Tampalini v Larrikin Holdings Pty Ltd

Case •

[2003] WASC 185

No judgment structure available for this case.

TAMPALINI -v- LARRIKIN HOLDINGS PTY LTD & ORS [2003] WASC 185



SUPREME COURT OF WESTERN AUSTRALIACitation No:[2003] WASC 185
Case No:COR:2/20035-7, 28 AUGUST 2003
Coram:MASTER NEWNES26/09/03
33Judgment Part:1 of 1
Result: Application dismissed
B
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Parties:SERGIO PAUL TAMPALINI
LARRIKIN HOLDINGS PTY LTD (ACN 009 428 273)
HAYDN ALAN ROBINSON
ANTHEA LEIGH ROBINSON

Catchwords:
Corporations Act
Application by shareholder to wind up company
Section 461(e), (f) and (k)
Turns on own facts

Legislation:
Corporations Act 2001 (Cth), s 461(1)(e), (f) and (k)

Case References:
Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (1999) 34 ACSR 469
International Hospitality Concepts v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368
Jenkins v Enterprise Gold Mines NL (1992) 10 ACLC 136
Loch v John Blackwood Ltd [1924] AC 783
Re Cumberland Holdings Ltd (1976) 1 ACLR 360
Re Eastern Copper Mines NL (1975) ACLC 28,239
Re George Raymond Pty Ltd (2000) 18 ACLC 85
Reid v Bagot Well Pastoral Co Pty Ltd (1993) 12 ACSR 197
Alessi v Original Australian Art Co Pty Ltd (1989) 7 ACLC 595
Baird v Lees [1924] SC 83
Belgiorno-Zegna v Exben Pty Ltd (2000) 35 ACSR 305
Community Development Pty Ltd v Engwirda Construction Co [1968] Qd R 541
Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd (1977) 13 ALR 561
Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492
Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (1999) 34 ACSR 469
In Re Gerard Novelle Cuisine Ltd (1981) NZCLC 95-016
Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606
Kokotovich Constructions Pty Ltd v Wallington (1995) 13 ACLC 1113
Loch v John Blackwood Ltd [1924] AC 783
McEwen v Combined Coast Cranes Pty Ltd (2002) 44 ACSR 244
Menard v Horwood & Co Ltd (1922) 31 CLR 20
Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 14 ACLC 519
Mincom Pty Ltd v Murphy [1983] 1 Qd R 297
Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692
Pulbrook v Richmond Consolidated Mining Co (1878) 9 Ch D 610
Re Anglo-Greek Steam Co (1866) LR 2 Eq 1
Re Broadcasting Station 2GB Pty Ltd [1964-65] NSWR 1648
Re Campbell's Corp Ltd & Companies Act (1978) 3 ACLR 519
Re Centre Restaurant Pty Ltd (1982) 6 ACLR 481
Re Cottonvale Distilleries Pty Ltd (1985) 3 ACLC 316
Re Cumberland Holdings Ltd (1976) 1 ACLR 361
Re Dalkeith Investments Pty Ltd (1985) 3 ACLC 74
Re Davis Investment (East Ham) Ltd [1961] 3 All ER 926
Re Eastern Copper Mines NL [1974] ACLC 40-205
Re George Raymond Pty Ltd; Salter v Gilbertson (1999) 18 ACLC 85
Re Gerard Novelle Cuisine Ltd (1981) NZCLC 95-016
Re Gold Co (1879) 11 Ch D 701
Re Haven Gold Mining Co (1882) 20 Ch D 151
Re Hop & Malt Exchange & Warehouse Co (1866) LR 1 Eq 483
Re Horwood & Co Ltd (1921) 21 SR (NSW) 750
Re H R Harmer Ltd [1958] 3 All ER 689
Re Kolback Group Ltd (1991) 4 ACSR 165
Re Koscot Interplanetary (UK) Ltd [1972] 3 All ER 829
Re London Suburban Bank (1871) LR 6 Ch App 641
Re M Dalley & Co Pty Ltd (1968) 1 ACLR 489
Re M'Donald Gold Mines (1898) 14 TLR 204
Re National Discounts Ltd (1952) 52 SR (NSW) 244
Re Newbridge Steam Laundry (1917) 1 IR 67
Re Netsor Pty Ltd (1982) 1 ACLC 73
Re North End Motels (Huntly) Ltd (1976) 1 NZLR 446
Re Norvabron Pty Ltd (1987) 5 ACLC 184
Re Polyresins Pty Ltd [1999] 1 Qd R 599
Re Rica Gold Washing Co (1879) 11 Ch D 701
Re Sydney and Whitney Pier Bus Services Ltd (1944) 3 DLR 468
Re Thomas Edward Brinsmead & Sons [1897] 1 Ch 406
Re Tivoli Freeholds Ltd (1972) VR 445
Re W R Willcocks & Co Ltd [1973] 2 All ER 93
Re Weedmans Ltd [1974] Qd R 377
Re William Brooks & Co Ltd v The Companies Act 1936-1960 (1961) 79 WN (NSW) 354
Re Wondoflex Textiles Pty Ltd [1951] VLR 458
Reid v Bagot Well Pastoral Co Pty Ltd (1993) 12 ACSR 197
Roberts v Walter Developments Pty Ltd (1997) 15 ACLC 882
Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324
Stapp v Surge Holdings Pty Ltd (1999) 17 ACLC 896
Thomas v H W Thomas Ltd [1984] 1 NZLR 686
Wayde v NSW Rugby League Ltd (1991) 180 CLR 459

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
    IN CHAMBERS
CITATION : TAMPALINI -v- LARRIKIN HOLDINGS PTY LTD & ORS [2003] WASC 185 CORAM : MASTER NEWNES HEARD : 5-7, 28 AUGUST 2003 DELIVERED : 26 SEPTEMBER 2003 FILE NO/S : COR 2 of 2003 BETWEEN : SERGIO PAUL TAMPALINI
    Plaintiff

    AND

    LARRIKIN HOLDINGS PTY LTD (ACN 009 428 273)
    First Defendant

    HAYDN ALAN ROBINSON
    Second Defendant

    ANTHEA LEIGH ROBINSON
    Third Defendant



Catchwords:

Corporations Act - Application by shareholder to wind up company - Section 461(e), (f) and (k) - Turns on own facts




Legislation:

Corporations Act2001 (Cth), s 461(1)(e), (f) and (k)



(Page 2)

Result:

Application dismissed




Category: B


Representation:


Counsel:


    Plaintiff : Mr A Metaxas
    First Defendant : Mr J A Pease
    Second Defendant : Mr J A Pease
    Third Defendant : Mr J A Pease


Solicitors:

    Plaintiff : Metaxas & Vernon
    First Defendant : Williams & Co Lawyers
    Second Defendant : Williams & Co Lawyers
    Third Defendant : Williams & Co Lawyers



Case(s) referred to in judgment(s):

Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (1999) 34 ACSR 469
International Hospitality Concepts v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368
Jenkins v Enterprise Gold Mines NL (1992) 10 ACLC 136
Loch v John Blackwood Ltd [1924] AC 783
Re Cumberland Holdings Ltd (1976) 1 ACLR 360
Re Eastern Copper Mines NL (1975) ACLC 28,239
Re George Raymond Pty Ltd (2000) 18 ACLC 85
Reid v Bagot Well Pastoral Co Pty Ltd (1993) 12 ACSR 197

Case(s) also cited:



Alessi v Original Australian Art Co Pty Ltd (1989) 7 ACLC 595
Baird v Lees [1924] SC 83
Belgiorno-Zegna v Exben Pty Ltd (2000) 35 ACSR 305


(Page 3)

