Munstermann v Rayward

[2017] NSWSC 133

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133
Hearing dates:	20 – 22 February 2017
Decision date:	24 February 2017
Jurisdiction:	Equity
Before:	Stevenson J
Decision:	Defendants to sell to plaintiffs their shares in third defendant at a price to be determined
Catchwords:	CORPORATIONS – oppression suit – plaintiff and defendant sole directors and equal shareholders of proprietary company – no shareholders agreement –deadlock – whether defendant engaged in conduct contrary to interests of members as a whole or unfairly prejudicial to plaintiff
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; NSWCA 95 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; HCA 25 Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688; NSWSC 413 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; NSWCA 97 Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343 Patterson v Humfrey [2014] WASC 446 Re a company; ex parte Shooter (No 2) [1991] BCLC 267 Re Brenfield Squash Racquets Club Ltd [1996] 2 BCLC 184 Re Enterprise Gold Mines NL (1991) 9 ACLC 168 Re Quest (1992) 6 ACSR 659 Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd (2004) ALR 136 United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514 Wayde v NSW Rugby League Ltd (1985) 180 CLR 459
Category:	Principal judgment
Parties:	Marcus Otto Munstermann (Plaintiff/First Cross-Defendant) Mark Lindsay Rayward (First Defendant/Cross-Claimant) Mazmark Industries Pty Limited (Second Defendant/Cross-Claimant) QIA Group Pty Limited (Third Defendant/Third Cross-Defendant) Fuseworx Pty Limited (Fourth Defendant/Second Cross-Defendant)
Representation:	Counsel: A S McGrath SC (Plaintiff, Fourth Defendant and Cross-Defendants) D K L Raphael (First and Second Defendants and Cross-Claimants)   Solicitors: Henry Davis York (Plaintiff, Fourth Defendant and Cross-Defendants) Etienne Lawyers (First and Second Defendants and Cross-Claimants)
File Number(s):	SC 2015/339876

Judgment

1. QIA Group Pty Limited carries on business in Queensland providing a range of safety inspection, training, and asset management services to owners and managers of strata property.

2. The plaintiffs, Mr Marcus Munstermann and his company Fuseworx Pty Limited, own 50 per cent of the issued shares in QIA.

3. The defendants, Mr Mark Rayward and his company Mazmark Industries Pty Limited, hold the other 50 per cent of the issued shares in QIA.

4. There is no shareholders agreement.

5. Mr Munstermann and Mr Rayward are the only directors of QIA.

6. Mr Munstermann and Mr Rayward agree that they have now reached an irreconcilable deadlock in the ownership and management of QIA. It is common ground that they are not able to agree about any aspect of the management of QIA’s business.

7. Mr Munstermann contends that:

1. Mr Rayward has conducted himself in the affairs of QIA in a manner that is contrary to the interests of the members of QIA as a whole and oppressive or unfairly prejudicial to Mr Munstermann and Fuseworx as shareholders of QIA;

2. the provisions of s 232 of the Corporations Act 2001 (Cth) are thereby enlivened; and

3. the Court should order, pursuant to s 233 of the Act, that Mr Rayward and Mazmark sell their shares in QIA to him.

8. It emerged during closing submissions that, in light of the cross-examination of Mr Rayward by Mr McGrath SC, who appeared for Mr Munstermann, there is now no dispute that s 232 is enlivened. Mr Raphael, who appeared for Mr Rayward, accepted this, in terms.

9. I find this to be a clear case of a director and equal shareholder of a company – here Mr Rayward – acting contrary to the interests of the members of the company as a whole and acting in a manner unfairly prejudicial to the other shareholder for the purposes of s 232.

10. The conclusion to which I have come is that Mr Rayward is the cause of the deadlock that now exists in QIA. The deadlock has come about following Mr Rayward’s announcement to Mr Munstermann in August 2014 that, because of his age and state of health, he wished to retire as a director of QIA and sell his shares to Mr Munstermann. The two men could not agree on a price. Thereafter, having had no active role in the management of QIA for many years, and as “part of [an] overall plan to leverage [his] way into a situation where there would be a buyout”, (to use words with which Mr Rayward agreed in cross-examination) Mr Rayward sought to intrude himself into a managerial role. In doing so, he obstructed the proper management of QIA and acted contrary to its interests. I will set out the detail of this conduct later in these reasons.

