Re Skytraders Pty Ltd
[2022] VSC 416
•28 July 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2019 04462
IN THE MATTER OF SKYTRADERS PTY LTD (ACN 001 851 921)
BETWEEN:
| PREMIER AVIATION HOLDINGS PTY LTD (ACN 104 968 354) | Plaintiff |
| v | |
| NORMAN FARQUHAR MACKAY & ORS (according to the Schedule of Parties) | Defendants |
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JUDGE: | Button J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 February–17 February, 21 February–24 February, 28 February–3 March, 7 March, 6 April–7 April 2022 |
DATE OF JUDGMENT: | 28 July 2022 |
CASE MAY BE CITED AS: | Re Skytraders Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2022] VSC 416 |
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CORPORATIONS – Oppression – Where one director of a company carrying on an aviation business held (via a controlled entity) a substantial minority shareholding, and the other director held (personally and through a controlled entity) a majority shareholding – Where, in practice, the minority shareholder was responsible for operations and the majority shareholder was responsible for administration – Where minority shareholder’s operational role ceased following a falling out between him and the majority shareholder, and he was subsequently removed from the board of directors by the majority shareholder – Where family members were employed at the company and were a cause of concern to the minority shareholder – Whether there was an agreement between the two shareholders prohibiting interference by the majority shareholder in operations and entitling the minority shareholder to a seat on the board – Whether the minority shareholder reasonably expected that the majority shareholder would not interfere in operations and that the minority shareholder would be entitled to a seat on the board – Whether any expectation changed over time – Whether actions of the majority shareholder’s family members constituted oppression – Whether the cessation of the minority shareholder’s operational role constituted oppression – Whether the removal of the minority shareholder from the board constituted oppression – Whether aspects of the financial management of the company constituted oppression – Whether failure to provide certain documentation and information constituted oppression – Whether exclusion from premises and digital systems constituted oppression – No oppression – Corporations Act 2001 (Cth) ss 232, 233.
CORPORATIONS – Winding up on just and equitable grounds – Where company solvent and profitable – Where there has been a falling out between shareholders, but no practical deadlock in the conduct of the affairs of the company – Whether buyout order could be made under s 467(4) of the Corporations Act 2001 (Cth) – No basis to conclude it would be just and equitable for the company to be wound up – Jurisdiction to make a buyout order not enlivened – Corporations Act 2001 (Cth) ss 461, 467.
CORPORATIONS – Winding up on just and equitable grounds– Whether buyout order falls within the scope of an ‘other order’ identified in s 467(1)(c) of the Corporations Act 2001 (Cth) and could therefore be made under that subsection where winding up jurisdiction not enlivened – Where winding up jurisdiction not enlivened and winding up application has failed, s 467(1)(c) does not empower the Court to nevertheless make a buyout order – Corporations Act 2001 (Cth) s 467(1)(c).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | G Bigmore QC S Rubenstein | Colin Biggers & Paisley |
| For the First, Second and Eighth Defendants | P Collinson QC | William James |
| For the Third and Seventh Defendants | C van Proctor | McCullough Robertson Lawyers |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Legal principles: oppression............................................................................................................ 8
Witnesses and credit of witnesses................................................................................................ 14
What was the agreement or understanding between Mr Vickers and Mr Mackay?.......... 17
The SDA........................................................................................................................................ 19
Events.................................................................................................................................. 20
Analysis............................................................................................................................... 32
The Expectation........................................................................................................................... 39
Mr Vickers’ reasonable expectations by mid-2003....................................................... 39
Post-2003 events................................................................................................................. 43
Family-related events...................................................................................................................... 46
Garry Studd incident.................................................................................................................. 47
Events.................................................................................................................................. 47
Analysis............................................................................................................................... 49
Sarah Vickers and the team building weekend...................................................................... 50
Events.................................................................................................................................. 50
Analysis............................................................................................................................... 58
August 2019 directions to operational staff: Calum Mackay............................................... 60
Events.................................................................................................................................. 61
Interference in operational matters by Daniel Burnaby........................................................ 66
April 2019 information regarding possible payload from Port Moresby to Christmas Island.................................................................................................................................. 68
June 2019 restriction on communications regarding VHP.......................................... 70
September 2019 potential flight from Melbourne to Christmas Island..................... 70
Lachlan Hare................................................................................................................................ 74
Events.................................................................................................................................. 74
Analysis............................................................................................................................... 83
The cessation of Mr Vickers’ operational role and removal from the board....................... 85
Cessation of Mr Vickers’s operational role............................................................................. 87
Events.................................................................................................................................. 87
Backdrop to 26 August 2019............................................................................... 87
Telephone discussion between Mr Vickers and Mr Mackay in the morning of 26 August 2019.......................................................................................... 88
Phone call between Mr Vickers and Mr Burnaby on 26 August 2019, overheard by Duncan Mackay................................................................................... 93
Text message and voicemail of Mr Mackay after the call.............................. 96
Second call between Mr Mackay and Mr Vickers on 26 August 2019.......... 96
Mr Vickers’ meeting with pilots......................................................................... 97
27 or 28 August 2019: Mr Vickers emptied out his office............................... 99
Mr Vickers’ email correspondence with CASA and staff............................. 100
Biloela incident: 29 August 2019...................................................................... 100
Mr Mackay’s meetings with CASA and with the pilots............................... 101
Mr Vickers and Mr Sharp’s meeting with their legal teams on 3 September 2019.............................................................................................................. 103
4 September 2019: staff advised Mr Vickers had resigned........................... 105
11-15 September 2019: correspondence........................................................... 105
Analysis............................................................................................................................. 108
Removal of Mr Vickers from Skytraders’ board.................................................................. 113
Events................................................................................................................................ 113
Analysis............................................................................................................................. 116
Financial irregularities.................................................................................................................. 123
Freight ledger............................................................................................................................. 125
Financial arrangements and practices.......................................................................... 125
Premier’s complaints regarding the Freight ledger.................................................... 127
Private expenses charged to freight ledger and ATO audit risk.............................. 127
The Freight Subsidy........................................................................................................ 128
Unauthorised loan account transactions............................................................................... 131
Unauthorised motor vehicles.................................................................................................. 134
Payments for use of Scarp’s Sydney property...................................................................... 136
Events................................................................................................................................ 136
Analysis............................................................................................................................. 139
Credit card and expense claims.............................................................................................. 140
Overview of allegations.................................................................................................. 140
The flat screen TV and the photographic equipment................................................. 141
Purchase from gun shop in Bowral, New South Wales............................................. 141
Payment of Mr Mackay’s club fees............................................................................... 142
Payments by Skytraders’ insurance broker to Mackay-related polo club and Sharp-related rowing regatta.................................................................................................................. 144
Payment of Mr Mackay’s personal legal fees by Skytraders.............................................. 151
Termination of access to office, information, network and email....................................... 155
September 2019 withdrawal of access to Skytraders’ physical premises and certain digital systems and records........................................................................................................ 157
13 September 2019 request....................................................................................................... 160
15 September 2019 email to staff............................................................................................. 162
The events as a whole.................................................................................................................... 163
John Sharp and Sallab................................................................................................................... 164
Relief................................................................................................................................................. 168
HER HONOUR:
Introduction
The plaintiff (Premier) holds just over 30% of the ordinary shares in the eighth defendant (Skytraders). Premier is the corporate vehicle by which Terry Vickers holds his interests in Skytraders. Skytraders is an aircraft operator whose principal business involves the provision of air transport services to a number of Commonwealth and State government departments.
Since it secured a contract with the Australian Antarctic Division (AAD) in mid-2003, Skytraders went on to secure a further contract with the AAD for inter-continental transport (between Australia and Antarctica), as well as contracts with the Australian Border Force (ABF) and Victoria Police. Skytraders’ business has grown to the point where, in the 2020 financial year, its revenue was over $48 million, it held assets of over $47 million and its net profit before tax was over $13 million. Skytraders’ staff also grew to over 106 employees, including 55 full time employees.
Premier took a transfer of shares in Skytraders on 3 June 2003. Mr Vickers had been appointed to the board of directors of Skytraders the day before, on 2 June 2003. He remained a director until 14 October 2019, when a resolution to remove him was passed at a meeting of shareholders called by the second defendant, Scarp Nominees Pty Ltd (Scarp). Scarp is owned and controlled by the first defendant (Mr Mackay). Mr Mackay, with Scarp, controls over 50% of the ordinary shares in Skytraders. Mr Vickers’ removal from the board was initiated by Mr Mackay shortly after Mr Vickers’ executive role in the Skytraders business ended in contested circumstances.
The initial transfer of shares in Skytraders to Mr Vickers, and his appointment to the board, followed Skytraders’ success in securing a contract with the AAD (the contract was signed on 13 June 2003).
For many years, Mr Vickers and Mr Mackay worked together (alongside others) to develop and operate Skytraders’ business. They enjoyed considerable success in that venture and have each received millions of dollars in dividends since the company first began paying dividends in 2016. Premier brought this proceeding on 1 October 2019, after Mr Vickers’ operational roles as Chief Pilot and Director of Operations ended, and Scarp had served a notice calling a shareholders’ meeting to remove Mr Vickers from the board. The cessation of Mr Vickers operational roles and his ejectment from the board, formed the focus of the Premier’s oppression case, but it also pleaded a vast array of other complaints, each of which is addressed below.
Before returning to Premier’s contentions in this proceeding, it is appropriate to set out some further background concerning the shareholdings in Skytraders and the various parties to the proceeding.
Before Premier became a shareholder, all of the ordinary shares in Skytraders were held by Mr Mackay and Andrew Niemeyer, who were also the directors. At the same time as shares were transferred to Premier, Mr Mackay restructured his affairs so that he held some shares personally, and the balance of his majority interest through Scarp.
By the time Premier initiated this proceeding on 1 October 2019, the ordinary shares in Skytraders were held as follows:
(a) 60 shares were held by Premier;
(b) 21 shares were held by Mr Mackay personally;
(c) 80 shares were held by Scarp; and
(d) 34 shares were held by the third defendant, Sallab Pty Ltd (Sallab).
As well as joining Sallab to the proceeding, Premier joined John Sharp as the seventh defendant. Premier alleged that Mr Sharp was the true controller of the Sallab shares and a de facto director, despite ostensibly having sold shares previously held through his controlled entity, Ashby Park Investments Pty Ltd (Ashby Park), to Sallab in 2013. Mr Sharp and Sallab were jointly represented in the proceeding and tendered documentary evidence (although they elected not to proceed to call Mr Sharp and Sam Ballas, the director, shareholder and secretary of Sallab). Sallab and Mr Sharp adopted the submissions made by Mr Mackay, Scarp and Skytraders (referred to as the Mackay parties) and otherwise confined their participation to issues directly concerning them.