Community Development Pty Ltd v Engwirda Construction Co [1968] Qd R 541
Cumberland Holdings Ltd v Washington H Soul Pattinson & Co Ltd (1977) 13 ALR 561
Ebrahimi v Westbourne Galleries Ltd [1972] 2 All ER 492
Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (1999) 34 ACSR 469
In Re Gerard Novelle Cuisine Ltd (1981) NZCLC 95-016
Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606
Kokotovich Constructions Pty Ltd v Wallington (1995) 13 ACLC 1113
Loch v John Blackwood Ltd [1924] AC 783
McEwen v Combined Coast Cranes Pty Ltd (2002) 44 ACSR 244
Menard v Horwood & Co Ltd (1922) 31 CLR 20
Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 14 ACLC 519
Mincom Pty Ltd v Murphy [1983] 1 Qd R 297
Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692
Pulbrook v Richmond Consolidated Mining Co (1878) 9 Ch D 610
Re Anglo-Greek Steam Co (1866) LR 2 Eq 1
Re Broadcasting Station 2GB Pty Ltd [1964-65] NSWR 1648
Re Campbell's Corp Ltd & Companies Act (1978) 3 ACLR 519
Re Centre Restaurant Pty Ltd (1982) 6 ACLR 481
Re Cottonvale Distilleries Pty Ltd (1985) 3 ACLC 316
Re Cumberland Holdings Ltd (1976) 1 ACLR 361
Re Dalkeith Investments Pty Ltd (1985) 3 ACLC 74
Re Davis Investment (East Ham) Ltd [1961] 3 All ER 926
Re Eastern Copper Mines NL [1974] ACLC 40-205
Re George Raymond Pty Ltd; Salter v Gilbertson (1999) 18 ACLC 85
Re Gerard Novelle Cuisine Ltd (1981) NZCLC 95-016
Re Gold Co (1879) 11 Ch D 701
Re Haven Gold Mining Co (1882) 20 Ch D 151
Re Hop & Malt Exchange & Warehouse Co (1866) LR 1 Eq 483
Re Horwood & Co Ltd (1921) 21 SR (NSW) 750
Re H R Harmer Ltd [1958] 3 All ER 689
Re Kolback Group Ltd (1991) 4 ACSR 165
Re Koscot Interplanetary (UK) Ltd [1972] 3 All ER 829
Re London Suburban Bank (1871) LR 6 Ch App 641
Re M Dalley & Co Pty Ltd (1968) 1 ACLR 489
Re M'Donald Gold Mines (1898) 14 TLR 204
Re National Discounts Ltd (1952) 52 SR (NSW) 244
Re Newbridge Steam Laundry (1917) 1 IR 67
Re Netsor Pty Ltd (1982) 1 ACLC 73
Re North End Motels (Huntly) Ltd (1976) 1 NZLR 446
Re Norvabron Pty Ltd (1987) 5 ACLC 184


(Page 4)

Re Polyresins Pty Ltd [1999] 1 Qd R 599
Re Rica Gold Washing Co (1879) 11 Ch D 701
Re Sydney and Whitney Pier Bus Services Ltd (1944) 3 DLR 468
Re Thomas Edward Brinsmead & Sons [1897] 1 Ch 406
Re Tivoli Freeholds Ltd (1972) VR 445
Re W R Willcocks & Co Ltd [1973] 2 All ER 93
Re Weedmans Ltd [1974] Qd R 377
Re William Brooks & Co Ltd v The Companies Act 1936-1960 (1961) 79 WN (NSW) 354
Re Wondoflex Textiles Pty Ltd [1951] VLR 458
Reid v Bagot Well Pastoral Co Pty Ltd (1993) 12 ACSR 197
Roberts v Walter Developments Pty Ltd (1997) 15 ACLC 882
Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324
Stapp v Surge Holdings Pty Ltd (1999) 17 ACLC 896
Thomas v H W Thomas Ltd [1984] 1 NZLR 686
Wayde v NSW Rugby League Ltd (1991) 180 CLR 459

(Page 5)

1 MASTER NEWNES: This is an application by the plaintiff to wind up the first defendant pursuant to s 461(1)(e), (f) or (k) of the Corporations Act2001 (Cth). That is, on the grounds that the directors have acted in their own interests rather than those of members as a whole, or have acted unfairly or unjustly, or that the affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial or discriminatory, or contrary to the interests of members as a whole.

2 The first defendant is the trustee of the Larrikin Unit Trust ("Trust"). In that capacity, the first defendant carries on the business of "Planet Video", which, as the name suggests, is involved in the retail sale and hire of videotapes and similar goods. It has conducted that business since approximately May 1990. The second defendant ("Mr Robinson") is the manager of the business and a director of the first defendant. He has managed the business of Planet Video from the outset. The third defendant ("Mrs Robinson") is his wife and is also a director of the first defendant. Mr Robinson and Mrs Robinson each hold one share in the first defendant and 10 units in the Trust.

3 The plaintiff ("Mr Tampalini") is a lecturer in theatre and drama arts at Murdoch University.

4 In May 1995, Mr Tampalini acquired one share in the first defendant and 10 units in the Trust. The circumstances in which Mr Tampalini acquired his interest in the first defendant and the Trust are a matter of dispute between the parties. According to the Robinsons, Mr Tampalini approached them in March 1995 seeking to acquire an interest in the business of Planet Video. There followed various discussions in the period March to May 1995, culminating in an agreement between Mr Robinson and Mr Tampalini.

5 Mr Tampalini, on the other hand, said that he was approached by the Robinsons. He said he had taught Mrs Robinson at primary school and again at university and, a year or two before he invested in the business, he had become reacquainted with her and had got to know Mr Robinson. He said he was asked by the Robinsons to catalogue videos for the business and, in the course of discussion, Mr Robinson raised with him the prospect of investing in the business.

6 I do not think that, in the end, much turns on the circumstances in which Mr Tampalini came to invest in the business. However it came about, in May 1995 Mr Tampalini acquired 10 units in the Trust for sum of $160,227 and one share in the first defendant for $31,773, a total of



(Page 6)
    $200,000. He borrowed the sum of $200,000 for that purpose. Mr Tampalini appears to have made very little enquiry about the first defendant's financial affairs before agreeing to acquire the share and units. He did not ask for any financial statements of the business and, although in evidence he said that he did ask questions about how the business operated, he could not recall what questions he asked or for how long he was engaged in investigating the business before deciding to acquire an interest in it.

7 Mr Tampalini has at various times described himself as a "silent partner" in the business, although he said in evidence that he expected to have some involvement in the management of it. Quite what level of involvement he expected was not made clear. It is clear, however, that Mr Tampalini was content to leave the day-to-day management to Mr Robinson.

8 According to Mr Tampalini, following his investment in the business he worked a total of about 30 to 40 hours per week on matters related to it. He said he fitted this around his commitments as a full-time lecturer at Murdoch University. Mr Tampalini said he attended the business premises on at least one day per week and the rest of the time he spent on its affairs was spent working on a computer at home. It was not clear, however, precisely what work Mr Tampalini did at home on a computer.

9 It is clear from the evidence that the affairs of the company were run in a relatively informal way. Mr and Mrs Tampalini and the Robinsons became friends. Mr Tampalini became a godfather to one of the Robinsons' children.

10 The Tampalinis and the Robinsons, and after Mr Tampalini and his wife separated in 1996, Mr Tampalini and Mr Robinson met socially, on average at least every fortnight, and often on those occasions the affairs of the business were discussed. Mr Robinson said he tried to educate Mr Tampalini regarding the day-to-day management and operation of the business, but that Mr Tampalini showed no interest. Mr Tampalini agreed that, during social meetings, Mr Robinson had explained to him aspects of the operation of the business, but denied that he had not shown any interest in them.

11 Mr Tampalini said that when he was at the business premises he often discussed matters relating to the operation of the business with Mr Robinson, including how the business was going financially. Mr Tampalini described the discussions, however, as mainly concerned



(Page 7)
    with advertising, window displays, the sorts of videos the business would buy, improvements that could be done to the shop and similar sorts of matters. It appears that those were the matters in which Mr Tampalini was principally interested.

12 Mr Tampalini said he was told by Mr Robinson that he had access to any information he required about the business. He said Mr Robinson showed him "sort of monthly accounts" when he was at the premises. Between May 1995 and October 2001 Mr Tampalini did not, however, seek to be provided with copies of any of the first defendant's financial statements or records and it appears that he did not seek to inspect them. It was not suggested that Mr Tampalini was denied access to any records of the business.

13 Mr Tampalini said there were probably only about five occasions on which formal, minuted directors' meetings were held. Most transactions were entered into without any formal meeting of directors or formal company resolutions. One of those transactions was a loan to the first defendant of the sum of $1.2 million by the Commonwealth Bank of Australia in about the middle of 2001 to enable the first defendant to purchase a building adjacent to the business premises and to refinance some smaller loans. Mr Tampalini says that it was agreed to enter into the loan at a meeting at the Robinsons' home and no minutes were taken and there was no formal resolution of the company.

14 Mr Tampalini acknowledged in evidence that he had not objected to the informality with which first defendant 's affairs were conducted.