11. QIA is trading profitably and employs 12 people. Mr Munstermann wishes the company to continue trading. I see no reason why that should not occur. There is no cause to wind it up. Ultimately, neither party submitted this should occur.

12. My conclusion is that the justice of the case requires that Mr Rayward sell his interest in QIA to Mr Munstermann.

13. In closing submissions, this was barely disputed. Mr Raphael suggested, albeit faintly, that an “alternative solution open to the Court” was to “appoint a receiver to the company and for the receiver to call upon each party to tender an amount for the purchase of the shares”. I see no reason to impose on the parties the expense and inconvenience of taking this course.

14. The most recent financial statements presently available are those for FY 2015 and for July and August 2015. In FY 2015 QIA made a profit before tax of $37,350 and had an excess of assets over liabilities of $327,789.

15. In those circumstances, Mr Michael Potter, forensic account (who was called by Mr Munstermann), expressed the opinion that the value of Mr Rayward’s shares in QIA to Mr Munstermann (that is with no discount for lack of control) as at 31 August 2015 was between $115,372 and $125,532. Mr Potter adopted capitalisation of future maintainable earnings as the basis for his valuation.

16. Mr Rayward called no evidence as to the value of the shares in QIA.

17. Although Mr Raphael cross-examined Mr Potter for several hours, that cross-examination did not cause Mr Potter to change his opinion and did not, in my opinion, reveal any reason to doubt the correctness of Mr Potter’s approach.

18. I accept Mr Potter’s evidence.

19. As QIA has been trading for almost 18 months since the date of Mr Potter’s opinion, it is common ground that Mr Potter should now be provided with up to date financial information concerning QIA and asked to express his opinion as to the value of the shares in QIA in light of that up to date material.

20. I propose to order that Mr Rayward sell his interest in QIA to Mr Munstermann. The sale will be at a price determined in accordance with Mr Potter’s reasoning, once he has access to the most recent financial statements of QIA.

Relevant principles

21. There was no dispute about the principles to be applied.

22. They are:

1. The test of oppression is an objective one of unfairness (Wayde v NSW Rugby League Ltd (1985) 180 CLR 459 at 472 - 473 (Brennan J) (as his Honour then was); Re Quest (1992) 6 ACSR 659 at 669 (Mackenzie J)).

2. The court must look to determine whether on the balance of probabilities the objective commercial bystander would be satisfied that the affairs of the company were being conducted unfairly (Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; NSWCA 95 at [362] (Young CJ in Eq) (as his Honour then was); Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495 at [84] (White J)).

3. A director may act oppressively in the sense relevant to the operation of s 232 and yet not breach any fiduciary or other duty owed as a director (Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [49] (Barrett J) (as his Honour then was)).

4. Conduct of a company’s affairs may be oppressive even though the conduct is otherwise lawful (Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; HCA 25 at [176] (Gummow, Hayne, Heydon and Kiefel JJ)).

5. Conduct that has the effect of paralysing a company in the operation of its business is properly characterised as conduct contrary to the interests of the members as a whole (Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; NSWCA 95 at [185] (Basten JA)).

6. A shareholder of 50 per cent of the shares in a company can seek relief for oppressive conduct because they do not have control in the form of power to prevent the oppression, particularly where individual strong arm tactics are used (Patterson v Humfrey [2014] WASC 446 at [52]-[53] (Le Miere J).

7. The court must formulate an opinion about oppression or unfair prejudice as at the date of the institution of proceedings and the issue of relief under s 233 must be determined as at the date of the hearing (Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; NSWCA 97 at [159] (Spigelman CJ)).

8. The discretion under s 233 is wide as to the appropriate remedy (Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd (2004) ALR 136 at [70] (Wilcox, Marshall and Jacobson JJ) citing United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514; [2003] NSWCA 910 at [34]-[38] (Campbell J)).

9. The nature of the remedy chosen by the court under s 233 will be dependent upon the conclusions drawn by the court as to the type of oppression with which the court is dealing and the court will choose the remedy which is least intrusive (Re Enterprise Gold Mines NL (1991) 9 ACLC 168 at 174 (Murray J), United Rural Enterprises Pty Ltd v Lopmand Pty Ltd at [26] citing Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688; NSWSC 413 at 742 (Young J)).

10. The aim of any order under s 233 must be to put an end to the oppression (Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343 at [125] (Barrett J) (as his Honour then was)).

11. The court should only look to wind up an otherwise solvent company as a “last resort” (Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688; NSWSC 413 at 742 (Young J) (as his Honour then was)).