Skytraders also had the following performance shares on issue:
(a) 10 E class shares were held by the sixth defendant, 6Platforms Pty Ltd;
(b) 10 F class shares were held by the fifth defendant, Edisto Pty Ltd;
(c) 1 G class share was held by Scarp;
(d) 1 H class share was held by Premier;
(e) 1 I class share was held by Sallab; and
(f) 10 L class shares were held by the fourth defendant, Deep Section Investments Pty Ltd.
The fourth defendant is an entity associated with Daniel Burnaby, Mr Mackay’s nephew through his former wife. Mr Burnaby is the Director of Commercial and General Counsel of Skytraders. He has worked at Skytraders since 2007, commencing in the role of ‘Commercial Executive’ and assuming the title of ‘General Counsel’ in 2008. Mr Burnaby became ‘General Manager Commercial’ in 2011. The fifth defendant is an entity associated with Matthew Ide, the Director of Engineering, Head of Aircraft, Airworthiness and Maintenance Control and the Head of Design. The sixth defendant is an entity associated with Anthony DeAngelis, the CFO of Skytraders. Those entities hold non-voting performance shares. The fourth to sixth defendants did not participate in the trial, and were excused other than in respect of any relief that might be granted to Premier and in respect of costs.
Omitting title changes, which are not presently relevant, Mr Vickers was Skytraders’ Chief Pilot — a role with statutory significance and responsibilities under the governing Commonwealth aviation-related legislation — and Director of Operations. He was based in Melbourne. Mr Mackay is the CEO, and is based in Sydney. Mr Mackay’s focus was on general corporate matters, administration and finance.
After some years of apparent harmony and prosperity, by 2016, relations between Mr Vickers and Mr Mackay were not at their peak. Mr Mackay and Mr Vickers communicated less frequently. In this period, Mr Vickers also butted heads with Mr Burnaby. Mr Vickers was unhappy with what he perceived to be Mr Burnaby (who occupied a commercial position) interfering in operational matters, which Mr Vickers considered to be his domain. After an incident concerning Mr Burnaby and Mr Vickers’ daughter, Sarah Vickers (then the Operations Manager) in late 2016, Mr Vickers and Mr Burnaby patched up their relationship in April 2017, after which tensions receded, only to flare up again in 2019. From at least late 2016, Mr Vickers was unhappy with the way Skytraders was being managed in some respects, and was also looking to his future, mindful of his advancing age and the demands of his operational role. Mr Vickers consulted solicitors at various points from late 2016.
It was common ground that, on 26 August 2019, Mr Vickers and Mr Mackay had a heated conversation, following which Mr Vickers absented himself from operational matters and cleared out his office a day or two later. On Mr Vickers’ account, he took leave to consider his position and his options, but had not resigned. On the Mackay parties’ account, Mr Vickers had resigned. There were substantial factual disputes about what occurred during the call between Mr Vickers and Mr Mackay, a subsequent call Mr Vickers had with Mr Burnaby, and events in the period leading up to, and following, 26 August 2019. After some debate (conducted by correspondence) between Mr Vickers and Mr Mackay about what had happened, on 13 September 2019 Mr Mackay directed Mr Vickers not to involve himself in operational or management matters, and directed that he was not to take any further action or function as Chief Pilot or Director of Operations.
Premier commenced this proceeding seeking relief under s 233 of the Corporations Act 2001 (Cth) (Corporations Act) on 1 October 2019. At that time Mr Vickers was still a director of Skytraders, but he was removed as a director on 14 October 2019 at the meeting requisitioned by Scarp on 20 September 2019.
While Premier has amended its case more than once since it commenced the proceeding, at no stage has the relief sought included the reinstatement of Mr Vickers to his operational roles, or his reinstatement to the board of directors. Rather, Premier has sought an order that the other shareholders purchase its shares in Skytraders. In substance, the contention has been that Mr Mackay and Scarp should buy Premier’s shares; it was not seriously contended that Sallab, or the holders of the performance shares, should be subject to a buyout order. Alternatively, Premier sought an order for a buy-back of Premier’s shares, or, as a further alternative, an order that Skytraders be wound up under s 461(1)(k) of the Corporations Act, ie, wound up on the just and equitable ground.
It is convenient in these reasons to use the expression ‘oppressive conduct’ (and ‘oppression’) to refer to conduct of the kind referred to in s 232(d) or (e) of the Corporations Act, ie, conduct of the affairs of Skytraders that is contrary to the interests of members as a whole,[1] or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. As detailed below, Premier contended that all of the conduct complained of was oppressive within s 232(e), but only a sub-set was contended to be oppressive within s 232(d).
[1]Premier advanced its case based on the conduct complained of being conduct of the affairs of Skytraders.
Premier contended that there was a ‘Shareholding and Directorship Agreement’ (the SDA) between Mr Mackay and Mr Vickers, formed between August 2000 and September 2001. Premier alleged that there were terms of the SDA to the effect that:
(a) upon joining Skytraders, Mr Vickers would be responsible for operations while Mr Mackay would be responsible for administrative management; and
(b) while Premier remained a shareholder of Skytraders, Mr Vickers would be entitled to a seat on the board of Skytraders.[2]
[2]FASOC [14(a)[(b)].
Premier also ran an alternative case, namely that Mr Vickers ‘understood and reasonably expected that as an owner of and as a person responsible for the operations of Skytraders, he would be entitled to a seat on the board of Skytraders’[3] (the Expectation).
[3]FASOC [15].
Premier’s principal allegations of oppression related to the termination of Mr Vickers’ roles as Chief Pilot and Director of Operations, and his ejection from the board of directors. It further contended that management, including Mr Mackay and Mr Burnaby, were interfering in operational matters in a way that had the potential adversely to affect safety and which was contrary to the separation of responsibilities agreed under the SDA.[4]
[4]FASOC [23(a)-(c)], [34].
In addition to these principal allegations, Premier also contended that a range of other conduct was oppressive and justified the grant of the relief sought. It is fair to say that the other conduct complained of was wide-ranging, and included complaints concerning conduct that occurred a number of years before 2019. Broadly, the conduct complained of concerned certain alleged financial irregularities, most of which Premier contended it only uncovered after examining Xero files in the context of the proceeding, and conduct concerning the employment of, and actions of, Mr Mackay and his relatives who were employed in the business. The complaint about family members was narrowed during trial so that the objection to the fact of employment of Mr Mackay’s relatives fell away. At a high level, the thrust of the complaint was that Mr Mackay’s relatives had been interfering in operational matters, contrary to the agreement Mr Vickers had with Mr Mackay about their respective areas of responsibility.
Allegations of oppressive conduct were also advanced concerning sponsorship payments made by Skytraders’ insurance broker to polo club entities associated with Mr Mackay (who is a polo enthusiast) and to an entity running a rowing regatta in named for Mr Sharp’s grandfather, payments made by Skytraders to Scarp for use of its premises in Sydney, the treatment in the accounts of certain cars used by Mr Mackay, use of credit cards by family members of Mr Mackay for private purposes, and the withdrawal of Mr Vickers’ access to Skytraders’ offices, computer networks and records.
Premier’s pleaded case did not distinguish between which alleged conduct constituted oppression on the basis that it was contrary to the interests of members as a whole, as distinct from, being oppressive, unfairly prejudicial or unfairly discriminatory to Premier. In final submissions, Premier clarified that the instances of conduct that it contended were contrary to the interests of members as a whole (as well as being unfairly prejudicial to Premier) were those exposing the company to a tax audit or to a safety examination by CASA and the financial allegations.[5]
[5]T1643.12-31.
For the reasons set out below, I have rejected Premier’s contention that there was oppressive conduct. Premier has not established the SDA for which it contended. While I am satisfied that Mr Vickers reasonably expected he would be appointed to the board, granted a substantial minority shareholding and take up the operational role he subsequently held, in the circumstances as they were in August and September 2019, it was no longer reasonable for Mr Vickers to expect that Mr Mackay would refrain from exercising his majority power to eject Mr Vickers from the board, or that he would remain in his operational role, able to return if he so chose. I have also considered whether the events concerning the cessation of Mr Vickers’ operational role and his removal from the board involved oppressive conduct, quite apart from the alleged SDA and Expectation. In my view, they did not.
So far as the other matters said to have involved oppressive conduct are concerned, I have concluded that none of them involved oppressive conduct. I have also assessed the conduct complained of as a whole, but have concluded that the course of events as a whole does not reveal oppressive conduct.
While Premier advanced, in the alternative to its oppression case, a contention that Skytraders should be wound up on the just and equitable ground, it was not suggested that the winding up case would have any basis if I rejected the oppression case, as I have. Accordingly, there is no basis upon which to award relief to Premier and there would be no utility in extending (and delaying delivery of) these Reasons by addressing the dispute as to the value of Premier’s shares in Skytraders.
Legal principles: oppression
The principles to be applied in determining whether conduct falls within s 232 of the Corporations Act are well established; the real issues commonly lie in the application of the principles to the facts. Nevertheless, the applicable principles, and those of particular relevance given the nature of the events relied upon by Premier, may be briefly stated.
First, the conduct in question is to be assessed objectively, through the eyes of a commercial bystander.[6] For the purposes of s 232(e), the plaintiff must establish that there has been commercial unfairness, namely conduct that is so unfair that reasonable directors considering the matter would not have thought the decision fair.[7]
[6]Aqua-Max Pty Ltd v MT Associates Pty Ltd (2001) 3 VR 473, [54] (Brooking, Charles and Chernov JJA); Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 (Wayde), 472 (Brennan J); Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 (Morgan), 704 (Young J); Endoline Pty Ltd v Drapac [2012] VSC 156, [272] (Ferguson J); Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621; [2012] FCA 1458, [508] (Gordon J); Donaldson v Natural Springs Australia Ltd [2015] FCA 498 (Natural Springs), [246] (Beach J).
[7]Wayde, 473 (Brennan J); Morgan, 704 (Young J); Joint v Stephens (2008) 26 ACLC 1467; [2008] VSCA 210 (Joint), [134]-[135] (Nettle, Ashley, Neave JJA).
The concept of ‘fairness’, which is central to the application of s 232(e), has been elucidated in a number of cases. Justice Robson set out a helpful summary in Re SRW Nominees Pty Ltd:[8]
[8][2019] VSC 547 (SRW Nominees), [34]-[40] (internal footnotes reproduced as in the original).
