrossian describes this claim as directed to the diversion of a corporate opportunity away from MDL by RKMNZ’s acquiring the New Zealand land for use as a limestone quarry. Mr Kelly submits that Brian’s evidence indicates that he rejected this land as a possible investment for MDL and was happy for Stephen to take it up, and that there is nothing commercially unfair about RKM or RKM NZ buying that land to develop it as a quarry after Brian had rejected it as an investment for MDL.

284. Again, the essential premise of this claim is that this opportunity was within the scope of MDL’s business. I have referred above to Robert’s and Brian’s evidence of their trip to New Zealand in 2009 to investigate the possible purchase of a quarry by the Murdoch Group, and as to their inspection of the Spring Junction land in the course of that trip. There is no evidence that any substantial consideration was then given to purchasing this land within MDL or within other companies in the Murdoch Group or by Brian and Robert personally, prior to the subsequent decision by Robert and Stephen to pursue that property.

285. Had it been necessary to determine Brian’s oppression claim, I would not have been persuaded that the purchase of the New Zealand land was within the scope of MDL’s business. I have referred above to the fact that interests in other quarries were purchased by Brian and Robert personally as well as by other companies in the Murdoch Group. I would not have found that Robert’s later decision to acquire this land in RKMNZ, rather than revisiting the question whether it should be acquired by MDL, or another company within the Murdoch Group, or Robert and Brian personally, was sufficient to establish the oppression claim.

Payment of Stephen’s remuneration

286. Brian also relies on an allegation that Robert caused or permitted Stephen to be paid remuneration by MDL in excess of that which ought reasonably have been due to Stephen. In opening, Mr Bedrossian addressed that claim only briefly, referring to the fact that the remuneration paid to Stephen included $72,500 on account of “holiday pay”, which was paid without consultation with Brian. In closing submissions, Mr Bedrossian accepted that the Court did not need to address the claim in respect of Stephen’s remuneration and, given the paucity of evidence and the absence of submissions, I do not propose to do so.

Provision of information to Brian

287. Brian also contends that Robert excluded Brian from obtaining timely and accurate information and making decisions in respect of MDL’s operations. I do not consider it necessary to address the claim for exclusion from information and decision-making, where it is plain that the basis of a winding up is established on other grounds.

The relief sought by Brian in the oppression claim

288. As I noted above, Brian, up to the point of closing submissions, sought an order under s 233 of the Corporations Act that Robert sell the entirety of his shareholding in MDL to Brian at fair value and that Robert resign as a director of MDL.

289. I should refer to Brian’s evidence in cross-examination, which undermined that claim for relief, before turning to the position that he now adopts. It was apparent in cross-examination that Brian did not have a clear understanding of the nature of the “oppression” claim that he had brought, although he understood that he was in Court because he felt he was “being robbed” and had called in accountants to review the documents and he believed that he had not received his share of “the money that was supposed to be made”. He also did not have a clear understanding that the relief he had sought in the oppression proceedings was that Robert sell his shareholding in MDL to him, and he volunteered that an alternative to such a sale was that Robert “corrects what he’s done” (T103). Brian’s evidence in cross-examination also undermined any suggestion that he could afford to acquire Robert’s shares if the order that he then sought was made. When asked in cross-examination whether he expected to pay fair value for Robert’s shareholding in MDL, he observed that that “depends how much it is” and that “[t]here’s not that much money floating around at this present time” (T103). When it was put to Brian that, at the time the proceedings were commenced, MDL was worth about $12 million and the cost of acquiring Robert’s shares would be about $6 million, he responded:

“I wouldn’t be able to do that, I haven’t got that sort of money.” (T106)

He later again accepted that the present position was that he did not have the money to buy out Robert’s share in MDL (T108).