12. As a remedy for oppression, an oppressor can be ordered to sell their shares to the oppressed party (Re a company; ex parte Shooter (No 2) [1991] BCLC 267 (Harman J); Re Brenfield Squash Racquets Club Ltd [1996] 2 BCLC 184 (Rattee J)).

13. If an order is to be made for the purchase of shares under s 233 the task of the court is to fix a price that represents a fair value in all the circumstances (Smith Martis Cork at [71] (Wilcox, Marshall and Jacobson JJ)).

Background

23. What follows is, to a very large extent, drawn from Mr McGrath’s submissions. Mr Raphael accepted that Mr McGrath’s summary of the evidence was comprehensive and complete. I adopt it with gratitude.

24. QIA conducts its business at offices in Ormeau, on the Gold Coast, from premises leased from Rec Fund One Pty Limited, the self-managed superannuation fund of Mr Munstermann and his wife, Mrs Alida Munstermann.

25. QIA has 12 full-time and part-time employees. Four people are retained on a contract basis. Mr Munstermann and Mrs Munstermann are amongst the full-time employees.

26. Mr Munstermann was appointed chief executive officer in December 2006 and was appointed managing director in March 2008.

27. Mr and Mrs Munstermann live on the Gold Coast, not far from QIA’s office.

28. Mr Rayward resides in Sydney.

29. Mr Rayward claimed that he retained control of the finances of QIA until April 2012 (although there is a dispute about the extent of that control).

30. Mr Rayward agreed, however, he has not been involved in the day-to-day conduct of QIA’s business since April 2012, at which time he resigned as an employee of the company. Mr Rayward agreed that since then, the financial control of QIA had been carried out by two employees, Ms Leanne Beazley and Ms Dulcie Eldridge.

Mr Rayward’s offer to sell

31. In August 2014 Mr Rayward informed Mr Munstermann that he was in poor health, that he had retired, (he was then about 60) and that he wanted to sell his shares in QIA to Mr Munstermann and resign as a director.

32. By that time, Mr Rayward's income from other sources had dried up. He and his wife's income from QIA was also about to cease. Mr Rayward had noticed a significant rise in the performance of QIA and concluded and that it was a good time for him to “cash in” his shares. These circumstances led him to believe that he would get a “very attractive price” for his shares in QIA.

33. Between August and October 2014, Mr Munstermann and Mr Rayward exchanged offers for the purchase by Mr Munstermann of Mr Rayward’s interest in QIA.

34. Mr Rayward offered to take $550,000 plus a car and a release of his loan account (then in the order of $100,000). Mr Munstermann offered $465,000, to be paid by instalments.

35. Mr Rayward told Mr Munstermann that he regarded Mr Munstermann’s offer as “woefully inadequate” and decided to try to work out how he could “get money out of QIA in some other way”.

Demands by Mr Rayward to be financial controller

36. Following the breakdown of negotiations for the sale of his shares to Mr Munstermann, Mr Rayward made repeated demands to be reinserted into the business as the financial controller.

37. In cross-examination, Mr Rayward stated that he did this instigated by, and as a consequence of, Mr Munstermann not buying his shares at a price acceptable to him.

38. He stated:

1. on 15 October 2014, that he would "go back to" overseeing all financial matters;

2. on 4 March 2015, that he intended to “re-enter QIA as the Chief Financial Controller”;

3. on 31 August 2015, that he would devote as much time as necessary to reviewing QIA's financial processes;

4. on 9 September 2015, that he wanted to “move into financial control”;

5. on 25 September 2015, that he intended to re-establish himself as the financial controller of QIA to investigate and develop management tools;

6. on 6 October 2015, that he wanted to be appointed to financial controller for QIA even if that meant that QIA staff (Ms Beazley and/or Ms Eldridge) had to be dismissed;

7. on 8 October 2015, stated that “[e]ffective immediately, I will be resuming my original role as Financial Controller of QIA group”; and

8. on 13 October 2015, asserting that “I will be re-joining the company”.

39. Mr Rayward's insistence to be re-inserted into the business as the financial controller was despite the fact that:

1. as he knew, Mr Munstermann had not asked him to do it, and in fact opposed Mr Rayward performing the role of financial controller;

2. he could not in any event take up a full-time role as a financial controller of QIA due to his health; and

3. the demands were made concurrently with indications from Mr Rayward that he had a need to reduce his regular involvement in QIA.