[34] The phrase ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory against’ is a compound expression.[9] The words should be ‘considered merely as different aspects of the essential criterion, namely commercial unfairness’.[10]
[9]Joint v Stephens [2008] VSCA 210, 53 [134] (Nettle, Ashley and Neave JJA).
[10]Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 704 (Young J). See also Joint v Stephens [2008] VSCA 210, 53 [134] (Nettle, Ashley and Neave JJA); Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336, 337 [4] (Emmett, Jacobson and Buchanan JJ).
[35] In Re Companies (Western Australia) Code,[11] Murray J of the Supreme Court of Western Australia said the concept of ‘unfairness’ takes many forms and may include:
[11](1990) 3 WAR 166.
the harm suffered as a result of the conduct of management, the prejudice caused, the lack of reasonable commercial justification for the course taken, or simply in the decision making processes within the company.[12]
[12]Ibid 189.
[36] In Re Ledir Enterprises Pty Ltd,[13] Black J of the Supreme Court of New South Wales noted that s 232(e) is concerned with conduct that involves ‘commercial unfairness’ or ‘a departure from the standards of fair dealing, or where a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair.’[14]
[37] The test for commercial unfairness has an objective standard.[15] It requires an assessment of whether objectively, in the eyes of a commercial bystander, there has been unfairness.[16] As Brennan J stated in Wayde v New South Wales Rugby League Ltd:[17]
The court must determine whether reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision will impose on a member on the other, would have decided that it was unfair to make that decision.[18]
[38] Evidence of conduct having been engaged in deliberately, knowing it to be unfair or not in good faith is persuasive, but not necessary.[19] As Sackar J of the Supreme Court of New South Wales stated: ‘although proof of some improper purpose or ulterior motive may well make the finding of oppression irresistible, the absence of such motivation will not and cannot in and of itself defeat [sic] charge of oppression.’[20]
[39] If the directors or a majority membership conduct the affairs of a company such that they advance their own interests or the interests of others of their choice, to the detriment of a minority shareholder, that conduct will ordinarily fall within the ambit of the oppression section.[21]
[40] Therefore the court is required to determine whether, on the balance of probabilities, an objective commercial bystander would be satisfied that the affairs of the company were being conducted unfairly. This inquiry is not assessed in a vacuum: the context is relevant to assess the fairness of the conduct.[22]
[13](2013) 96 ACSR 1.
[14]Ibid 53 [178]. See also Morgan v 45 Flers Ave Pty Ltd (1986) 10 ACLR 692, 704 (Young J); Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, 472 (Brennan J).
[15]Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, 472 (Brennan J).
[16]Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, 704 (Young J).
[17](1985) 180 CLR 459.
[18]Ibid 473.
[19]Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Ltd (No 3) (2015) 109 ACSR 369, 434 [471] (Sackar J). See also Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, 470 (Brennan J); Campbell v Backoffıce Investments Pty Ltd (2009) 238 CLR 304, 360 [176] (Gummow, Hayne, Heydon and Kiefel JJ); Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310, 361 [217].
[20]Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Ltd (No 3) (2015) 109 ACSR 369, 434 [471].
[21]Re Bright Pine Mills Pty Ltd [1969] VR 1002, 1011 (O’Bryan, Smith and Pape JJ); Re Companies (Western Australia) Code (1990) 3 WAR 166, 191 (Murray J).
[22]O’Neill v Phillips [1999] 1 WLR 1092, 1098 (House of Lords) (Lord Hoffmann).
Secondly, fairness is not to be assessed in a vacuum, but having regard to the context in which the conduct complained of occurred.[23] That context includes the business, the conduct of the aggrieved party — which may be such that the conduct complained of is not unfair, or may affect the relief to be granted — and the nature of the relationship between the people participating in the business.[24] In many cases, there may be an agreement or understanding between those engaged in business with one another. Such an agreement or understanding will often be important in assessing whether the conduct in question constitutes oppression.[25] Such agreements or understandings may result in the aggrieved party having a ‘legitimate expectation’ about the basis upon which he or she would participate in the management of the company.[26]
[23]O’Neill v Phillips [1999] 1 WLR 1092 (O’Neill v Phillips), 1098 (Lord Hoffmann).
[24]See the authorities collected by Sifris J in Exton v Extons Pty Ltd (2017) 53 VR 520 (Exton), 526-7 [49]-[54].
[25]O’Neill v Phillips, 1099-101 (Lord Hoffmann).
[26]O’Neill v Phillips, 1101-2 (Lord Hoffmann); but note that it is important not to elevate ‘legitimate expectation’ to a cause (cf a consequence) of equitable restraint on legal rights: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97 (Fexuto), [421] (Priestley JA).
Where the parties have conducted business as a quasi-partnership, exclusion from management is a ‘classic hallmark’ of oppression, but will not constitute oppression in every case. It is trite to observe that persons may participate in all manner of partnerships; characterisation of an enterprise, conducted through a corporation, as a ‘partnership’ or ‘quasi-partnership’ does not determine the roles of the respective partners. As Young J observed in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd, ‘the mere fact that a company is a quasi-partnership is insufficient to raise a legitimate expectation that each partner will be able to take part in management’.[27] On appeal, Spigelman CJ stated that, while it may be accepted that the existence of irreconcilable differences among persons involved in what is, in effect, a partnership ‘will destroy the personal relationship involving mutual confidence, that lies at the heart of the partnership analogy’, such irreconcilable differences do not, of themselves, constitute oppression or unfair prejudice.[28]
[27](1998) 28 ACSR 688; [1998] NSWSC 413, 703 (ACSR), quoted with approval in Exton, 532‑3 [42] (Sifris J)
[28]Fexuto, [89].
Where constraints on the exercise of legal rights (such as the rights of the majority) arise from understandings between those associating themselves in a business venture, the focus is on the understandings between the members at the time they entered into association. Nevertheless, later events may also found promises (which need not be legally enforceable as a matter of contract) which cannot, as a matter of justice and equity, be ignored and which may support the characterisation of conduct as oppressive in the circumstances.[29]
[29]O’Neill v Phillips, 1101 (Lord Hoffman); SRW Nominees, [49] (Robson J).
Likewise, expectations, once formed, are not immutable. Whatever the equitable constraints on the exercise of power that may initially have existed, those constraints are responsive to the circumstances; they may alter in their content, or cease altogether. The most frequently cited statement of principle is the following statement of Austin J in Tomanovic v Argyle HQ Pty Ltd:
[W]hile it is recognised that conduct may be oppressive if inconsistent with the “legitimate expectations” of shareholders, expectations are not immutable. The non-fulfilment of expectations will not establish oppression, if there has been some good reason for the extinguishment of the expectation: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd(2001) 37 ACSR 672, at [85], [86] [175]; [2001] NSWCA 97; Nassar v Innovative Precasters Group Pty Ltd(2009) 71 ACSR 343, at [96]; [2009] NSWSC 342 per Barrett J.[30]
[30][2010] NSWSC 152 (Tomanovic), [39(c)] (emphasis added).
While Austin J’s statement of principle has been frequently cited, and no issue was taken with it by the New South Wales Court of Appeal,[31] it warrants some elaboration by reference to the cases cited by Austin J. With respect, the paragraph of the judgment of Spigelman CJ in Fexuto that more helpfully exposes the need to identify a ‘good reason’ for expectations to change, and the need to consider who bears responsibility for the emergence of irreconcilable differences, is paragraph 90 (paragraphs 85 and 86, being the paragraphs of Fexuto cited by Austin J in Tomanovic, simply refer to the reasoning of the trial judge, which the Chief Justice did not embrace in all respects). There, Spigelman CJ observed that:
There will be circumstances in which the emergence of irreconcilable differences will cause the court to conclude that an understanding or expectation as to participation in management should be taken to have ceased, in a manner not entitling the person excluded from such participation to relief under the statutory provisions. That would be so where the court decides that it is the person excluded who is responsible for the breakdown in the relationship. This appears to have been the case in Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd(2000) 34 ACSR 469. See also Belgiorno-Zegna v Exben Pty Ltd(2000) 35 ACSR 305 esp at [142], [151].[32]
[31]Tomanovic v Global Mortgage Equity Corp Pty Ltd(2011) 288 ALR 310; 84 ACSR 121; [2011] NSWCA 104, [140] (Campbell JA, Macfarlan and Young JJA agreeing).
[32]Fexuto, [90]. This passage was quoted by Barrett J in Nassar v Innovative Precasters Group Pty Ltd(2009) 71 ACSR 343 (Nassar); [2009] NSWSC 342, [96], being one of the cases and passages in turn cited by Austin J in Tomanovic.
In Fexuto, Spigelman CJ went on to consider the findings below and concluded that:
I am not prepared to hold that the deterioration of the relationship was the responsibility of Bob Bosnjak to such a significant extent that Fexuto became disentitled from relying on his exclusion from day-to-day management as an element in the judgment of oppression or unfair prejudice.[33]
[33]Fexuto, [104].
Thirdly, where there is an overwhelming identity of interest between shareholders and directors, that constitutes a contextual circumstance which may mean that conduct of directors which might otherwise be in breach of duty (whether statutory or fiduciary) will not be conduct that is not in the best interests of the company as a whole, or unfair.[34] Similarly, conduct undertaken with the acquiescence or consent of the aggrieved person does not provide the basis for an oppression claim.[35]
[34]Exton, 531-2 [39] (Sifris J).
[35]Exton, 534-5 [46] (Sifris J) quoting Tomanovic, [39] (Austin J, citing John J Staff (Real Estate) Pty Ltd v Robert R Andrew (A’Asia) Pty Ltd (1991) 6 ACSR 63, 66 (Young J)).
Fourthly, sub-ss 232(d) and (e) constitute distinct grounds for the award of relief in respect of oppressive conduct.[36] Conduct can be contrary to the interests of the members as a whole even if it does not involve commercial unfairness.[37] Whether conduct is contrary to the interests of members as a whole is to be assessed objectively and by reference to whether the conduct adheres to accepted standards of corporate behaviour or is in accordance with how reasonable directors would act in attending to the affairs of the company.[38]
[36]Exton, 531-2 [39] (Sifris J). See also Turnbull v National Roads and Motorists’ Association Ltd (2004) 186 FLR 360; 50 ACSR 44; [2004] NSWSC 577, [32] (Campbell J); Shelton v National Roads and Motorists’ Association Ltd(2005) 51 ACSR 278; [2004] FCA 1393, [25] (Tamberlin J); Szencorp Pty Ltd v Clean Energy Council Ltd(2009) 69 ACSR 365; [2009] FCA 40, [59] (Goldberg J); KGD Investments Pty Ltd v Placard Holdings Pty Ltd(2015) 110 ACSR 379; [2015] VSC 712, [27] (Almond J).