15 After Mr Tampalini acquired his interest in the first defendant, an arrangement was made that, in addition to Mr Robinson's salary as manager and their respective dividends from the first defendant, Mr Tampalini and Mr Robinson would each receive a weekly amount of $200 in cash. Once again, there is a dispute about how that arrangement came into being. Mr Tampalini says it was Mr Robinson's idea. Mr Robinson says that Mr Tampalini insisted upon it as soon as he became involved in the business. In any event, it continued until about mid-1998, when Mr Robinson told Mr Tampalini that he wanted to change the arrangement and to treat Mr Tampalini as an employee in the books of the first defendant. He proposed that Mr Tampalini be paid an increased amount of $300 per week to compensate for the income tax to which the payment would then be subject. About a year later, Mr Tampalini's salary was increased to $400 per week, following his



(Page 8)
    complaint that the net amount he was receiving after income tax was less than the $200 per week he had been receiving previously.

16 Mr Tampalini said that, at the time the arrangement was changed in 1998, he understood that Mr Robinson would cease to draw cash from the business. Mr Robinson's evidence, however, was to the effect that the new arrangement only related to Mr Tampalini's position. Mr Robinson acknowledged that he continued to draw $200 per week in cash until about September 2001, when, following accusations by Mr Tampalini that "black money" was being taken out of the business, Mr Robinson decided to cease the practice. He said he was also influenced by the introduction of the Goods and Services tax which he considered made the withdrawal of cash impractical. Mr Robinson says that he used the $200 a week he drew for meals, meetings, coffees for staff, business travel and other incidental expenses relating to the business, for none of which he sought reimbursement from the first defendant.

17 Since investing in the business, Mr Tampalini has received a monthly dividend of $2200, or some $26,000 per annum. He described it in evidence as a good return on his investment. The dividend was initially $2100 per month, but, at some time prior to 2001, the directors agreed to increase it to $2200.

18 It seems, however, that by about the middle of 2001 Mr Tampalini had become concerned that he was not receiving a fair share of the benefits available from the business. On 20 August 2001 a meeting took place at the offices of the first defendant's accountants attended by Mr and Mrs Robinson, Mr Tampalini, and Messrs Richardson and Van Dijk of the accounting firm. Why the meeting was convened is a matter of dispute but it is evident that by then Mr Tampalini was dissatisfied about a number of matters, including what he believed to be Mr Robinson's excessive drawings from the business, the Robinsons' private use of a motor vehicle owned by the first defendant, the provision of free video hire to a real estate agent, JJ Burns, and the non-payment of employer superannuation contributions in respect of Mr Tampalini's salary.

19 The meeting was chaired by Mr Richardson and various concerns raised by Mr Tampalini were aired. Minutes of the meeting were prepared by Mr van Dijk. Mr Tampalini subsequently took issue with the accuracy of several items in the minutes and it is evident from the minutes themselves that the meeting did not resolve all of Mr Tampalini's complaints.


(Page 9)

20 In September 2002 Mr Tampalini consulted solicitors. On 3 October 2001 Mr Tampalini's solicitors wrote to the Robinsons alleging that Mr Tampalini had not received any regular reports on the first defendant's financial results, either monthly or at year end, that the first defendant had not paid superannuation contributions in respect of Mr Tampalini's salary and that the second defendant had authorised JJ Burns to have $5000 worth of video hire at no cost in payment of a commission due to that firm from the sale of a property owned by the Robinsons. In the letter concern was expressed that the Robinsons were operating the business for their personal benefit and to the detriment of Mr Tampalini as the minority shareholder in the first defendant. The solicitors advised that Mr Tampalini proposed to exercise his statutory right as a director to inspect the company's books and records and that Mr Tampalini would contact the Robinsons to arrange a time for that inspection. Mr Tampalini's solicitors gave notice that, in future, Mr Tampalini would require copies of all month-end and year-end financial statements and reports and suggested that a meeting of the directors of the first defendant be convened to record the matters of concern to Mr Tampalini and to take steps to remedy them without delay.

21 On 14 October 2001, Mr Tampalini wrote direct to the Robinsons. He said that he was convening a meeting of the directors of the first defendant on 24 October at 4 pm "to clarify and finalise" eight issues, which he set out. They included the provision of free video hire to JJ Burns, non-payment of employer superannuation contributions on his salary, the provision of monthly and yearly profit and loss statements since he acquired his shares and the "submission date of the provision of all business documents of [the first defendant] for independent auditing". He said his solicitors had offered their offices as a venue for the meeting and requested that the Robinsons confirm their attendance or suggest an alternative time and place for the meeting.

22 The Robinsons replied to both letters by letter dated 19 October 2001 to Mr Tampalini's solicitors. The relevant portion of that letter is as follows:


    "Many of the claims made by or on behalf of your client are in dispute or were dealt with at a meeting of the shareholders and company accountants on the 20th of August. Your client is in possession of the minutes of this meeting which we assume you will have viewed.


(Page 10)
    All financial documents relating to Larrikin Holdings have always been available to your client. Mr Tampalini was actively encouraged to pay due diligence to monthly reports. The company is happy to provide your client with financial records for the previous five years, though the 2000/2001 records will only be available upon the completion of the company's tax return by our accountants. The company will require guarantees of confidentiality and the safety and good order of these documents. Amongst these will be the desired records on the specific areas your client has mentioned.

    On the matter of Mr Tampalini's superannuation, the company awaits the provision, by your client, of the name of his fund upon which we can then issue a cheque to the agreed amount.

    Mr Tampalini's fellow shareholders are quite willing to attend a meeting in an attempt to settle the various issues in dispute but we are entitled to 21 days' notice per the company's articles. The shareholders are unable to attend the meeting suggested by your client at such short notice. Anthea Robinson will be in Melbourne until the 4th of November after which a mutually suitable time and date can be arranged.

    …

    Mr Tampalini's fellow shareholders will have their own items of concern, not the least of which will be Mr Tampalini's progress in covering his responsibility for four hundred thousand dollars in loan guarantees."


23 Mr Tampalini's solicitors responded on 25 October 2001 saying that their client was still waiting for the "final minutes" of the meeting of 20 August 2001 from the first defendant's accountant. They said that the plaintiff had never been provided with copies of financial documents relating to the company, rather that "he has been told to look at the books". In relation to the superannuation contribution, the solicitors said that they had asked Mr Tampalini to provide the defendants with the name of his superannuation fund so that the cheque for the overdue amount could be paid without delay. They also pointed out that in their letter of 3 October 2001 they had not suggested a shareholders' meeting be convened, but rather a directors' meeting, for which no specific notice was required, and they pressed for that again.
(Page 11)

24 The Robinsons replied, through their solicitors, some three weeks later, on 15 November 2001. With the letter was enclosed a cheque for $3,811.19 in respect of the outstanding amount of the superannuation contributions. The Robinsons' solicitors noted that Mr Tampalini had still not advised the name of the fund to which the moneys were to be paid. They also advised that the Robinsons could see little value in a meeting with Mr Tampalini for a number of reasons, which they set out. They said that the company's books and records remained available for inspection at the offices of the company's accountants.

25 Despite the terms of his solicitors' letter of 14 October 2002, it appears that Mr Tampalini did not make arrangements to inspect the first defendant's records. In about late November 2001, however, he instructed a firm of accountants, Burges McFarlane & Young ("BMY"), to undertake an investigation into the financial affairs of the first defendant since 1995.

26 BMY wrote to the first defendant's accountants on 23 November 2001 informing them that they had been instructed by Mr Tampalini to conduct an investigation into "the business of Planet Video" and that, initially, the investigation would consist of an "analytical review of the financial affairs of the Planet Video books of account for … the years ended 30 June 1996, 1997, 1998, 1999, 2000 and as soon as the financial statements are ready, 2001." They requested financial statements for those years, schedules of fixed assets on hand at the end of each financial year, tax returns for Planet Video and Mr Tampalini for the same financial years, the secretarial binder of the first defendant, copies of any MYOB disks, printed ledgers or books of original entry to substantiate the information entered in the financial statements for each of the required years and any deposit forms, cheque butts or other documents of original entry that were held on behalf of the first defendant. BMY also wrote to the Robinsons' solicitors to the same effect.

27 I should mention that in their letter BMY noted that the first defendant's accountants were also Mr Tampalini's personal accountants and stressed that BMY had been engaged by Mr Tampalini only to conduct this investigation, and not to do any other accounting or taxation work.

28 Ms Talbot, a chartered accountant employed by BMY, gave evidence that on 22 January 2002 BMY received from the first defendant's accountants financial statements, depreciation schedules and tax returns for the Trust for the financial years 1996 to 2000.