40. Mr Munstermann told Mr Rayward, repeatedly, that the reason he why he was not prepared for Mr Rayward to reinsert himself as financial controller was because the role was already being effectively performed by Ms Beazley and Ms Eldridge.

41. Mr Munstermann did not, however, seek to exclude Mr Rayward from the business of QIA and made repeated offers, in writing, to discuss a possible role for Mr Rayward with reasonable remuneration.

42. Mr Munstermann said, and I accept, that he was willing to consider any proposal by Mr Rayward to engage with the business. However, Mr Rayward did not suggest any role other than financial controller.

Unjustified billing of QIA

43. On 2 April 2015, Mr Rayward submitted two invoices to QIA for approximately $16,000 for some 104 hours of "works undertaken for budget review and forward planning as requested".

44. In fact, there had been no request to Mr Rayward to do any such work and Mr Munstermann refused to pay the invoices.

45. In cross-examination, Mr Rayward accepted that:

1. he did not know or recall if the 'request' for him to do this work was documented anywhere;

2. he had had no discussion with anyone about the rate he was going to be paid for the work;

3. he had not been asked by Mr Munstermann to undertake paid work to analyse the budget;

4. the invoices were issued in the hope that he had an entitlement to be paid and, when it did not eventuate, he dropped his demand for payment;

5. the invoices represented an opportunity in which he could try to “squeeze some money out of QIA” (to which suggestion he responded “My word. Yep”);

6. his rendering of the invoices was a “try on” in which Mr Rayward sought to get away with layering on some extra costs on QIA for his own benefit; and

7. the outcome or product of any work the subject of the invoices has never been provided to Mr Munstermann or any member of QIA's staff.

Unjustified salary

46. On or about 8 October 2015, Mr Rayward unilaterally made an entry in QIA's MYOB accounting system that he was to be paid a salary of $150,000 per annum. He sent an email to Ms Beazley announcing that “I will be resuming my original role as Financial controller of QIA” and gave Ms Beazley what he described in cross-examination as “an order…as director” that she include him in the pay run.

47. This was done in circumstances where Mr Rayward proposed somehow to replace Ms Beazley as financial controller. At the time Ms Beazley was working three days per week and was being paid a salary of $45,000 per annum, with approximately two thirds of her time dedicated to the role of financial controller. In effect, Ms Beazley was paid $30,000 to fulfil her role as financial controller.

48. Mr Rayward took the view that he could simply create a role for himself in the company and pay himself what he wanted to be paid.

49. He said in cross-examination that he held a view that:

1. he could do this without recourse to Mr Munstermann, and in fact knowing that Mr Munstermann was opposed to it;

2. no-one could stop him doing it; and

3. he could undertake whatever financial transactions he wished without regard to Mr Munstermann, provided he believed there was a benefit to the business (although he ultimately accepted that the only person to financially benefit from this particular transaction was himself).

50. Mr Rayward admitted that every time he took a step to remove money out of QIA it was in his interests and not in the interests of QIA.

Unreasonable conduct regarding approval of payments

51. In cross-examination, Mr Rayward readily accepted the (somewhat obvious) propositions that QIA’s relationship with its staff and QIA's reputation with its customers and suppliers were important matters, and that if QIA failed to pay any of its creditors or staff on time it:

1. could have a very damaging effect on QIA’s reputation;

2. would likely result in a supplier refusing to supply services;

3. would severely disrupt QIA's operations;

4. would not be in QIA's interests;

5. would hit the financial bottom line of QIA; and

6. would affect the financial performance of QIA.

52. Nonetheless, Mr Rayward agreed that in the period from September to November 2015 he refused, or significantly delayed, the payment of QIA's creditors, staff wages and staff out-of-pocket expenses. I return to this below.

53. In July 2015, without consulting Mr Munstermann, Mr Rayward instructed QIA’s banker, National Australia Bank Limited, that QIA’s bank accounts with NAB were no longer to be operated on Mr Munstermann’s authority alone but required his authority as well.

54. On 1 September 2015, Mr Rayward requested that all planned financial transactions (prior to any taking place) be “put forward to a regular minuted Directors Meeting so as to enable approval or adjustment as deemed necessary”.

55. Mr Rayward agreed that his proposal required that all payments, including for purchases of minor items such as staples, to be approved at minuted meetings of the directors of QIA.