[37]Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, 360 [176] (Gummow, Hayne, Heydon and Kiefel JJ); Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tas) Pty Ltd (No 3) (2015) 109 ACSR 369; [2015] NSWSC 1639 (Australian Institute of Fitness), [82]-[85] (Sackar J); Exton, 531-2 [39] (Sifris J).
[38] Australian Institute of Fitness, [84] (Sackar J), citing Goozee v Graphic World Group Holdings Pty Ltd (2002) 170 FLR 451; 42 ACSR 534; [2002] NSWSC 640, [42]-[44] (Barrett J).
Fifthly, oppressive conduct may arise from a series of events, or from a single act or omission.[39] It is not necessary that the oppressive conduct be continuing at the time of trial, although the cessation of the oppression will be relevant to whether there is any occasion for, or utility in, making an order under s 233.[40]
[39]Natural Springs, [248]-[249] (Beach J).
[40]Exton, 529 [34] (Sifris J).
Sixthly, mismanagement or poor management does not, of itself, constitute oppressive conduct.[41]
[41]Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688; [1998] NSWSC 413, 740 (ASCR) (Young J); Ananda Marga Pracaraka Samgha Ltd v Tomas (No 6) (2013) 300 ALR 492; [2013] FCA 284, [417] (Dodds-Streeton J); Natural Springs, [250] (Beach J).
Seventhly, s 232 does not regulate or provide a remedy for ‘family law’ style disputes dressed up in a corporate guise, and the regime does not provide for some kind of corporate ‘no fault divorce’ allowing a shareholder to require other shareholders to purchase its shares simply because there has been a breakdown in the trust and confidence between the shareholders.[42] However, a breakdown in personal relations can be one of several factors that together lead to a conclusion that oppression has been made out.[43]
[42]Natural Springs, [250] (Beach J), citing O’Neill v Phillips, 1104 (Lord Hoffman, with whom the four other members of the House of Lords agreed).
[43]Tomanovic v Global Mortgage Equity Corp Pty Ltd (2011) 288 ALR 310; 84 ACSR 121; [2011] NSWCA 104, [199] (Campbell J, Macfarlan and Young JJA agreeing).
Eighthly, conduct undertaken in compliance with a company’s constitution can still be oppressive, but it will only rarely, if ever, be oppressive if the action in question was mandated by the constitution (cf being discretionary).[44]
[44]Medical Research & Compensation Foundation v Amaca Pty Ltd (2004) 51 ACSR 587; [2004] NSWSC 1227, [29] (Young CJ in Eq); Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1, 20 (Latham CJ); Natural Springs, [251] (Beach J).
Finally, the grant of a remedy for oppressive conduct is discretionary. Remedies for oppressive conduct will be moulded to bring an end to the oppression and to compensate the person oppressed for the effects of the oppression.[45] The focus will be on the appropriateness of the remedy at the time of trial, and not at the time when the application was filed.[46]
[45]Vigliaroni v CPS Investment Holdings Pty Ltd (2009) 74 ACSR 282; [2009] VSC 428, [85] (Davies J), citing Szencorp Pty Ltd v Clean Energy Council Ltd (2009) 69 ACSR 365; [2009] FCA 40, [71] (Goldberg J); Natural Springs, [270] (Beach J).
[46]Szencorp Pty Ltd v Clean Energy Council Ltd (2009) 69 ACSR 365; [2009] FCA 40, [69]-[71] (Goldberg J).
Witnesses and credit of witnesses
Premier called the following lay witnesses, each of whom was cross-examined:
(a) Mr Vickers, former director, Chief Pilot and Director of Operations of Skytraders as well as the owner and controller of Premier’s shares in Skytraders;[47]
(b) Rex Booth, formerly the Training and Checking Manager at Skytraders;[48] and
(c) Wally Meyer, formerly the Operations Manager at Skytraders.[49]
[47]First witness statement of Terrence Patrick Vickers dated 26 August 2020 (Vickers I); second witness statement of Terrence Patrick Vickers dated 5 March 2021 (Vickers II); and third witness statement of Terrence Patrick Vickers dated 27 October 2021 (Vickers III).
[48]Witness statement of Rex Holroyd Booth dated 5 March 2021 (Booth).
[49]Witness statement of Ian Wallace Meyer dated 5 March 2021 (Meyer).
Premier also relied on an affidavit of Anthony Schiavello of BDO Corporate Finance (East Coast) Pty Ltd.[50] He deposed to having been contacted by Mr Vickers’ lawyers on 3 September 2019 and having met with Mr Vickers on 4 September 2019 regarding the preparation of a valuation for use in an anticipated oppression proceeding. Mr Schiavello was not required for cross-examination.
[50]Affidavit of Anthony Schiavello sworn 23 February 2022.
The Mackay parties called the following lay witnesses, each of whom was cross-examined:
(a) Mr Mackay, the CEO and original co-founder of Skytraders, and controller of the majority of shares in Skytraders;[51]
[51]First witness statement of Norman Farquhar Mackay dated 13 November 2020 (Mackay I); second witness statement of Norman Farquhar Mackay dated 9 February 2022 (Mackay II); and third witness statement of Norman Farquhar Mackay dated 22 February 2022 (Mackay III).
(b) Matthew Ide, the Director of Engineering, Head of Aircraft, Airworthiness and Maintenance Control and Head of Design as well as the Acting Safety and Quality Manager (when required) at Skytraders;[52]
[52]First witness statement of Matthew Myles Ide dated 10 November 2020 (Ide I); and second witness statement of Matthew Myles Idea dated 9 February 2022 (Ide II).
(c) Daniel Burnaby, the Director of Commercial and General Counsel at Skytraders;[53]
[53]First witness statement of Daniel Richard Haworth Burnaby dated 10 November 2020 (Burnaby I); and second witness statement of Daniel Richard Haworth Burnaby dated 9 February 2022 (Burnaby II).
(d) Duncan Mackay, the General Manager – Sales and Marketing at Skytraders and elder son of Mr Mackay;[54]
[54]First witness statement of Duncan Farquhar Mackay dated 13 November 2020 (Duncan Mackay I); second witness statement of Duncan Farquhar Mackay dated 9 April 2021 (Duncan Mackay II); third witness statement of Duncan Farquhar Mackay dated 9 February 2022 (Duncan Mackay III); and fourth witness statement of Duncan Farquhar Mackay dated 14 February 2022 (Duncan Mackay IV).
(e) Calum Mackay, Commercial Executive at Skytraders and younger son of Mr Mackay;[55]
[55]First witness statement of Calum Haworth Mackay dated 6 November 2020 (Calum Mackay I); and second witness statement of Calum Haworth Mackay dated 9 February 2022 (Calum Mackay II).
(f) Anthony DeAngelis, the CFO of Skytraders;[56]
(g) Jorn Gronset, the current Chief Pilot (and a former Deputy Chief Pilot) at Skytraders;[57] and
(h) Garry Studd, Deputy Chief Pilot at Skytraders.[58]
[56]First witness statement of Anthony John DeAngelis dated 12 November 2020 (DeAngelis I); second witness statement of Anthony John DeAngelis dated 9 April 2021 (DeAngelis II); third witness statement of Anthony John DeAngelis dated 13 July 2021 (DeAngelis III); fourth witness statement of Anthony John DeAngelis dated 15 December 2021 (DeAngelis IV); and fifth witness statement of Anthony John DeAngelis dated 9 February 2022 (DeAngelis V).
[57]First witness statement of Jorn Olav Gronset dated 5 November 2020 (Gronset I); and second witness statement of Jorn Olav Gronset dated 9 February 2022 (Gronset II).
[58]Witness statement of Garry Studd dated 5 November 2020 (Studd).
While witness statements for John Sharp and Sam Ballas (the ostensible principal of Sallab) were filed, they were not called by Mr Sharp and Sallab. Mr Sharp and Sallab adopted the submissions of the Mackay parties other than on issues specific to the interests of Mr Sharp and Sallab, on which they made their own submissions and tendered documents.
The lay witness statements were voluminous, running to over 600 pages.
Premier and the Mackay parties each called expert valuation evidence. Premier called John Dawson of Korda Mentha Forensic. The Mackay parties called Meredith Chester of PricewaterhouseCoopers Australia. Mr Dawson and Ms Chester prepared a number of reports,[59] including a joint report. They gave evidence concurrently and were cross-examined.
[59]First Dawson expert report dated 5 March 2021; Chester expert report dated 9 April 2021; Chester valuation critique dated 9 April 2021; Second Dawson expert report dated 10 December 2021 and Joint Expert Report dated 10 December 2021.
Attacks on credit abounded in final submissions. Premier contended that Mr Mackay’s evidence was generally unreliable, and impugned the evidence of Duncan Mackay, Calum Mackay, Mr Burnaby, Mr DeAngelis, and Mr Ide, on the basis that their interests were aligned with those of Mr Mackay. It submitted that their evidence was ‘engineered to serve the interests of Norman Mackay’.[60] Additional contentions were made concerning the reliability of specific aspects of the evidence.
[60]Premier’s closing submissions, [324].
The Mackay parties impugned the credit of Mr Vickers. They did not have ‘any particular quarrel with the evidence of Rex Booth’, but criticised Mr Meyer’s evidence.[61]
[61]T1483-T1485.
I address matters of credit and conflicts in the evidence progressively below. However, by way of overview, I have significant reservations about the reliability of much of Mr Vickers’ evidence, and also have reservations about Mr Mackay’s evidence. I do not have the same reservations about the evidence of Duncan Mackay, Calum Mackay, Mr Burnaby, Mr DeAngelis, and Mr Ide. While Mr DeAngelis let his frustration at repetitive questioning get the better of him on occasions, I accept his evidence on matters concerning the way in which the books of Skytraders were run, and the steps taken in respect of the various financial irregularities asserted by Premier. As detailed below, I have some reservations about aspects of Mr Meyer’s evidence, but found Mr Booth to be a generally honest witness.
What was the agreement or understanding between Mr Vickers and Mr Mackay?
Premier’s FASOC alleged as follows:
13. In about or between August 2000 and September 2001, Norman Mackay and Terry Vickers agreed that:
(a) Terry Vickers would assist Skytraders in submitting a tender for the establishment of air services sought by the Commonwealth for the Australian Antarctic Division (AAD);
(b) if the tender was successful, Terry Vickers:
(i) would join Skytraders and be responsible for establishing and managing the operations of the business while Norman Mackay would be responsible for administration and financial management of Skytraders; and
(ii) would receive shares in Skytraders and would have a seat on the board of Skytraders
(the Shareholding and Directorship Agreement).