(Page 12)

29 Ms Talbot said that that information enabled BMY to do the analytical review of the financial information, but not to investigate the figures on which that information was based.

30 On 25 February 2002, BMY wrote to the first defendant's accountants requesting financial statements of the first defendant for the financial years ended 30 June 1996 to 2001, computer disks, general ledgers, trial balances or books of original entry for the first defendant and the Trust to substantiate the information in the financial statements for each year, and deposit forms, cheque butts and other documents of original entry. At the same time, BMY wrote to the Robinsons' solicitors requesting that the Robinsons instruct the first defendant's accountants to release that information to BMY, and, in addition, requesting a number of other categories of documents which they understood the accountants did not have. BMY also requested a meeting with the Robinsons and the bookkeeper for Planet Video at the business premises to enable them to gain an understanding of the systems and controls in place.

31 Ms Talbot acknowledged in cross-examination that BMY's request involved a substantial amount of information, a lot of which was likely to be in storage and would have to be retrieved. Ms Talbot also said that BMY's investigation involved two steps. The first was the analytical review of the financial statements. The second was the analysis of the supporting information for those financial statements. It was necessary first to review the financial statements to see what additional information they required for the second step. That was done after receipt of the material on 22 January 2002. The more extensive material requested in the letter of 25 February 2002 was needed to enable the second step to be carried out.

32 The Robinsons wrote direct to BMY by letter dated 16 March 2002, saying that, while they had better things to do, they would co-operate with the investigation so far as they must, but due to the absence on sick leave of the person who ran the office at Planet Video, the information would take some time to collate and they suggested a period of four weeks would be needed. They observed that they understood it had already been agreed that BMY would meet the costs of the first defendant's accountants.

33 Mr Tampalini's solicitors wrote to the Robinsons' solicitors on 16 April 2003 complaining of the delay in providing the further documents and insisting that they be made available within the next seven days. It was intimated that legal proceedings would be commenced by Mr Tampalini if that time limit was not met.


(Page 13)

34 The Robinsons' solicitors responded the same day, saying that they had spoken to the first defendant's accountants who had told them that all information requested of them by BMY had been forwarded two weeks earlier and that they had had no contact with BMY since. Their response did not refer to the additional material that the Robinsons had been requested to provide.

35 On 24 April, Mr Tampalini's solicitors wrote again to say that BMY was still waiting for documents and as soon as precise details of what was outstanding could be obtained an immediate application will be made to the court for their production.

36 Once again, the Robinsons' solicitors replied on the same day. They said that the Robinsons had written to BMY "approximately three weeks ago" informing them that the documents would take some time to collate because the business was short staffed and the Robinsons would be interstate from about 25 April to 5 May 2002. They reiterated an earlier comment that, as Mr Tampalini's concerns related to accounting issues, they were best resolved by the accounting firms and not by applications to the court.

37 In the meantime, on 4 April 2002 the first defendant's accountants rendered an invoice in the sum of $566.10 to Mr Tampalini in respect of the provision of the requested information. Mr Tampalini said he thought the account excessive and sought advice on it from his solicitors. He said he did not pay it for "a considerable time", although he could not recall how long that was.

38 It was not clear from the evidence precisely when the additional documents were made available for inspection by BMY, but Ms Talbot said that the first inspection took place in May 2002 at the offices of the first defendant's accountants. Following that inspection BMY was told by the first defendant's accountants that a fee of $500 per day would apply for any further use of their boardroom. BMY sought Mr Tampalini's instructions in relation to the charge. Ms Talbot said there was a significant delay before those instructions were obtained.

39 On 17 June 2002, Mr Tampalini's solicitors wrote to the Robinsons' solicitors complaining that the Robinsons were insisting that the inspection take place at the offices of the first defendant's accountants and those accountants were claiming a fee of $500 per day for the use of their boardroom for the inspection. They demanded that the inspection be arranged without any charge for the venue and alleged that the



(Page 14)
    accountants' attempt to impose a charge was simply a tactic by the Robinsons to limit Mr Tampalini's rights of inspection.

40 On 19 June 2002 the Robinsons' solicitors informed Mr Tampalini's solicitors that the accountants were prepared to make their offices available for the inspection for $200 per day. Mr Tampalini's solicitors said that that was unreasonable. Subsequently, in early July 2002, arrangements were made for the documents to be inspected at the offices of the Robinsons' solicitors. The inspection took place in the second part of July and was completed in August 2002.

41 On 8 October 2002 BMY provided to Mr Tampalini a report setting out the results of their investigation into the financial affairs of the first defendant.

42 On 25 November 2002 Mr Tampalini's solicitors wrote to the defendants' solicitors setting out Mr Tampalini's complaints as reflected in their later written submissions. In the letter, Mr Tampalini's solicitors said that proceedings to wind up the first defendant would be brought unless, within seven days, Mr Tampalini received, among other things, one-half of the issued shares in the first defendant and one-half of the units in the Trust, the Robinsons agreed personally to provide the first defendant and the Trust with an indemnity for any taxation liabilities that might accrue in respect of the Welfare Fund, and the Robinsons agreed that in future no resolution of the Board of the first defendant or the shareholders in general meeting would be carried unless it was supported by Mr Tampalini or his proxy or alternate (as the case may be). That proposal was not acceptable to the Robinsons.

43 On 7 January 2003, Mr Tampalini commenced these proceedings, in which he seeks an order under s 461(e), (f) or (k) of the Corporations Act that the first defendant be wound up.

44 Section 461 provides, relevantly, as follows:


    "The Court may order the winding up of a company if …

    (e) directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members; or

    (f) affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly


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    discriminatory against, a member or members or in a manner that is contrary to the interest of the members as a whole, or
    …

    (k) the Court is of opinion that it is just and equitable that the company be wound up."


45 It was common ground that a winding-up order is the only relief available to Mr Tampalini on this application. Alternative remedies, for instance of the sort provided for under s 233, are not available. It was not explained why the application was brought under s 461 rather than s 233.

46 There are very few decisions that consider s 461(e) or its predecessors, and accordingly little judicial guidance on its application. I respectfully agree, however, with the view of Bowen CJ in Eq in Re Cumberland Holdings Ltd(1976) 1 ACLR 360 at 374-375, that the provision is not limited to cases where the board of directors acts unanimously, but is available where the effective majority has acted in its own interests or otherwise unfairly or unjustly. I consider that in order to attract relief under this provision it must be shown that there is a substantial case of departure from proper standards of commercial morality and that that departure has resulted in unfairness or injustice to the petitioner as a shareholder: Re Eastern Copper Mines NL (1975) ACLC 28,239 at 29,243. I also respectfully agree with the learned author of McPherson's The Law of Company Liquidation, 4th ed at page 167, that the directors' conduct is to be determined on an objective assessment.

47 I might observe, however, that it is doubtful that, in the present case at least, subs (e) adds anything to the other provisions of s 461 relied upon.

48 In relation to s 461(f), I take the position to be as stated by the Full Court in Jenkins v Enterprise Gold Mines NL (1992) 10 ACLC 136 at 145 – 6, in relation to comparable wording in s 320 of the Companies (Western Australian) Code:


    "The applicant must show either that the affairs of the company or an act or omission of the company was or would be oppressive to, or unfairly prejudicial to, or unfairly discriminatory against members, or contrary to the interests of members of the company as a whole. Whether the word


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    'oppression' connotes more than unfairness it would seem to include unfairness where the unfairness results from abuse of majority power or control (see, for example, Meyer at 342; Re Jermyn Street Turkish Baths [1971] 1 WLR 1042 at 1060 per Buckley J; Re Tivoli Freeholds Ltd [1972] VR 445 at 452 per Menhennitt J; and De Terri Co Pty Ltd (1988) 12 ACLR 457). It is now enough to show that the relevant conduct was 'unfairly prejudicial': Re Dalkeith Investments Pty Ltd (1985) 9 ACLR 247 at 253 per McPherson J; and see Parker v NRMA (1989) 1 ACSR 227. The key word is 'unfairly': Wayde, above, and see Re Spargos Mining NL (1990) 3 ACSR 1 at 43 per Murray J; and Morgan v 45 Flers Avenue Pty Ltd (1987) 10 ACLR 692.