56. On 2 September 2015, Mr Rayward indicated that he intended to “review every dollar” that was planned to be spent before giving approval for bank transfers.

52. On 9 September 2015, Mr Rayward told Ms Beazley that before authorising any payment by QIA he must be provided with information including cost centre allocations, month to date totals and any variance in the size of payments.

53. On 10 September 2015, in response to a request by Ms Beazley for subcontractors to be paid, Mr Raywood repeated his request for this information. Yet, as Mr Rayward knew, QIA had never used cost centres. Mr Rayward was asking for something that he knew did not exist. Mr Rayward ultimately refused to authorise the payment sought by Ms Beazley saying “Marcus [Munstermann] needs to determine what he wants to do first”.

54. Thereafter, Mr Rayward failed to authorise payments for creditors or staff expenses, despite QIA being in arrears with its creditors.

55. On 6 October 2015, Mr Rayward sent an email to Mr Munstermann stating that “due to you not providing a budget for FY 2016”, all payments needed to be pre-approved by QIA's directors and further additional information, including cost centre allocations, must be provided. Mr Rayward also stated that he wanted to be involved in all aspects of QIA including “buying staples”.

56. But, as Mr Rayward accepted in cross-examination, Mr Munstermann had provided a budget for FY 2016 and his statement that payments were being delayed because a budget had not been provided was false.

57. In response to Mr Rayward's refusal to authorise payments, QIA received complaints from its creditors and staff.

58. In cross-examination Mr Rayward agreed that in October 2015, he was:

1. “refusing to authorise the payment of wages to staff for work they had done at QIA until you were put on the payroll at your $150,000 self-set salary”;

2. thereby preferring his own interests to those of QIA by failing to authorise payment of wages;

3. prepared to sacrifice QIA’s interests for his own in relation to this issue; and

4. seeking to hold QIA “at ransom so you could get what you wanted”.

64. In mid-October 2015, Mr Rayward unilaterally and without notice took steps to close QIA's bank accounts with Westpac Banking Corporation Limited and cancel QIA's credit cards.

65. In an effort to break the impasse, in late October 2015 Mr Munstermann arranged for Ms Beazley to become a signatory on the NAB accounts.

66. On or about 2 November 2015, Mr Rayward unilaterally and without notice to Mr Munstermann removed Ms Beazley as a signatory to the NAB accounts and changed the account so Mr Munstermann could not add signatories.

67. On 11 November 2015, Ms Beazley sent three emails to Mr Rayward requesting that he authorise the payment of QIA's superannuation obligations.

68. Mr Rayward replied to Ms Beazley’s email, with copies to each member of QIA’s staff, by stating that “there is [sic] insufficient funds in the QIA bank account to pay this amount at this time.

69. It is hard to imagine a more alarming message for QIA’s staff to receive. There was no need for Mr Rayward to copy the staff in on this email. And what he said was not true. There were ample funds in QIA’s accounts to meet its superannuation obligations. Mr Rayward had only looked at QIA’s cheque account. Although he had access to all of QIA’s accounts, he did not check them all before sending his most inflammatory email. This was most irresponsible conduct. It was not the conduct of a prudent financial controller, or a responsible company director.

70. On 12 November 2015, Mr Rayward demanded to be provided with weekly timesheets for each employee prior to authorising the payment of wages. Yet Mr Rayward knew that QIA employees did not keep weekly timesheets. Mr Rayward conceded that the effect of his demand was that QIA staff would not be paid unless they could produce something that did not exist. Mr Rayward conceded that this would have had a damaging effect on QIA's staff.

71. On 12 November 2015, Mr Rayward demanded an immediate change to QIA's third party payment system whereby he would not approve payment of any invoice unless the expense had been submitted and pre-approved by Mr Rayward. He stated that if there was failure to comply with the system the person who ordered the goods or services would have to pay for them.

72. By this point, Mr Rayward had lost all perspective on his proper role as a director of QIA.

Additional mistreatment of QIA employees

73. On 23 July 2015, QIA’s national client relations manager, Ms Deborah Sullivan, telephoned Mr Rayward and he stated that he was going to “ruffle a few feathers” and “get rid of a few staff”.

74. On 8 September 2015, Ms Beazley informed Mr Rayward that she felt offended by comments he had made.

75. On 10 September 2015, Mr Rayward engaged in an email exchange with Ms Beazley in relation to the chain of command in QIA in which Mr Rayward asserted that she and the other staff did not know their accountabilities, authorities, and responsibilities.