14. There were terms of the Shareholding and Directorship Agreement including to the effect that:
(a) upon joining Skytraders, Terry Vickers would be responsible for operations while Norman Mackay would be responsible for administrative management; and
(b) while Premier Aviation (the nominee company of Terry Vickers) remained a shareholder of Skytraders, Terry Vickers would be entitled to a seat on the board of Skytraders.
15. Alternatively to the matters in 14 above, Terry Vickers understood and reasonably expected that as an owner of and as a person responsible for the operations of Skytraders, he would be entitled to a seat on the board of Skytraders.
Premier pleaded that the removal of Mr Vickers as a director was in breach of the SDA, alternatively was contrary to the Expectation, and constituted oppressive conduct. Premier pleaded that Mr Vickers’ engagement as Chief Pilot and Director of Operations had been terminated and that this termination constituted oppressive conduct.[62] There was some ambiguity in Premier’s opening as to whether or not it contended that the termination of Mr Vickers’ operational roles was contrary to the SDA (alternatively the Expectation) (in addition to his ejection from the board being contrary to the SDA, alternatively the Expectation).[63] However, Premier’s closing squarely put the case on the basis that both the termination of Mr Vickers’ operational roles and his removal from the board were contrary to the SDA (alternatively the Expectation).[64] No objection was taken to the slight disconformity between this position and the literal terms of the pleading,[65] which did not allege a breach of the SDA or Expectation in connection with the termination of Mr Vickers’ operational roles.
[62]FASOC, [34].
[63]Premier’s opening submissions, [106].
[64]Premier’s closing submissions, [370]-[377].
[65]FASOC, [34(c)].
It is important to note, at the outset, that determining whether the SDA existed, or whether Mr Vickers had the Expectation asserted, does not answer the question whether or not conduct said to have been in breach of, or contrary to, the SDA or Expectation, was oppressive. The existence of agreements or understandings between persons who join in corporate enterprises are matters of context in which the commercial fairness of conduct complained of is to be assessed.[66] Just as conduct can be oppressive even if it does not contravene any agreement, or disappoint any understanding, conduct which does do so is not, ipso facto, oppressive. The enquiry into the existence of agreements and understandings must not be allowed to distract from the need to address the statutory question, namely whether the conduct in question is of the kind stipulated in s 232(d) or (e) of the Corporations Act.
[66]See the authorities discussed at paragraphs 30-31 above.
In view of the nature of the enquiry demanded by the statute, fixing on whether the basis of Mr Vickers’ participation in Skytraders came about by reason of a ‘contract’ he entered with Mr Mackay (which would be enforceable as such) or by reason of an understanding or expectation on the part of Mr Vickers which formed the substratum of a quasi-partnership relationship, is perhaps less important than the conduct of the trial would indicate. Nevertheless, as the parties argued the case on those two bases — the SDA and the Expectation — and their existence (if found) would constitute a matter of context in which the actions complained of fall to be assessed, I will address both aspects.
The SDA
As noted above, the SDA for which Premier contended had two terms. The first term provided that Mr Vickers ‘would be responsible for operations while [Mr Mackay] would be responsible for administrative management’. It is convenient to refer to this as the ‘demarcation term’ as Premier contended that certain conduct which involved interference in operational matters was in contravention of this term.
Given Premier’s contention in closing that terminating Mr Vickers’ operational role was contrary to the SDA,[67] it follows that the effect of the demarcation term (as advanced by Premier) was to secure Mr Vickers’ operational role (cf merely preventing Mr Mackay or others involving themselves in operational matters).
[67]Note also the contention that the issue for the Court was whether the agreement between Mr Vickers and Mr Mackay was ‘in perpetuity…until somebody got too old or whatever’: T1601.
The effect of the second term contended for was to guarantee Mr Vickers a seat on the board while Premier remained a shareholder, which board seat was not contingent on Mr Vickers occupying an operational role.
Determination of whether Mr Vickers and Mr Mackay entered into the SDA as alleged (necessarily involving the terms alleged) requires consideration of the history of Mr Vickers’ and Mr Mackay’s engagement between 2000 and mid-2003.
Events
Mr Vickers and Mr Mackay crossed paths professionally in the early 1990s when both were, in different capacities, involved in air freight operations.[68] Skytraders was the general sales agent for DHL. Mr Vickers, through corporate entities, supplied personnel to operate an aircraft supplied by DHL. For a period, work for DHL was undertaken under an AOC obtained by Premier Airlines Pty Ltd (Premier Airlines). That company was held as to 50% by Mr Vickers and his wife, and as to 50% by Mr Mackay. After DHL obtained its own AOC, Premier Airlines was deregistered, but Mr Vickers continued to supply services to DHL through another company until 1999.[69] Around this time, Mr Vickers was also involved in providing consulting services in the aviation industry internationally.
[68]Vickers I, [21].
[69]Vickers I, [27]-[32].
There was no suggestion that Mr Mackay’s involvement of Mr Vickers in the AAD opportunity was an act of charitable benevolence. It is therefore, not necessary to address the conflict between the evidence of Mr Mackay, which portrayed Mr Vickers as struggling for work, and Mr Vickers’ evidence, which portrayed his consulting services as much in demand.
Whatever the health of Mr Vickers’ consulting business, the documents establish that Mr Mackay had contacted Mr Vickers in relation to the AAD opportunity by 21 August 2000, when Mr Mackay emailed Mr Vickers. Mr Mackay’s email referred to the AAD tender process, then expected to close on 11 September 2000. Mr Mackay said ‘we would like to beef up our technical expertise. when do you return to oz?’[70] Mr Vickers responded favourably a couple of days later, attaching his resume.[71]
[70]CB.796.
[71]CB.797-CB.805.
In late 2000, Mr Mackay journeyed on an ice-breaker to the Antarctic region with the AAD and other potential tenderers. Skytraders had been shortlisted as a provider around the middle of 2000.[72] The trip was a familiarisation and information-gathering trip to allow short-listed enterprises to experience the conditions prior to the formal Request for Proposal (RFP) stage, and also to assess potential runway locations for the intercontinental link. At that stage, the AAD was investigating both an intercontinental link, from Australia to the Antarctic continent, and an intra-continental service, ie, flights within Antarctica. The ice-breaker arrived back in early February 2001. As well as engaging closely with the AAD staff on-board, while he was on the ice-breaker, Mr Mackay engaged in email correspondence with Mr Vickers, providing information to him, and seeking his views on various matters.
[72]Mackay I, [88].
On 30 January 2001, Mr Mackay sent Mr Vickers a long email. Amongst the points covered were the following:
(a) a statement by Mr Mackay that his commitment to Lynden (being Lynden Air Cargo, sometimes referred to as LAC) related only to the intercontinental link, and not to the intra-continental air service; and
(b) a suggestion to Mr Vickers that he read certain AAD reports and ‘once having done so i [sic] invite your interest in joining us in a bid for the intra service’.[73]
[73]CB.832-CB.834.
Mr Mackay’s reference to LAC related to the fact that, after the AAD invited Expressions of Interest in about 1999, Mr Mackay got LAC involved in developing the intercontinental aspect of the AAD opportunity. However, LAC was no longer involved by the time Skytraders presented to the AAD in October 2001.
Mr Mackay’s evidence was to the general effect that his engagement with Mr Vickers in the period prior to arriving back in Australia on the ice-breaker (which was on 8 February 2001) was sporadic and peripheral.
While the AAD did not issue its formal RFP until 25 July 2001,[74] work to progress Skytraders’ proposal was undertaken at least in March 2001, when Mr Vickers made enquiries relating to the price and ski options for the C-212 aircraft, as well as the potential for underwing fuel tanks to be fitted.[75] Responses to the RFP were due on 21 September 2001.
[74]Due to delays on the AAD side, explained in its letter to Mr Mackay dated 4 May 2001: CB.841.
[75]CB.835-840.
After the release of the RFP, work naturally picked up, and it was common ground that Mr Vickers was closely involved in developing the proposal to use the C-212 for the intra-continental component as part of Skytraders’ response to the RFP (the Response). Mr Vickers’ evidence was that between January 2001 and the release of the RFP, he exchanged ‘six or seven hundred emails’ with Mr Mackay and others in relation to the AAD project.[76] Even allowing for a degree of exaggeration, I accept that Mr Vickers was deeply involved in developing Skytraders’ Response, albeit his input was focused on the areas in which he had expertise.
[76]T234.24-27.
The engagement between Mr Vickers and Mr Mackay included spending a week at Mr Niemeyer’s residence in Leura in the Blue Mountains in early to mid-September 2001. Mr Vickers’ and Mr Mackay’s evidence diverged as to the contribution made by Mr Vickers to the Response prior to that week. According to Mr Mackay, they met in the Blue Mountains to work on an aspect of the Response, which Mr Mackay had asked Mr Vickers to assist in (but Mr Mackay had already worked on the other parts of the Response).[77] According to Mr Vickers, he had already ‘essentially finished the tender response’ and worked on the finer details, with Mr Mackay focused on checking the grammar of the Response.[78]
[77]Mackay I, [109].
[78]Vickers II, [25].
Their diverging views on this point was not isolated, but reflected a general difference in their evidence on their respective contributions to the Response and the associated presentation made to the AAD in Hobart in October 2001. Mr Mackay’s evidence generally portrayed Mr Vickers as lacking any specific talents or experience relevant to the AAD tender. He emphasised Mr Vickers was a jet pilot with no polar flying experience and that the kind of AOC Mr Vickers had obtained was just a standard AOC. That said, Mr Mackay did acknowledge that Mr Vickers made an important contribution to the Response.
Mr Vickers’ evidence portrayed Skytraders, prior to his involvement in the AAD proposal, as a relatively small air freight broker with declining prospects, which was performing poorly financially, and which had no operational experience as an airline.[79] Mr Mackay and Mr Vickers also had different recollections about whose idea certain initiatives were (such as the proposal to use a certain jet aircraft for inter-continental flights to Antarctica) and who delivered which parts of the presentation to the AAD in Hobart. Resolution of the issues in this case does not require me to make findings of fact determining whose recollection is to be preferred on these disputed points.
[79]Vickers I, [38], [65]-[67]; T251.21-26.