290. Brian also accepted, in cross-examination, that he would like MDL to be wound up and for a final account to be taken and for him and Robert each to get a half share (T106) although that was contrary to the relief he then sought in the oppression proceedings and consistent with the relief then sought by Robert in the winding up proceedings. At the same time, he gave somewhat inconsistent evidence which contemplated that MDL would not be wound up and that, while he would like his share in the value of the company to come to him, he would also “like some control in how the company is run” and that he would be happier if he had “more involvement” (T107). He then gave evidence, in cross-examination, that appeared to be inconsistent with his earlier answers in respect of a winding up, that splitting up and distributing the assets of MDL would take away its operating capability and it would become worth “hardly anything” (T108). That assessment is likely to be incorrect, given the intrinsic value of MDL’s assets and the assets of associated companies. Later in his cross-examination, Brian treated the suggestion of a winding up as a threat made by Robert to “frighten” him out of the Court proceedings, and said that he did not think that Robert would consider winding up a family company (T226). That evidence is inconsistent with the relief that he now seeks in closing submissions.

290. In closing submissions, Brian no longer sought an order that Robert sell his shares in MDL to him, which, as I noted above, could not properly have been made where Brian’s evidence in cross-examination was that he could not afford to purchase those shares. The relief now sought by both Robert and Brian, by way of a winding up order, can readily be made, without determination of Brian’s oppression claim, by reason of the breakdown of their relationship.

Robert’s winding up application

292. By Originating Process filed on 9 September 2016, Robert seeks an order under s 461(1)(k) of the Corporations Act winding up MDL on the grounds that it is just and equitable and in the interests of the members as a whole.

293. At least where a company was established on the basis of relationships of mutual confidence, a winding up order may be made on the just and equitable basis under s 461(1)(k) of the Corporations Act where irreconcilable differences emerge between its members: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd above at [89]; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343; [2009] NSWSC 342 at [97]–[98]. The Court may make a winding up order on that basis in circumstances that do not amount to oppression, although a person who is responsible for the breakdown of the relationship is less likely to be afforded relief: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd above; Nassar v Innovative Precasters Group Pty Ltd above at [90], [96], [117]. I have also summarised the applicable principles in Re AJ Roberts Removals and Storage Pty Ltd [2017] NSWSC 1054 and Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914. A winding up is a characteristic remedy in circumstances that a working relationship predicated on mutual cooperation, trust and confidence has broken down, and that there is no absolute rule that the Court will not wind up a solvent company, although winding up is a last resort: Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [119]; Re Pure Nature Sydney Pty Ltd above at [76]; Asia Pacific Joint Mining v Allways Resources Holdings Pty Ltd (2018) 125 ACSR 227; [2018] QCA 048 at [52]. I bear in mind that s 467(4) of the Corporations Act applies where a winding up order is sought on the just and equitable ground, and I must have regard to the matters identified in that section, including the availability of some other remedy and whether the applicant is acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.

294. A number of factors plainly support a winding up on the just and equitable ground. First, it is plain that the Murdoch Group Companies, including MDL, were formed on the basis of the personal relationship between Brian and Robert based on mutual trust and confidence, and were conducted by them as a family business on that basis. Second, it is plain that the relationship between the parties has failed, and the length and range of issues in this litigation plainly demonstrates that matter. Third, board meetings were historically not conducted in a formal manner in MDL and, since the dispute has arisen, Brian is not prepared to attend board meetings which Robert has sought to convene. There are obvious difficulties in either now managing the business in an informal way or conducting board meetings of MDL, and there is deadlock at shareholder and board level in MDL, where only two shares have been issued and Brian and Robert each hold one share. As a result of the distrust between the parties, Brian is presently unwilling to sign financial accounts for MDL.