    In our opinion the application of the test involves a question of fairness. It is for the court to decide whether in balancing the interests of the company as a whole against minority interests the directors have acted so as to unfairly prejudice the interests of the minority. The court decides this 'according to ordinary standards of reasonableness and fair dealing'. Whether the conduct is unfairly discriminatory will be judged on standards which reasonable directors with such skills as directors should have, acting bona fide, would think to be fair."


49 In determining whether allegations of oppression have been made out the court must examine the conduct, not in isolation, but in the context in which it takes place: Reid v Bagot Well Pastoral Co Pty Ltd (1993) 12 ACSR 197 at 212 per Debelle J (with whom King CJ and Millhouse J agreed); Re George Raymond Pty Ltd (2000) 18 ACLC 85.

50 Turning to subpar (k), in Loch v John Blackwood Ltd [1924] AC 783, the Privy Council said in relation to the just and equitable ground (at 788):


    "…at the foundation of applications for winding up, on the just and equitable rule, there must lie a justifiable lack of confidence in the conduct and management of the company's affairs. But this lack of confidence must be grounded on the conduct of the directors, not in regard to their private life or affairs, but in regard to the company's business. Furthermore, the lack of confidence must spring not from dissatisfaction at being outvoted on the business affairs or on what is called the domestic policy of the company. On the other hand, wherever the lack of confidence is rested on a lack of probity in the


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    conduct of the company's affairs, then the former is justified by the latter, and it is under the statute just and equitable that the company be wound up."

51 A winding-up order will not be made if the company is solvent and the applicant is either acting unreasonably or has some other available remedy: International Hospitality Concepts v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368 at 372.

52 It is in the light of those principles that I turn to the grounds upon which Mr Tampalini says a winding-up order should be made.

53 As it appeared from the outline of submissions filed by his solicitors before the hearing, four specific matters were relied upon by Mr Tampalini as justifying an order under s 461 of the Act. They were:


    (1) The difficulties which it is said Mr Tampalini encountered in securing access to the first defendant's records.

    (2) The first defendant's participation in a Welfare Fund which, it is said, works to the advantage of Mr Robinson and to the disadvantage of the first defendant and Mr Tampalini.

    (3) The issue of a special unit in the Trust to the first defendant.

    (4) The alleged misappropriation of the first defendant's resources by Mr Robinson for his own benefit.


54 It is necessary to deal with each of those matters. Before doing so I should observe that many of the material events were not seriously in dispute. There were, however, several areas where there was a conflict of evidence between the Mr Robinson and Mr Tampilini. In my view Mr Tampilini's evidence has to be scrutinised with care and I would treat it with caution, except where it is supported by other evidence. In my view, Mr Tampilini was inclined to tailor his evidence in the manner that he perceived best suited his case, so far as he could do so without contradicting the documentary evidence.

55 I was pressed by counsel for Mr Tampalini to find that Mr Robinson was not a witness to be believed, primarily on the basis of an affidavit sworn by Mr van Dijk, and filed on behalf of the defendants, in which Mr van Dijk said that, so far as he was aware, all income of the Robinsons and of the business had been declared and income tax paid on it. Counsel pointed out that Mr Robinson (but not Mr van Dijk) knew that some



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    income had not been declared as Mr Robinson had been drawing cash from the business until September 2001 and Mr Robinson therefore knew that the affidavit was misleading. Mr Robinson said in cross-examination that he was interstate when Mr van Dijk's affidavit was prepared and did not learn of it until some time after it was filed. He said he then drew the true position to the attention of his solicitors. Mr van Dijk gave evidence that he had never discussed his affidavit with Mr Robinson. It is also significant that the evidence that Mr Robinson had drawn cash until September 2001 did not emerge in cross-examination but was given in evidence-in-chief by Mr Robinson. I do not, therefore, accept that there was any attempt by Mr Robinson to cause the Court to be misled.

56 Although in cross-examination Mr Robinson's relative lack of commercial sophistication led him to have difficulty in following some of the questions put to him, I am satisfied that he was a truthful witness.


Access to financial records

57 Mr Tampalini contends that the response of the Robinsons to his requests from October 2001 to exercise his statutory right to inspect the first defendant's records was symptomatic of an attitude that the first defendant is their company and he must take what they give him. He also alleges that the invoice received from the first defendant's accountants in an amount of $566.10 for the provision of the requested information was a device to frustrate the investigation. As Mr Tampalini's counsel put it, the Robinsons "had to be beaten into submission for the plaintiff to exercise his statutory right".

58 I am not persuaded that, in the circumstances, Mr Tampalini was denied, or unreasonably delayed in obtaining, access to the financial information he sought.

59 I should note at the outset that no complaint is made by Mr Tampalini about access to the financial records of the first defendant prior to the request first made by BMY, on his behalf, in November 2001. The effect of Mr Tampalini 's evidence on that point is that the financial records were always available to him if he chose to inspect them, but he did not do so. It was not suggested in evidence that he had previously requested copies of any financial records or that he had been denied access to any financial information.

60 It is also relevant, in my view, in considering whether there was unreasonable delay in providing him with the requested information that



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    Mr Tampalini's request for documents was specifically for the purposes of the investigation he had commissioned into the affairs of the first defendant, extending back over a period of some six years. It was not a request for contemporaneous documents or documents which would ordinarily be available for inspection in the day-to-day running of the business. As Ms Talbot acknowledged, a substantial amount of information was requested and a good deal of it was likely to have been in storage. It is evident that Planet Video was (and is) a not insubstantial retail business, having an annual turnover of some $880,000 in the financial year ended 30 June 1996 increasing to some $2,800,000 in the financial year ended 30 June 2001 and, at the latter date, some 17 employees.

61 As I have mentioned, the first specific request for financial records on behalf of Mr Tampalini was made by BMY on 23 November 2001. Ms Talbot acknowledged in evidence that the investigation required by the plaintiff was a two-stage process and that the documents required for the first stage of that process were received in January 2002. Those documents enabled BMY to conduct what was described as the analytical review and to ascertain what further documents they needed for the second stage of the process, the verification of the information in the financial statements. That further information, and the balance of the information requested in November 2001, was requested by BMY by a letter of 25 February 2002.

62 It was suggested in the course of the hearing that the comment in the Robinsons' letter of response of 16 March 2002 to the effect that they had better things to do indicated that they treated Mr Tampalini's request for access to the documents almost contemptuously. I do not accept that. It is, I think, not difficult to understand that the Robinsons might have felt some irritation that that such an omnibus demand was now being made, at a time when they were short staffed, when over the preceding six years or so that Mr Tampalini had been a director he had not taken the trouble to look at any of the financial records of the first defendant; not even, it appears, its annual financial statements and taxation returns.

63 The additional information sought by BMY was made available, and the first inspection by BMY took place, in May 2002, but then a dispute arose because the first defendant's accountants demanded $500, later reduced to $200, per day for any further use of their boardroom. There were also, almost inevitably, problems associated with the logistics of inspection. I should say, however, that there is no evidence the Robinsons had anything to do with the decision of the first defendant's accountants to



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    charge for the use of their boardroom and nor is there any evidence that they had anything to do with the account for $566.10 which was rendered to Mr Tampalini.

64 Moreover, Mr Tampalini's own approach to the matter was itself not likely to impress upon the Robinsons the need for the sort of timeliness that Mr Tampalini now appears to suggest was required of them. Although his solicitors said in their letter of 14 October 2001 that Mr Tampalini would contact the Robinsons to arrange access to the first defendant's books and records, in fact nothing was done in that regard until BMY wrote to the Robinsons and the first defendant's accountants nearly six weeks later, on 23 November 2001. Again, although in their letter of 19 October 2001 the Robinsons had requested that Mr Tampalini advise them of the name of his superannuation fund for payment of the employer contributions, Mr Tampalini had not done so by 15 November 2001 when the Robinsons' solicitors sent a cheque for the required amount to Mr Tampalini's solicitors.

65 Delays also occurred in relation to the first defendant's accountants. Mr Tampalini admits that he took a long time to pay their account issued on 4 April 2002 and Mrs Talbot said that part of the delay in the inspection of the books of account occurred because of delay by Mr Tampalini in providing instructions on the proposed charge for the use of the first defendant's accountant's boardroom.

66 The reasonableness of the defendants' response to Mr Tampalini's request for copies of, and access to, the first defendant's records must be considered in that context.