The one matter, carriage of which Mr Mackay unstintingly credited to Mr Vickers, was development of the proposal to use the C-212 aircraft fitted with skis and the associated calculations relating to range and payload. As it turned out, there were significant problems with the C-212s, the skis and the calculations, which meant that the aircraft could not fly to Antarctica to service the intra-Antarctic needs of the AAD as it should have. It could not carry the anticipated payload and could only make the journey in certain conditions, limiting its utility to the AAD. The AAD ultimately cancelled the contract in or around 2012,[80] after it had effectively ‘mothballed’ the aircraft in September 2011, in advance of the 2011/2012 season.[81] Premier did not accept that Mr Vickers was to blame, or was solely responsible for the C-212 proposal. Mr Mackay was cross-examined on a number of emails showing him to have had involvement in liaising with the AAD regarding the C-212s and the skis.[82]
[80]The exact date on which the contract was terminated is not entirely clear. On 19 March 2012, the AAD sent a letter to Skytraders stating that it wished to cancel the contract related to the C-212s, but did not by that letter terminate the contract: CB.1681. In his first witness statement, Mr Mackay stated that the contract was then cancelled ’in or about 2012’. In cross-examination, he stated that the contract was terminated in 2013: T750.1-9. Nothing turns on whether the contract was terminated in 2012 or 2013.
[81]CB.1677-CB.1678.
[82]CB.14060, CB.14062, CB.14065, CB.14066; T730.30-T738.13.
It was unclear what forensic purpose the extensive blame game concerning the ill-fated C-212s and the skis served. Even taking Mr Mackay’s version at its highest, the most it could show is that Mr Vickers made errors in calculations, which only came to light well after Mr Vickers’ company, Premier, received shares, Mr Vickers became a director in June 2003 and Mr Vickers assumed an operational role in Skytraders. As such, the narrative concerning Mr Vickers’ errors (assuming the errors were ultimately his and not the product of faulty calculations from third party suppliers), the ultimate loss of the AAD intracontinental contract many years later, and the reputational damage occasioned by the C-212s not performing as required by the AAD, cannot logically inform the basis on which Mr Vickers and Premier came into Skytraders in the first place. Specifically, that narrative has no bearing on whether or not there was a contract or understanding of the kind for which Premier contends.
With that digression, I return to the narrative. Mr Mackay’s evidence was that there was some discussion between him and Mr Vickers about the basis on which he was to be compensated for the work he was doing during the week they spent at the home of Mr Niemeyer at Leura in the Blue Mountains.[83] His evidence was that he did not initially contemplate that Mr Vickers would be made a shareholder for a few reasons. First, Mr Mackay saw Mr Vickers as simply providing a consulting service. Skytraders’ limited financial resources were put to Mr Mackay in cross-examination as inconsistent with the notion Skytraders could pay Mr Vickers on a consulting fee basis. Mr Mackay’s evidence in response to this line of questioning was largely non-responsive, focusing on the fact that the AAD did do business with Skytraders, apparently thereby demonstrating financial wherewithal beyond that apparent from Skytraders’ accounts.[84]
[83]Mackay I, [134].
[84]T678.24-T684.5.
Secondly, Mr Mackay referred to the fact that any remuneration linked to the success of the AAD tender would be some years hence, once funds were flowing under a contract with the AAD. Thirdly, Mr Mackay noted that he was not the sole shareholder in Skytraders and the agreement of the other shareholder, Mr Niemeyer would be required to introduce a new shareholder. That said, Mr Mackay stated that he did discuss compensation based on a 25% share of profit, if and when Skytraders won the AAD contract.[85] According to Mr Mackay, Mr Vickers raised being paid by way of dividend in these conversations, but no commitment was made; Mr Niemeyer was not present for the week in Leura and, as noted, Mr Mackay’s view was that Mr Niemeyer’s agreement would be required to introduce Mr Vickers as a shareholder.
[85]Mackay I, [136].
Mr Vickers disputed Mr Mackay’s account of their week at Leura. His evidence was that the basis upon which he was to be remunerated was not discussed that week. His evidence was that the discussions about him receiving a 25% shareholding and seat on the board had commenced from August 2000.[86] However, Mr Vickers accepted in cross-examination that he had not reached any agreement with Mr Mackay that there would be a separation between their responsibilities (of the kind pleaded) in August 2000.[87] Mr Vickers was not able to identify with any precision when it was that he and Mr Mackay agreed to separate their responsibilities in the manner for which Premier contended:
Just to press you on this, are you able to identify a month or a year where you think you had this settle discussion with Mr MacKay about the separation of responsibilities?---No, I can’t.
Could that have been, in fact, in 2001?---No, no.
Are you saying that - - - ?---I don’t believe so. I believe we had a very clear understanding very early on of what we both brought to the party.
Are you saying, therefore, that the agreement you had with Mr Norman MacKay about a separation of responsibilities was some time in calendar year 2000?---I would, I would think so.[88]
[86]T236.14-T237.6.
[87]T237.7-16.
[88]T238.2-14.
On Mr Mackay’s account, after Skytraders was named as the AAD’s preferred supplier in February 2002, he made contact with Mr Vickers again, who was interested in being involved.[89] Mr Mackay explained that Mr Niemeyer was not enthused about the new direction Skytraders was taking, and wanted to continue to run an air freight operation part time. This meant Mr Niemeyer took the air freight operations into another company. With Mr Niemeyer and Mr Mackay having effectively decided to split the business, that facilitated Mr Vickers taking remuneration by way of a shareholding in Skytraders, which would have been tax-effective for him. Mr Niemeyer agreed with Mr Mackay that his shareholding could be diluted to allow for Mr Vickers to take shares, while allowing Mr Mackay to remain the majority shareholder.[90]
[89]Mackay I, [147]ff.
[90]Mackay I, [156].
While Mr Mackay said he considered Mr Vickers to be merely a consultant, or someone who was providing services, rather than a ‘business partner’, he said in his witness statement that he agreed to give Mr Vickers 25% of the shares in Skytraders, in part because he was having treatment for a potentially serious medical condition and ‘needed to put something in place for my children as that was the principal purpose in spending a life building Skytraders’.[91] Quite how giving Mr Vickers a substantial shareholding would assist in Mr Mackay’s broader aspirations concerning the company and his family, in the event of continued ill health, was not explained.
[91]Mackay I, [158].
Despite Mr Mackay’s general view that Mr Vickers did not have any unique skills, he accepted in cross-examination that he did not go to the market to obtain the technical input Mr Vickers provided, but only approached Mr Vickers.[92]
[92]T702.11-19.
According to Mr Mackay, he offered Mr Vickers a 25% shareholding and stated that retaining control was a base requirement. On the account given by Mr Mackay in his first witness statement, Mr Vickers contacted him a few days later and said words to the effect of, ‘If I’m not getting a guaranteed seat on the board, then I want to make up for that by a higher shareholding’. Mr Mackay said in his first witness statement that he thought about it for a few days, and then agreed to give Mr Vickers 30% but reiterated that he wanted to keep majority control.[93] These discussions were said to have occurred in March and May 2003.
[93]Mackay I, [162]-[163].
It was not clear on Mr Mackay’s account what happened between February 2002 and March 2003; implicitly, on his evidence, the matter of Mr Vickers’ participation or remuneration was not directly addressed for a year, all the while activity was continuing apace following Skytraders having been named the preferred supplier. In my view, that is implausible. It is implausible that Mr Vickers having raised taking a shareholding by at least the Leura meeting in mid-2001, the matter was not progressed until March 2003 and that Mr Vickers worked on the AAD project in the vague hope that he would be offered shares at some point, or remunerated by some other means.
Mr Mackay’s account changed in his second witness statement. There he said that he did not ‘precisely recall the reason for the increase from 25% shareholding to 30% shareholding, other than that it arose from negotiating several different issues’, including the need to maintain majority control.[94] In cross-examination, Mr Mackay struggled to reconcile the two accounts he gave in his first and second witness statement, ultimately positioning the second account as additional (cf contradictory) evidence.[95]
[94]Mackay II, [3].
[95]T696.21-T697.30.
I pause here to note that, despite Mr Mackay’s emphasis in his evidence on maintaining majority control, maintaining majority control by holding more than 50% of the shares is not inconsistent with having reached an agreement or understanding with Mr Vickers for him to have a board seat associated with Premier’s shareholding. Nor are the terms of the company’s constitution (and before it the company’s memorandum and articles of association), which permitted the removal of a director by a majority vote, necessarily inconsistent with the existence of an agreement or understanding of the kind for which Premier contended. In many circumstances, agreements or understandings can be reached which involve someone not exercising powers they would otherwise have under the company’s constitution. Indeed, when Mr Mackay exercised his personal and corporate majority to remove Mr Vickers from the board, that was the only occasion on which he exercised his majority power.[96] In cross-examination, Mr Mackay was asked whether he had ever, before 2019, raised with Mr Vickers use of his (Mr Mackay’s) majority rights under the company’s constitution. The relevant passage of evidence is as follows:
Your position has always been as I understand it that the constitution provided you as the majority shareholder with a right to remove any director, is that right?---That is correct.
What I want to ask you now is whether, until 2019, you had any discussion with Mr Vickers about the use of that power?---Sorry, prior to what - before 2019?
Yes?---I think there was discussion of it in 2003.
And what discussion was that?---Oh, I really don't recall - 20 years earlier. 20 years ago.[97]
[96]T781.9-10.
[97]T789.26-T790.4.
Based on such vague and uncertain evidence, I am not prepared to proceed on the basis that there was a discussion between Mr Vickers and Mr Mackay in 2003 concerning Mr Mackay’s exercise of majority powers in the company’s constitution. Further, the variability in Mr Mackay’s apparent level of recollection of conversations and events between 2000 and 2003 was notable. While his witness statements were drafted conveying distinct recollection of conversations in the early 2000s, when cross-examined, Mr Mackay frequently made observations to the general effect that the events of 2001 to 2003 were a long time ago, and he did not recall specific matters. Mr Mackay’s lack of recall of events occurring 20 years ago is perfectly understandable, but his frequent recourse to a lack of clear recollection in answering questions in cross-examination makes me cautious in relying on his evidence where he purported, particularly in his written evidence, to recount clear recollections of events and discussions with Mr Vickers in 2001 to 2003. In addition, Mr Mackay’s readiness in refuting Mr Vickers’ evidence of contact having occurred regarding the AAD in 2000, only to recant when Mr Vickers subsequently located emails substantiating contact having occurred in August 2000, further suggests to me that Mr Mackay’s recollection of the detail of events occurring so long ago was not strong.