295. Brian previously opposed the winding up application on grounds set out in his Grounds of Opposition to Winding Up dated 3 February 2017. Those Grounds of Opposition are no longer pressed, where Brian now supports a winding-up, but I will address them briefly for completeness. Brian then contended (Grounds of Opposition [1]) that Robert has failed to establish facts or circumstances, which individually or cumulatively render it just or equitable, for the purposes of s 461(1)(k) of the Corporations Act, for MDL to be wound up. I am not persuaded by that contention and it is inconsistent with the relief which Brian now also seeks. Brian has also himself established matters which would make it just and equitable for MDL to be wound up, unless alternative relief were possible. Brian no longer seeks such alternative relief, and Robert has established a breakdown in the relationship between the parties that would warrant winding up unless any other order could be made.

296. Brian also then contended (Grounds of Opposition [2]) that, for the purposes of s 467(4) of the Act and also as a general ground of opposition to the contention that it is just and equitable that MDL be wound up, Robert had and continues to have available to him at least one other remedy, other than the winding up of MDL, and Robert had acted and continues to act unreasonably in seeking to have the company wound up instead of pursuing those other remedies. Brian then contended that the other available remedies comprised both the offers made by Brian to acquire the Robert’s shareholding in MDL and Brian’s ability, in the Oppression Proceedings, to consent to Court orders requiring the sale of Robert’s shares in MDL to Brian. Obviously, this contention cannot be sustained, where Brian accepted in cross-examination that he could not fund the acquisition of those shares and is inconsistent with Brian’s now seeking an order that MDL be wound up.

297. Third, Brian then contended (Grounds of Opposition [3]) that it was not just and equitable for MDL to be wound up in reliance upon the matters on which Brian relied by reason of the matters raised in the other proceedings and the suggestion that the determination of the other proceedings would establish that Brian was justified in his concerns and complaints regarding Robert’s conduct in respect of MDL and that conduct was unreasonable and caused the circumstances upon which he now relies in seeking a winding up order. While I accept that proposition in part, it would not displace the need for a winding up where the relationship between the directors and shareholders has irretrievably broken down and no feasible alternative to a winding up has been identified. Brian also then contended (Grounds of Opposition [4]) that, in the other proceedings, it would be established that Robert’s conduct rendered it unjust and inequitable, including in the circumstances of opportunities to sell to Brian his shareholding in MDL, that MDL be wound up on Robert’s application. I cannot accept that contention, where an alternative to winding up is not established and, of MDL were not wound up on Robert’s application it would need to be wound up as to the only just and equitable order in the oppression proceedings brought by Brian.

298. I recognise that a winding up of MDL could give rise to detriment to either shareholder, if the assets or business of MDL was sold by a liquidator to the other shareholder, other family members or their associated companies without a full sale process or in a manner that did not maximise the sale proceeds. In order to mitigate that risk, I have in mind appointing a liquidator from a national firm who will have the resources to conduct a national sale campaign in respect of the business if appropriate. Second, although the form of the sale process to be adopted is a commercial decision for the liquidator, it seems to me that a well-advised liquidator who is conscious of the significant risks in a related party sale may well seek a direction from the Court as to the appropriateness of any such sale, at least of MDL’s main undertaking (in the sense used in the case law) or any major assets.

299. The Robert Murdoch Interests submit that the appropriate order is for the Court to wind up MDL but defer making that order for a period in which the parties may consider their position with the benefit of the Court’s judgment and have a further opportunity to resolve their differences. The Brian Murdoch Interests also raised, in closing submissions, the possibility that a winding up order should be stayed for a short period, to allow the parties to consider any steps which might be taken upon the delivery of a judgment without the immediate intervention of a winding up order. The parties have had a long period in which to resolve the proceedings between themselves and have not done so. Nonetheless, I will stay the winding up order for a further two weeks after orders are made, consistent with the approach commonly taken in cases of this kind, to allow the parties a further opportunity to resolve these issues by agreement between themselves.

Costs

300. Subject to hearing from the parties, each of them has had only partial success, and my preliminary view is that there would be no order as to the costs of the proceedings.

301. I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 14 days or, if there is no agreement, their respective draft short minutes of order and short submissions as to the differences between them.

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Decision last updated: 29 October 2020