67 In the circumstances, I do not consider that the conduct of the Robinsons was unreasonable or unfair. The material requested was extensive and went back over a number of years. It required the co-ordination of the activities of two firms of accountants and of the solicitors and parties involved. Issues arose from time to time in relation to the inspection which, although unfortunate, could not be regarded as unusual in these circumstances. I also accept that the Robinsons were handicapped by the absence of at least one key staff member at a critical time, and by the fact that Mr Robinson necessarily had to devote a good deal of his time to running the business of Planet Video. In addition, although his solicitors pressed the matter with some vigour, Mr Tampalini's own timeliness was not consistent with the same degree of urgency.


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68 I should add that there was also complaint made about the timeliness and appropriateness of the defendants' response to a letter dated 21 July 2003 from Mr Tampalini's solicitors requiring access to financial records of the first defendant. The letter required the defendants to make available for inspection within seven days "the financial records" of the first defendant in respect of a number of specific items in the accounts of the Trust and of the first defendant for the financial year ended 30 June 2002. The Robinsons' solicitors responded the following day, advising that their client was interstate but that the documents were being collated. Inspection took place on 31 July 2003, having been postponed from 30 July because the defendants were unable to produce the records on that day. Mr Tampalini complained that nothing in the seven boxes of documents produced appeared to be related to the matters raised. Mr Robinson said that he had arranged to be produced what the defendants' solicitors had told him was required by the request.

69 In cross-examination Mr Tampalini acknowledged that he had received a copy of the 2002 accounts on 11 June 2003. The letter to the defendants requiring access to the detailed financial records within seven days was not sent until almost six weeks later, and a little over two weeks before the hearing of this application was due to commence. Mr Tampalini said in cross-examination that he thought he had given appropriate priority to the matter.

70 In my view, the requirement for the production of the documents within seven days was, in the circumstances, unreasonable. I am not persuaded that the defendants' response was unreasonable.




The WelfareFund

71 In 1998, the first defendant established the Planet Video Welfare Fund and, in 1999, a superannuation fund. According to Mr Robinson, he and Mr Tampalini attended a meeting at the offices of the first defendant's accountants in 1998 at which advice was given by the accountants that a welfare fund and a superannuation fund should be established by the first defendant. The accountants said the funds would have various ongoing benefits, including assisting the business to retain its long-term staff and to reduce the amount of income tax payable by the first defendant. Mr Robinson said the accountants advised that, in order to comply with the requirements of the taxation legislation, the funds should be established in the name of one only of the directors of the first defendant. Mr Robinson says that, subsequently, he had several discussions with Mrs Robinson and Mr Tampalini regarding the establishment of the funds



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    and, ultimately, it was resolved that the funds would be established and that they would be established in Mr Robinson's name.

72 The Welfare Fund came into existence in September 1998. The effect of the transactions involved was that Mr Robinson borrowed $215,000 from United Overseas Credit Ltd (Hong Kong). The loan was for a term of 10 years and interest was payable on it during the term. The funds were immediately on-lent by Mr Robinson to the first defendant. The amount of the loan was credited to Mr Robinson's loan account in the books of the first defendant. The loan was secured by a 10-year insurance bond over the life of Mr Robinson, purchased by the trustee of the Welfare Fund in New Zealand using the loan funds which were provided to it by the first defendant, albeit the actual funds were apparently paid direct by United Overseas Credit in Hong Kong to the vendor of the insurance bond. The insurance bond was then assigned to United Overseas Credit. At the expiration of the 10-year period the insurance bond will mature and the funds will be used to discharge Mr Robinson's borrowings from United Overseas Credit.

73 In the meantime, the first defendant is paying the interest which is payable to United Overseas Credit on the loan and, according to the first defendant's accountant Mr van Dijk, the amount of the interest is debited to Mr Robinson's loan account.

74 The first defendant obtained a tax deduction of $215,000 as a result of the arrangement.

75 In 1999 a superannuation fund was established in a similar way for an amount of $100,000 and the capital of the Welfare Fund was increased by a further amount of $35,000. The total amount therefore borrowed was $350,000. A total taxation deduction for that amount was obtained by the first defendant.

76 Mr Tampalini acknowledged that he attended the meeting at the offices of the first defendant's accountants at which the accountants recommended that the Welfare Fund and the superannuation fund be established and at which they advised that such funds were legitimate means of minimising the first defendant's tax liability. Mr Tampalini recalled the discussion of the initial amount of $215,000 for the Welfare Fund, but not of the $100,000 for the superannuation fund or the additional amount of $35,000 subsequently borrowed for the Welfare Fund. He said he did not receive any explanation of how the Welfare Fund was set up and he asked no questions about it. Mr Tampalini said



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    that he may have had a discussion about the matter with Mr Robinson following the meeting, but he does not now recall it. Mrs Robinson said that she recalled discussing the Fund with Mr Robinson and Mr Tampalini before it was established.

77 It was not suggested that Mr Tampalini was denied any advice or information about the nature or effect of the establishment of the funds that was available to the Robinsons.

78 The precise nature of the Welfare Fund was not entirely clear from the evidence. It appears that the Robinsons' and Mr Tampalini's medical expenses were collated from time to time and a claim for them forwarded to the Fund, together with a cheque from the first defendant for the amount of the claim. The Fund then sent back a cheque for the same amount and the proceeds of that cheque were distributed between Mr Tampalini and the Robinsons according to the amount of their medical expenses.

79 Although up to 2001 the only members of the Fund were the Robinsons and Mr Tampalini, Mr Robinson said it was always intended in time to extend the Fund to other employees of the "Planet Video" business, but that they had wanted to ensure that the Fund worked effectively before doing so. Another employee had since joined the Fund.

80 The collation of the medical expenses and the preparation of the claim to the Fund were carried out by Mr Tampalini's wife for a period of time. I am satisfied that Mrs Tampalini's role was limited to a purely clerical one and that she had no real understanding of what the Fund involved or how it operated. I am also satisfied that Mr and Mrs Robinson and Mr Tampalini had no real understanding of what the Fund involved or how it operated. I accept Mr Robinson's evidence that it was only very recently that he had learned for the first time that the funds had been borrowed in his name, rather than in the name of the first defendant. Although Mr Robinson is clearly a successful businessman, I accept that he has a very limited, if any, understanding of accounting matters. He has no training in the area, having formerly been a spray painter and sand blaster. Neither Mrs Robinson nor Mr Tampalini appeared to have any greater understanding of accounting matters.

81 I am satisfied that, as is not entirely uncommon in these situations, the Robinsons and Mr Tampalini agreed to establish the funds simply on the basis of the assurances of the first defendant's accountants that they would provide a legitimate tax deduction and some potential long term



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    benefits for the business, but with little more understanding of them than that. Mr Tampalini, who was a party to the decision, had substantially no greater or lesser understanding of what they involved than the Robinsons. It is, I think, clear that the transactions which implemented the funds were arranged by the first defendant's accountants and that neither the Robinsons nor Mr Tampalini had any real understanding of those transactions.

82 It was contended by counsel for Mr Tampalini that Mr Robinson had derived substantial personal benefit from the establishment of the Welfare Fund in that he had drawn down the money credited to his loan account. Ms Talbot, in her report dated 8 October 2002, after referring to the two funds, simply says "[n]umerous payments and part of the latest borrowings have been made over the period for [Mr Robinson] which is in the process of reducing his loan account. Whilst these are personal expenses and are not being claimed as deductions in the tax returns of the entities the money for the payment of these amounts is cash generated by the business." Ms Talbot went on to say that the arrangements in relation to the Welfare Fund and the superannuation fund were "exceedingly one sided and only protect [the second and third defendant]".

83 In evidence Ms Talbot said the arrangements were "exceedingly one-sided" because the effect of the loans was to make available to Mr Robinson the sum of $350,000 that had been credited to his loan account. Ms Talbot did not explain the comment in her report that the transactions would "only protect" Mr and Mrs Robinson. Ms Talbot acknowledged that the moneys for the two funds came from a loan for which Mr Robinson was personally liable but said the loan was secured by the insurance bond. Ms Talbot said, based on her examination of the accounts, that Mr Robinson had drawn out the funds credited to his loan account.

84 Mr Robinson was adamant that he had not drawn on the funds credited to his loan account and, as I have mentioned, said he was surprised to learn that the money had been borrowed in his name and on-lent to the first defendant, rather than borrowed in the name of the first defendant. Mr van Dijk, who has been the accountant for the first defendant and the Robinsons since 1997, gave evidence that the funds credited to Mr Robinson's loan account have not been drawn down by Mr Robinson but that his loan account has been progressively reduced by debiting to it the interest payable on the United Overseas Credit loan. The only direct benefits Mr Robinson has received from the transaction have been the benefits, in common with the other share holders, derived from



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    the taxation deductions which resulted from the establishment of the Fund and in respect of personal medical expenses.