That is not to say I rely readily on Mr Vickers’ recollections of that period either. Both Mr Vickers and Mr Mackay were not particularly impressive witnesses. They were both often non-responsive — even belligerent — in their answers to questions in cross-examination. Both were prone to making self-serving speeches. While I do not consider either gave consciously untruthful evidence, they were both acutely alive to where their interests lay and my impression, having observed both give evidence for more than three days each, was that their recollections had been (I assume unwittingly) moulded over the course of time and in light of their falling out.
Ultimately, however, the details of Mr Mackay and Mr Vickers’ differing recollections of the events of 2000-2003 is not decisive. Senior counsel for the Mackay parties did not dispute that there was an agreement between Mr Mackay and Mr Vickers that he would get a 30% shareholding and a board seat. As counsel observed ‘[o]bviously, that was agreed between you at some point’.[98] Rather, what counsel for the Mackay parties suggested to Mr Vickers was that there was no agreement involving the kind of division of responsibilities pleaded.[99] In responding to this line of questioning, Mr Vickers highlighted that both he and Mr Mackay had their respective areas of expertise. As Mr Vickers put it, it was clear what each of them ‘brought to the party’.[100]
[98]T250.18.
[99]T250.2-T252.10.
[100]T238.8-10.
Further, Mr Vickers accepted in his evidence that he did not have a conversation with Mr Mackay in which it was agreed that, even if Mr Vickers did not continue in his operational roles, but remained a shareholder, he would continue to be entitled to a board seat.[101] With counsel and Mr Vickers talking over one another at points, the transcript is somewhat muddled. However, having heard the evidence as it was given, it was clear to me that the thrust of Mr Vickers’ evidence was that the board seat was linked to the shareholding, and that the agreement he had with Mr Mackay did not link the board seat to his operational role.[102] As stated by Mr Vickers ‘[t]he directorship went with the sharehold[ing] — it was not connected to the, to the, the concept that I was working as chief pilot’.[103]
[101]T252.24-T253.12.
[102]In his second witness statement, Mr Vickers stated he ‘never had a discussion with Norman Mackay about a “guaranteed” seat on the board.’: Vickers II, [55].
[103]T252.20-22. This is not easy to reconcile with the position taken by Mr Vickers in his second witness statement, where he went on to say that it was his understanding that, with a 25% ownership interest, he would be entitled to a senior management role and management rights (in the form of a directorship and the role of Chief Pilot) associated with his ownership: Vickers II, [55]. It may be that the reconciliation lies in Mr Vickers’ understanding he would have a directorship and operational role because he was to be a 25% shareholder, but accepting that his board seat did not arise by reason of having a senior managerial role.
Under cover of his third witness statement, Mr Mackay produced an unsigned document, apparently retrieved from some kind of archived server, with meta-data indicating a date of 5 June 2003, and the document creator being Mr Mackay’s then assistant, Jennifer Pinkus.[104] Mr Mackay stated in his third witness statement that ‘[t]he document was drafted to reflect what had been agreed between me, Mr Niemeyer, and Mr Vickers in or about June 2003. … I believe the document would have been signed by me and each of Messrs Niemeyer and Vickers in or about June 2003’.[105]
[104]CB.14592; Mackay III, [1]-[2].
[105]Mackay III, [3].
However, the fact that I have found that the 15 September 2019 email to staff was, as alleged by Premier, in effect a direction not to provide Mr Vickers with information, does not ipso facto make the email oppressive. As at 15 September 2019, however the termination of Mr Vickers’ operational roles came about, it was clear his executive involvement in the company was at an end. Further, as at 15 September 2019, it was clear that Mr Vickers was contemplating issuing proceedings, and, as set out above, Mr Mackay was concerned that Mr Vickers may take action that would be harmful to the company. In these circumstances, it was reasonable for Skytraders to protect itself by ensuring that Mr Vickers and Premier accessed information through official channels (as they in fact did through requests made citing s 247A and s 290 of the Corporations Act), rather than by the ‘backdoor’ through staff. Accordingly, I do not consider the 15 September 2019 email to staff to constitute oppressive conduct.
The events as a whole
As detailed above, I have concluded that each of the specific instances of conduct complained of by Premier did not constitute oppressive conduct within the meaning of s 232 of the Corporations Act. Nor, in my view, is this a case where oppressive conduct in the whole arises from a series of incidents, none of which rises to the level of constituting oppressive conduct when considered in isolation.
Approaching the facts complained of globally, there is no doubt that Mr Vickers was deeply unhappy about aspects of the way in which Skytraders was being run. But, for the most part, he did not articulate his objections. Rather, it appears he allowed his private resentments to build and fester, occasionally complaining about Mr Burnaby’s perceived interference. Mr Vickers’ failure to raise his objections and complaints as the events in question arose may, at least to some extent, be explained by an unwillingness to challenge Mr Mackay on any issue on which Mr Vickers understood Mr Mackay to have a different view (including as to whether Mr Burnaby should be reined in). That unwillingness may itself be explained (again to some extent) by Mr Mackay’s domineering and dominant personality, as was apparent from his demeanour in giving evidence.
Nevertheless, Mr Vickers’ failure to articulate his disagreement with many of the matters complained of means that the commercial unfairness of the actions complained of must be assessed taking into account that Mr Mackay, in particular, was not made aware of the extent to which Mr Vickers felt that the manner in which the company was being run was unfair to him and Premier, or resulted in interference in operational affairs posing safety risks to the company. The evaluation of whether the impugned events as a whole constituted commercial unfairness must also be considered in light of the ebb and flow of events over the relevant period, given the events complained of were peppered across a number of years and specific events had been dealt with and closed (at least for those not privy to Mr Vickers’ private thoughts).[601] In conclusion, standing back and assessing the impugned conduct as a whole, Premier has not established that the events complained of were oppressive under either limb of s 232.
[601]Eg, in early 2017, Mr Burnaby and Mr Vickers buried the hatchet concerning the team building event. Eg, the Studd incident had been dealt with and defused. Eg, the objectionable method of the introduction of Calum Mackay into the Melbourne operations department did not derail his visit, and Mr Vickers’ himself proceeded to make use of Calum Mackay’s services. Eg, the Sydney property rental was raised in a meeting and agreed to by Mr Vickers and Mr Sharp.
John Sharp and Sallab
In its FASOC, Premier alleged that Mr Sharp remained a director of Skytraders within the meaning of s 9 of the Corporations Act, notwithstanding the cessation of his formal appointment as a director on about 28 June 2013. It also alleged that Mr Sharp was the beneficial owner and/or controller of the shares in Skytraders that are formally held by Sallab. That shareholding represents over 17% of the ordinary shares in Skytraders.
Premier’s theory on this point was that Mr Sharp caused Ashby Park to transfer its shares to Sallab at an undervalue on the basis that Sallab would hold the shares for him, thereby putting them beyond the reach of Mr Sharp’s wife in divorce proceedings.
There is a substantial body of evidence before the Court suggesting that Premier is correct that Mr Sharp is the true economic owner of the Sallab shares. That evidence includes:
(a) the fact that, as at 30 June 2013, Skytraders had cash at bank and cash on deposit of $11,750,001 and positive net assets of over $16 million,[602] yet the purchase price for shares representing over 17% of the ordinary shares was only $350,000;[603]
[602]CB.6629-CB.6635. Cf the ostensible purchase price for the shares, being $350,000.
[603]CB.1817. While counsel for Mr Sharp and Sallab made the point (T1562.10-23) that the sale agreement was struck in April 2013, before the FY13 accounts were finalised, it was not submitted that the FY2012 accounts suggested such a radically different position as would make $350,000 a comprehensible sale price. Skytraders’ 2012 balance sheet shows net assets of over $9 million, and cash on hand of close to $8 million: CB.1701-CB.1702.
(b) evidence of the operations of Skytraders including the provision of ‘shareholder reports’ to Mr Sharp;
(c) Mr Sharp’s role in the company, which did not change at all when he apparently sold the shares he held through Ashby Park to Sallab, including his continued attendance at director and shareholder meetings;
(d) emails and activities that refer to and treat Mr Sharp as though he was a shareholder of Skytraders;[604] and
(e) provision of statements of the dividends to be issued to shareholders to Mr Sharp (and not Mr Ballas), the treatment of one of the loan accounts, ‘Sallab 2’, as a proxy for a loan account recording amounts spent by Mr Sharp and credited to his loan account in the same way as the loan accounts for Mr Vickers and Mr Mackay operated,[605] and the recording, in dividend-related documents of Thenford Consulting (Mr Sharp’s vehicle) being entitled to a 17.4% share of the dividends.[606]
[604]See, eg, CB.2941 (being an email dated 7 September 2017, where Mr DeAngelis arranges for a new company, Hiflite Pty Ltd, to be established, stating ‘The shareholding of Hiflite Pty Limited will be owned by Norman [Mackay], Terry [Vickers] and John [Sharp]’s SMSFs in the same ratio as the holding is in Skytraders.’); CB.2857, CB.3196 (each being shareholder meeting minutes, showing Mr Sharp as an attendee).
[605]Eg CB.2434ff; T1188.28-T1189.4.
[606]Eg CB.3049.
Most telling of all is the evidence of Mr Sharp’s own words in his meeting with Mr Vickers on 12 November 2019 in which they discussed this proceeding and the possibility of selling their shareholdings or the company.[607] Mr Vickers secretly recorded that conversation. A transcript of the conversation was in evidence. At the that meeting, Mr Sharp referred to ‘my seventeen and a half’, obviously a reference to the 17.5% shareholding ostensibly held by Sallab, referred to the value of ‘my shareholding’ if it were to be purchased,[608] and to a desire to see ‘my shares having a good solid value so that I can sell them at some point’.[609] This conversation occurred more than six years after the ostensible sale of Ashby Park’s shares.
[607]CB.5244-CB.5286, especially at CB.5280.
[608]CB.5261.
[609]CB.5280.
There is, however, a formal record of the share transfer to Sallab and there are records showing Sallab did duly transfer the $350,000 in official consideration. The existence of documentation that is consistent with a genuine sale having occurred is entirely unsurprising. It would be expected that anyone proceeding with a sale on the basis Premier alleged would ensure the obvious paperwork was in order. Likewise, the fact that Skytraders paid dividends to Sallab in the first instance,[610] is of limited relevance without an exploration of the very substantial body of subsequent financial transactions between Sallab (or Mr Ballas) and Mr Sharp (or his related interests and family).[611]
[610]A matter relied on by Mr Sharp and Sallab in their closing submissions.
[611]I note here that Premier relied in closing submissions of detailed banking records showing transactions between those two sets of interests.