76. On 8 October 2015, Ms Beazley informed Mr Rayward that he had on a number of occasions pressured her to step outside her role and bounds of authority, questioned her integrity and was "crossing the line with regard to bullying in the workplace".

77. On 12 November 2015, in reply to Mr Rayward’s email referred to at [68] above (erroneously informing all staff that QIA had insufficient funds to pay its superannuation), three of QIA’s employees Paul Atkinson, Deborah Sullivan and Simon Vincent responded to Mr Rayward's email, requesting not to be sent such emails.

78. Mr Rayward’s response to Mr Atkinson’s request was to demand that he provide his position description, key performance indicators, scope of work and agreed employment outcomes. Mr Rayward accepted that this demand amounted to workplace bullying on his part (“I guess looking at it now, yes”). Mr Rayward agreed that he wanted to dismiss Mr Atkinson at the time he sent the email.

Refusal to recognise Mr Munstermann as Managing Director

79. Mr Munstermann was appointed Managing Director of QIA at a meeting of directors held on 7 March 2008. In fact, Mr Rayward proposed Mr Munstermann as Managing Director.

80. And yet, from September 2015, Mr Rayward maintained that Mr Munstermann had not been appointed Managing Director of QIA.

81. He maintained this position in his affidavit, sworn on 5 July 2016, despite having by then seen a copy of the 7 March 2008 minute (which was annexed to an earlier affidavit of Mr Munstermann).

Refusal to authorise budget and financial statements

82. On 23 July 2015, Mr Rayward was provided with QIA's financial statements for FY 2015.

83. On 8 September 2015, Mr Rayward was provided with QIA's budget for FY 2015.

84. On 18 September 2015, Mr Munstermann circulated an agenda for the meeting of the directors of QIA to be held on 21 September 2015. The agenda for the September directors meeting included:

1. adoption of the FY 2015 statements; and

2. adoption of the 2016 budget.

85. Mr Rayward refused to authorise the 2016 budget and the FY 2015 statements.

Mr Rayward's action plan

86. On 9 September 2015, Mr Rayward circulated an "immediate recovery plan" for QIA.

87. The “recovery plan” was a single page and included the following proposals:

1. Mr Munstermann's salary be reduced by 53 per cent, from $170,000 to $80,000 per annum;

2. Mrs Munstermann’s salary be reduced by 41 per cent, from $85,000 to $50,000 per annum; and

3. Paul Atkinson be fired as an employee of QIA.

88. Mr Rayward agreed in cross-examination that the “recovery plan” was an attempt to squeeze money of QIA at the expense of Mr Munstermann and was part of his overall plan to leverage his way to a buyout of his shares in QIA.

89. On 13 September 2015, Mr Munstermann invited Mr Rayward to prepare and circulate a more detailed recovery plan as soon as possible.

90. At the September directors meeting, Mr Rayward confirmed that his recovery plan for QIA consisted only of dismissing Paul Atkinson and cutting the pay of Mr Munstermann and Mrs Munstermann.

Conclusion and Orders

91. It is because of these circumstances that I have reached the conclusion set out at [10].

92. In my opinion, Mr Rayward has conducted himself oppressively towards Mr Munstermann and contrary to the interests of the members of QIA as a whole for the purposes of s 232 of the Act.

93. In the circumstances, it is appropriate for orders to be made under s 233 that remove Mr Rayward from the management and ownership of QIA in favour of Mr Munstermann.

94. I propose to make orders to the following effect:

1. Mr Rayward and Mazmark sell their shares in QIA to Mr Munstermann at the price to be determined by the Court as the fair market value for those shares as at 31 January 2017.

2. Mr Rayward tender his resignation as a director of QIA in writing with immediate effect.

3. Mr Rayward take all necessary steps to remove himself as a signatory and/or authorised person on any accounts held by QIA with any bank or financial institution.

4. Mr Rayward repay to QIA the full amount of his director’s loan from QIA.

5. Mr Rayward return all property of QIA to QIA, including the motor vehicle Mazda CX9 registration number XXXX.

6. Mr Rayward and Mazmark pay the costs of Mr Munstermann and Fuseworx of the proceedings.

95. I will hear counsel as to the precise orders to be made and as to the further conduct of the proceedings.

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Amendments

24 February 2017 - [22(3)] and [22(7)] - typographical errors corrected

Decision last updated: 24 February 2017