Issue of special unit in the trust to the first defendant

85 On 1 May 2001, a special unit in the Trust was issued in the name of the first defendant for the sum of $1. In the financial years ending 30 June 2001 and 2002, a total amount of $666,207.08 was distributed by the first defendant, in its capacity as trustee of the Trust, to the first defendant in its own right as a unit holder. That was the trading profit of the "Planet Video" business for those years.

86 Mr Tampalini says that he was not consulted about the issue of the special unit to the first defendant. Counsel for Mr Tampalini submitted that the only inference open in the circumstances was that the special unit had been created in order to starve Mr Tampalini of distributions that would otherwise have had to have been made on a pro rata basis to the beneficiaries of the Trust.

87 In the course of his closing submissions counsel for Mr Tampalini also argued that the unit had not been lawfully issued, in that the necessary resolutions had never been passed. He contended that the first defendant was in breach of trust in issuing a unit to itself in its own right.

88 I do not consider that I am in a position to make a finding as to whether or not the unit was lawfully issued to the first defendant. Whether or not the special unit was lawfully issued was not in issue as the case was run and accordingly was never properly explored in the evidence. It is true that each of Mr Tampalini, Mrs Robinson and Mr Robinson said in evidence that they knew nothing about it but it was also apparent that each of them had, at best, a very limited understanding of legal and accounting matters and that they left such matters wholly in the hands of the first defendant's accountants. Mr Robinson said in evidence that if anything was sent to him by the first defendant's accountants he invariably signed it because he didn't have time to read the "fine detail".

89 Although BMY examined the accounts and records of the first defendant and the Trust in detail, no mention was made in their report of 8 October 2002 of any irregularity, nor was any query raised, in connection with the issue of the special unit. BMY merely observed that "[o]n 1 May 2001 a special unit in the Larrikan Unit Trust was issued in the name of Larrikan Holdings Pty Ltd at $1. The profit for the year



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    ended 30 June 2001 was distributed to this unit holder in place of the annual commission."

90 The relevant records of the Trust and the first defendant, which would have revealed the true position, were not produced in evidence. Mr van Dijk, who would presumably have been involved in any accounting work relating to the special unit, was not asked about it.

91 It is, in my view, by no means inconceivable that as the unit holders in the Trust and directors of the trustee the Robinsons and Mr Tampalini had in fact authorised the issue of the unit either without a clear appreciation that that was what they were doing or without now recalling it.

92 As I have said, Mr Tampalini contended that the purpose of the issue of the special unit was to starve him of trust distributions. That, however, does not appear to be borne out by the evidence.

93 It was not in issue that in each year prior to the creation of the special unit, an amount had been paid by the first defendant, in its capacity as trustee, to itself in its own right as "commission". How the first defendant earned the commission did not emerge in the evidence. In any event, it did not appear to be in dispute that the effect of the payment was to enable distributions of profits from the business to be paid to the Robinsons and Mr Tampalini as franked dividends, rather than as distributions from the Trust. That, as Mrs Talbot acknowledged in evidence, had taxation benefits for the Robinsons and Mr Tampalini.

94 It appears that the creation of the special unit, and the subsequent distributions to the first defendant as a beneficiary of the Trust, were intended to replace the commission arrangement.

95 I am satisfied that none of Mr and Mrs Robinson or Mr Tampalini understood why the commission arrangement was changed. Indeed, none of them appeared to realise that it had been changed and I think it is doubtful that any of them understood, or were perhaps even conscious of, the commission arrangement itself. Their only concern was that the business of Planet Video was a success and that their dividends were paid in the most tax effective way. How, in accounting terms, that was accomplished appears to have been a matter left entirely in the hands of the first defendant's accountants.

96 In any event, the effect of the issue of the unit appears to be no more than that money which would previously have been paid by the first



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    defendant as trustee to itself in its own right as commission, is now paid by way of a distribution to it in its own right as a beneficiary of the Trust. That change was presumably perceived by the accountants for the first defendant to have some benefit for the Robinsons and Mr Tampalini.

97 Furthermore, it is the case, of course, that Mr Tampalini owns one-third of the issued shares in the first defendant. There is no evidence to suggest that, as a result of the issue of the unit and the distribution of the profits of the business to the first defendant, the dividends that Mr Tampalini has received have been reduced, or that he has been, or will be, denied any moneys to which he would otherwise have been entitled.

98 It is, in any event, difficult to see how this matter could fall within s 461 of the Act. What is alleged is a breach of trust by the first defendant, in its capacity as the trustee of the Trust, in issuing the special unit to itself in its own right and in distributing all of the profits of the business to itself as a unit-holder. The consequence, it is alleged, is that assets of the Trust have improperly passed to the first defendant, ostensibly in its own right, and the beneficiaries of the Trust have thereby been deprived of trust distributions which would otherwise have been available to them. That, it seems to me, does not affect Mr Tampalini in his capacity as a member of the first defendant but rather only in his capacity as a beneficiary of the Trust.




Misappropriation by the second defendant

99 Mr Tampalini complains that assets of the first defendant have been misappropriated by Mr Robinson. In the course of the hearing the four original complaints were whittled down to two. The latter were, first, that Mr Robinson had caused the first defendant to provide $5000 worth of free video hire to JJ Burns and, secondly, that contrary to the agreement between them, Mr Robinson had continued to draw $200 in cash per week from the business from 1998 to September 2001.

100 Mr Robinson acknowledged that he had given JJ Burns a credit to the value of $5000 at Planet Video in lieu of payment of the normal agent's commission on the sale of the Robinsons' property. He said the credit had been used up and JJ Burns has continued to hire and purchase videos from the business. According to Mr Robinson, when later Mr Tampalini listed a property for sale with JJ Burns, he informed Mr Tampalini of the arrangement he had previously come to with JJ Burns and suggested that Mr Tampalini might enter into a similar arrangement. In the event, Mr Tampalini's property was ultimately sold by another agent.


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101 Mr Tampalini denied that he had been told of the arrangement in the circumstances suggested by Mr Robinson and denied that Mr Robinson had suggested that Mr Tampalini might enter into a similar arrangement. Mr Tampalini did not clearly explain how he came to be told by Mr Robinson of the arrangement, but says he first learnt of it in April 2001, whereas the arrangement had been entered into by Mr Robinson with JJ Burns in about June 1996.

102 Mr Robinson accepted that he made the arrangement with JJ Burns without first consulting Mr Tampalini, but said he considered it was fair to do so because at least equal, and probably greater, personal benefits had been obtained from the first defendant by Mr Tampalini and that such practices were consistent with the relatively informal way in which the company's affairs were conducted.

103 Mr Robinson said that, prior to his arrangement with JJ Burns, the first defendant had purchased two television sets, each costing $3100, one of which had been provided to Mr Tampalini and one to Mr Robinson. Mrs Robinson, although having a one-third interest in the first defendant and the Trust, did not receive one. Subsequently a video recorder owned by the first defendant had been supplied to Mr Tampalini's wife when they separated, and later a second-hand television set owned by the first defendant was provided to Mr Tampalini's mother.

104 It was not in issue that, in January 2001, the first defendant had also provided Mr Tampalini with an unsecured, interest-free loan of $40,000 to enable him to make a short-term speculative investment in certain shares. The loan was intended to be for a period of seven days, but it was not repaid for approximately a month. Mr Tampalini made a profit of some $7500 on the transaction. There was no directors' meeting or resolution of the first defendant to approve the loan.

105 It was also not in issue that, although Mr Tampalini has been a director and an equal shareholder in the first defendant, and the holder of one-third of the units in the Trust since May 1995, he did not, prior to May 2000, provide any security for the borrowings of the first defendant for the purposes of the business. All of the security required by the lenders was provided by the Robinsons. Since May 2001, Mr Tampalini has provided a personal guarantee of the first defendant's borrowings from National Australia Bank, secured by a second mortgage over his wife's house. When asked in cross-examination whether he had ever had discussions with Mr Robinson about putting up security to the value of one-third of the National Australia Bank loan, Mr Tampalini replied "I



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    understood that [Mr Robinson] would have liked us [Mr and Mrs Tampalini] to have covered the one-third of the loan". It was not contested that for most, if not all, of the period since May 1995 the Robinsons have provided a disproportionate share of the security required by lenders.