While the veracity of the transfer and the question of undervalue was apparently in dispute in the Family Court proceeding between Mr Sharp and his former wife, I do not make anything of the conclusion reached in the Family Court proceeding for two reasons. First, s 91 of the Evidence Act 2008 (Vic) prohibits the use of a judgment in another proceeding to prove a fact that was in issue in that proceeding. Second, it is far from apparent that the documentation produced in this proceeding was before the Family Court.
Nevertheless, notwithstanding my scepticism regarding the transaction and Mr Sharp’s position, the anterior question is whether it is necessary to make findings on Premier’s pleaded contentions that Mr Sharp was a de facto director of Skytraders from about 28 June 2013 onwards and was the beneficial owner of the shares in Skytraders formally held by Sallab.[612]
[612]FASOC, [9(b) and (d)].
In my view, it is not necessary for this Court to make findings on those matters in order to determine the oppression case advanced by Premier. Had the Mackay parties contended that Sallab’s passive shareholding undermined Premier’s alternative Expectation case,[613] it would have been necessary to determine whether Mr Sharp was in fact a de facto director who remained actively engaged in the business and was the beneficial holder of Sallab’s shares. However, as I have noted, at paragraph 124 above, the Mackay parties did not contend that subsequent events concerning Mr Sharp and Sallab undermined Premier’s Expectation case on the basis that Skytraders was a company in which shareholders (viz Sallab) could and did hold passive shareholdings.
[613]On the basis that a passive shareholder was inconsistent with the quasi-partnership thesis underpinning Premier’s expectation case.
Further, and as addressed above at paragraphs 124 to 129, I do not consider that subsequent events, including the status occupied by Mr Niemeyer or Mr Sharp, could assist Premier. For these reasons, in my view it is not necessary to make findings on Mr Sharp’s position in order to dispose of that part of the case either.
It was never satisfactorily explained just why Mr Sharp was joined to the proceeding. No oppression was alleged stemming from his actions (or those of Sallab). Mr Vickers rejected the suggestion Mr Sharp was joined to embarrass him and to maximise pressure to settle.[614] The only explanation advanced by Mr Vickers was that he believed that Mr Sharp remained the beneficial owner of the shares held by Sallab on the basis that, in his view, the transaction by which Ashby Park, the entity controlled by Mr Sharp, sold its shares to Sallab was a fabrication.[615] That explanation is not persuasive given that, as a party, Sallab would be bound by the outcome of this proceeding, whoever it holds its shares for.
[614]T536.26-T537.17.
[615]T554.29-T555.10. Aside from this explanation, Mr Vickers explained that the decision of who to join to the proceeding was primarily made on the basis of legal advice: T536.26-T537.17; T554.25-T555.23.
Given my conclusions above, it is also not necessary for me to determine the admissibility of the decision of the Family Court proceedings between Mr Sharp and his former wife.[616] Mr Sharp and Sallab sought to tender the decision, but objection was taken by Premier.
[616]Counsel for Mr Sharp and Sallab sought to rely on the decision (in which the contention that the transaction between Ashby Park and Sallab was a sham was rejected) to counter evidence of Mr Vickers as to his suspicions regarding the bona fides of that transaction: T1576.30-T1579.29.
Relief
Premier has not established that there was oppressive conduct. Accordingly, it is not necessary to address the relief that would have been appropriate had the oppression case succeeded.
In closing submissions, counsel for Premier expressly confirmed (in answer to a question I asked of him) that, if I found against Premier on oppression, it did not contend that it had a residual winding up case which may still be advanced. In this regard, Premier did not contend that there was conduct which, if not oppressive, still enlivened the Court’s jurisdiction to wind up Skytraders on the just and equitable ground.[617]
[617]Cf Nassar, [97]-[98] (Barrett J).
However, the Mackay parties, recognising that success in defeating the oppression case would leave them in the unhappy position of having Premier continue to be a shareholder,[618] explored in submissions whether there was a basis upon which a buyout could be ordered as a less drastic remedy to winding up Skytraders.[619] Skytraders is a profitable business and it is well-established that courts are extremely reluctant to wind up solvent companies.
[618]While Skytraders continued to pay healthy dividends after Mr Vickers and Mr Mackay fell out (and thus dividend payments were not the subject of complaint in this proceeding) it does not take much imagination to foresee future points of conflict if Premier remains a shareholder.
[619]See, eg: Timesgarden Pty Ltd v Shi [2022] NSWSC 331, [208] (Rees J).
Before considering whether there would be a less drastic remedy to winding up Skytraders, as the submissions of the Mackay parties rightly pointed out, the question is whether there is a proper basis for me to form an opinion that ‘it is just and equitable that [Skytraders] be wound up’. While observing that whether such an outcome is just and equitable is a question of fact, to be decided in each case on the unique circumstances of the case, the Mackay parties submitted that the decided cases nonetheless identify a number of categories in which the jurisdiction to wind up on the just and equitable ground has been enlivened.
Of the categories identified, the Mackay parties submitted that only the ground of deadlock in the conduct of the affairs of Skytraders was eligible for consideration. However, as the Mackay parties noted, ‘in reality, there is no deadlock in the conduct of the affairs of Skytraders’ now that Mr Vickers no longer has an operational role and has not sought reinstatement to the board in Premier’s prayer for relief. The Mackay parties’ closing submissions also traversed the facts, making the point that there was also no serious deterioration in the relationship between Mr Vickers and Mr Mackay prior to 26 August 2019, which might be characterised as constituting a deadlock or breakdown.
I agree with the submission made by the Mackay parties that the circumstances of this case are such that there is no basis upon which I could conclude that it would be just and equitable for Skytraders to be wound up. While there has been a breakdown in the relationship between Mr Vickers and Mr Mackay, it is not impeding the commercial operations of Skytraders.[620] Nor, as already noted, did Premier contend that there was a basis to exercise the winding up jurisdiction if I concluded that the case in oppression fails.
[620]Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667, [80] (Black J), referring to Tomanovic, [49]-[51] (Austin J).
Given the unhappy stalemate attendant on a loss on the oppression case, and the Court’s inability to direct a purchase of Premier’s shares under the winding up jurisdiction, the Mackay parties ventured a novel suggestion. They contended as follows:
Notwithstanding the unavailability of s 467(4), it is submitted that jurisdiction to order a buyout of Premier’s shares is found in s 467(1)(c) which states that “on hearing and winding up application the Court may… make any interim or other order that it thinks fit”. There is no reason to conclude that the orders of the kind identified in s 233(1), in particular a buyout order, do not fall within the scope of the expression “other order”. [621]
[621]Mackay parties’ closing submissions, [298].
Counsel for the Mackay parties conceded that they were unable to find any record of a case in which a court has ordered the buyout of shares in circumstances where the court has not otherwise concluded that the winding up jurisdiction has been enlivened.
I reject the argument advanced by the Mackay parties. It amounts to a contention that, despite concluding that it is not just and equitable that Skytraders be wound up, this Court has the power to, and ought to, order a buyout of Premier’s shares simply because it brought (and failed in) an application to have the company wound up on the just and equitable ground.
There is limited case law on the extent of the power conferred by s 467(1)(c). As Young J noted in Alati v Wei Sheung, ‘[a]lthough a comparable section has been in the Companies or Corporations Acts from the middle of the nineteenth century, there has not been any Australian case considering the extent of the court’s power in those 150 years.’[622] His Honour observed that the provision is expressed in wide terms.[623] The Mackay parties relied on the observations of Young J as supporting a generous interpretation of the provision. Section 467(1)(c), and the observations made by Young J in Alati, were referred to in Host-Plus Pty Ltd v Australian Hotels Association,[624] but it was not necessary in that case for Hansen J to consider the submissions made about the ambit of s 467(1)(c).[625] Finally, reference was made to s 467(1)(c) in ReRenex Founder Hold Co Pty Ltd.[626] In that case, there was a dispute whether the Court had the power to direct a valuation in an oppression proceeding. Justice Delany considered there was such a power, stating:
As discussed during the hearing I consider there are two separate sources of power that enable the Court to order a valuation of the company; the first being s 467(3)(f) of the Act and the second, the Civil Procedure Act 2010 (Vic) (‘the CPA’).[627]
Contrary to the written submissions of the Mackay parties, Delany J did not rely on s 467(1)(c) to order a valuation.
[622]Alati v Wei Sheung (2000) 34 ACSR 489 (Alati), [28]; [2000] NSWSC 601, [28].
[623]Alati, [34] (Young J); see also Triulcio v Chase Property Investments Pty Ltd [2004] NSWSC 311, [37] (Gzell J).
[624][2003] VSC 145 (Host Plus).
[625]Host Plus, [68].
[626]Re Renex Founder Hold Co Pty Ltd [2021] VSC 661 (Renex).
[627]Renex, [11].
In any event, and without venturing any concluded views on the outer bounds of s 467(1)(c), I do not accept that s 467(1)(c) empowers this Court to direct a buyout in the circumstances of this case. Where a winding up application has been taken to trial and has failed, I do not consider that any construction of s 467(1)(c) is open which would permit the Court to award final relief which is the self-same relief that may have been ordered (as a less drastic alternative to winding up) under s 467(4). Clearly the power conferred by s 467(1)(c) must be exercised judicially. The proposition that a buyout should be ordered merely because it would be convenient given the shareholders have fallen out — but where there is no jurisdictional basis to so order under s 467(4) given the failure of the substratum of the winding up application— lacks any juridical basis. It is an invitation to the arbitrary exercise of power.
Premier’s originating application dated 1 October 2019 will be dismissed with costs. Any party seeking to make submissions that any special costs order be made is directed to do so in writing within seven days of delivery of these reasons.
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SCHEDULE OF PARTIES
S ECI 2019 04462
| BETWEEN: | |
| PREMIER AVIATION HOLDINGS PTY LTD (ACN 104 968 354) | Plaintiff |
| - and - | |
| NORMAN FARQUHAR MACKAY | First Defendant |
| SCARP NOMINEES PTY LIMITED (ACN 608 980 650) | Second Defendant |
| SALLAB PTY LTD (ACN 164 150 332) | Third Defendant |
| DEEP SECTION INVESTMENTS PTY LTD (ACN 628 475 383) | Fourth Defendant |
| EDISTO PTY LTD (ACN 620 149 831) | Fifth Defendant |
| 6PLATFORMS PTY LIMITED (ACN 613 457 373) | Sixth Defendant |
| JOHN SHARP | Seventh Defendant |
| SKYTRADERS PTY LTD (ACN 001 851 921) | Eighth Defendant |
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