106 All that, the Robinsons say, is consistent with the informality with which the first defendant's affairs have been conducted and the fact that from time to time various personal benefits have been provided informally to each of the shareholders. The arrangement with JJ Burns has to be viewed in that context.

107 Mr Tampalini also complains that, in 1998, when he ceased to draw $200 in cash from the business and agreed to be paid as an employee, it was agreed Mr Robinson also would cease drawing cash from the business. In fact, unbeknown to Mr Tampalini and contrary to that arrangement, Mr Robinson continued to draw $200 per week in cash from the business.

108 Mr Robinson's version of the events is that in 1998 the only change that was made in the arrangement was that Mr Tampalini was to be paid a salary as an employee. It did not affect Mr Robinson who continued his cash drawings until about June 2001 when, he said, Mr Tampalini started making general accusations of "black money" coming out of the business and Mr Robinson was also faced with what he saw as a problem with the introduction of the GST.

109 It is not apparent why, when in 1998 Mr Tampalini converted to a salary which was to provide an equivalent cash benefit to the $200 a week in cash he had been drawing, Mr Robinson would cease to derive a similar benefit. No reason was offered by Mr Tampalini. It was not, for instance, suggested that Mr Robinson's salary as manager was adjusted accordingly. I do not accept that the arrangement in 1998 was as claimed by Mr Tampalini.

110 It was also submitted on behalf of Mr Tampalini that there had been no directors' meeting in the two years since Mr Tampalini had unsuccessfully sought to convene one in October 2001. Counsel for the defendants argued that on that occasion the meeting could not be convened within the time period demanded by Mr Tampalini and since then no-one had turned their attention to it. Mr Tampalini had not sought to pursue it or to convene another meeting. He could hardly complain now that the failure to hold directors' meetings was unfair or oppressive.


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111 In the course of his closing submissions counsel for Mr Tampalini also submitted that the first defendant should be wound up on the additional ground that the first defendant, through those involved in its financial affairs, had perpetrated a fraud on the Australian Taxation Office. It was said that the fraud lay in the fact that the special unit in the Trust had not been lawfully issued and the Deputy Commissioner of Taxation had been deceived into believing that the first defendant had lawfully received dividends in the Trust in its own right and had been entitled to pay the franked dividends which it had paid to its shareholders from those funds.

112 Several things need to be said about that submission. First, it was raised for the first time, without notice, in the closing submissions of counsel for Mr Tampalini. It was not put to the Robinsons or the first defendant's accountant, Mr van Dijk, in cross-examination. Moreover, in his affidavit of 23 July 2003 Mr van Dijk, who since 1997 has prepared the financial records of the first defendant and the taxation returns on behalf of the Robinsons, said "I believe from my own knowledge and my inspection of the company's books and records and bank statements at the time of preparation of the accounts, all income was declared and income tax paid by the Defendants in accordance with the Income Tax Assessment Act 1936." Although Mr van Dijk was cross-examined about that passage in connection with the cash payments to Mr Robinson – in respect of which counsel for Mr Tampalini was careful to make it clear that he did not suggest that Mr van Dijk knew of the payments – the accuracy of it was not otherwise challenged in cross-examination.

113 Secondly, no evidence was sought to be led on the issue on behalf of Mr Tampalini. It was not referred to in BMY's report. The only conclusion that could be drawn from that report was that apart from the specific issues raised – of which this was not one – the affairs of the first defendant were in order. No application was made to lead evidence from Ms Talbot on the topic. Nor was any evidence sought to be led relating to the nature or purpose of the commission payments and no documents were put in evidence which might show whether or not the appropriate authorisation had been obtained for the issue of the special unit. It was not suggested that the relevant records were not available.

114 I asked counsel for Mr Tampalini to direct me to the evidence that was relied upon for the submission if it was pressed. I made a copy of the transcript of the hearing available for that purpose. Having reviewed the passages to which I was subsequently referred by counsel I am satisfied



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    that there is no evidence that those concerned on behalf of the first defendant have been involved in deceiving the taxation authorities.

115 Quite apart from the fact that the plaintiff's case was never run on this basis, the submission, in my view, is simply without any foundation in the evidence.

116 I consider that Mr Tampalini has not made his case for the first defendant to be wound up under s 461 on the other grounds upon which he relies.

117 For the reasons I have given, I do not consider that access to the books and records that Mr Tampalini sought was unreasonably delayed or that it was obstructed. The delays that occurred are explicable given the nature and volume of the material sought, the various parties involved and the co-ordination of this matter with their other commitments. Mr Tampalini himself also contributed to some of the delay. The urgency with which his solicitors pressed the issue was not matched by any apparent sense of urgency on the part of Mr Tampalini himself. Nor was it consistent with Mr Tampalini's prior approach to the financial affairs of the first defendant. Although a director, he had shown an almost total lack of interest in the accounts and financial records of the first defendant from May 1995 until late 2001 and only turned his attention to them in 2001 when he became concerned that he was being disadvantaged in respect of his own emoluments.

118 The precise nature of the Welfare Fund and the superannuation fund were not fully explored in the evidence. But it is clearthat the funds were established, with the concurrence of Mr Tampalini, by the first defendant's accountants and on the basis of their advice that the funds would provide taxation and other perceived benefits to the first defendant. I am satisfied that Mr Tampalini's understanding of the funds, such as it was, was not significantly less than the Robinsons', albeit I believe that none of them had any real understanding of what was involved. I also accept the evidence of Mr Robinson and Mr van Dijk that Mr Robinson has not, through the establishment of the funds, obtained any special personal benefits denied to Mr Tampalini. I am not persuaded that Mr Tampalini has been treated unfairly.

119 I do not consider that it has been established that Mr Tampalini has been disadvantaged by the issue of the special unit in the Trust or by the distribution of the profits of the business to the first defendant, in which, like the Trust, he has a one-third interest.


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120 I am not persuaded that there was an arrangement in 1998 that the cash payments to Mr Robinson would cease. In any event, the complaint by Mr Tampalini about the cash payments made to Mr Robinson after that date is not a matter that, in my view, would justify winding up the first defendant. There are other, more suitable and less draconian, remedies available. In addition, as it seems, and as was submitted by Mr Tampalini's counsel, the cash payments were not declared for income tax purposes, that is a matter to be dealt with by the taxation authorities.

121 In relation to the video hire to JJ Burns, I am satisfied that, at the time, that was consistent with the informal manner in which, with the concurrence of Mr Tampalini, the first defendant's affairs were run and is consistent with the provision of significant benefits, including audio-visual equipment and an interest free loan, to Mr Tampalini.

122 I do not, therefore, consider that Mr Tampalini has established that the Robinsons have conducted the affairs of the first defendant in their own interests or otherwise unfairly or unjustly to Mr Tampalini. I do not consider that the affairs of the first defendant have been conducted in a manner that is unfair to Mr Tampalini.

123 In the light of that finding it is unnecessary for me to make any finding on the defendants' alternative contention that s 461 has no application in the circumstances of this case as the first defendant is a bare trustee: Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (1999) 34 ACSR 469. In support of that contention it was submitted that in truth the complaints made by Mr Tampalini relate to the conduct of the affairs of the Trust, not to the first defendant in its own right. The winding up of the first defendant would not affect Mr Tampalini's position as a unit holder in the Trust. It would simply mean that a new trustee was appointed.

124 Counsel for Mr Tampalini argued that the first defendant was more than a bare trustee as it held the profits from the business for the last two financial years, distributed to it as the holder of the special unit.

125 I must say I do not see how that submission can be reconciled with the contention, advanced (albeit belatedly) on behalf of Mr Tampalini, that the special unit was not lawfully issued. If that were correct, the result, as the defendants' counsel submitted, would be that the first defendant has no beneficial interest in the money paid to it. It would be held by the first defendant on trust and a new trustee would be obliged to recover it. On Mr Tampalini's case, therefore, the first defendant is a bare



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    trustee of the Trust and, if that is the case, it would not be appropriate to wind it up on this application.

126 I consider the application should be dismissed.
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Cases Citing This Decision

1

Tampalini v Robinson [2005] WASC 182
Cases Cited

19

Statutory Material Cited

0

Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd [2000] WASCA 170
Hipages Group Pty Ltd v Reach Aussie Pty Ltd [2017] FCA 112
Hipages Group Pty Ltd v Reach Aussie Pty Ltd [2017] FCA 112