Trafalgar West Investments Pty Ltd as trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 6]
[2014] WASC 278
•1 AUGUST 2014
TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST -v- SUPERIOR LAWNS AUSTRALIA PTY LTD [No 6] [2014] WASC 278
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 278 | |
| Case No: | COR:59/2011 | 7 MAY 2014 | |
| Coram: | KENNETH MARTIN J | 1/08/14 | |
| 29 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| A | |||
| PDF Version |
| Parties: | TRAFALGAR WEST INVESTMENTS PTY LTD AS TRUSTEE FOR THE TRAFALGAR WEST INVESTMENTS TRUST SUPERIOR LAWNS AUSTRALIA PTY LTD KINGSLEY CRAIG FLUGGE MARGARET FLUGGE JEROME MATTHEW FLUGGE LINLEY FLUGGE DAMIEN CRAIG FLUGGE |
Catchwords: | Corporations law Statutory oppression Conduct preceding membership Conduct of other legal proceedings Whether arguably capable of consituting oppression Relevance of family ownership structure Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165 and Re Lowes Park Pty Ltd (1994) 62 FCR 535, distinguished |
Legislation: | Corporations Act 2001 (Cth), s 232, s 233 |
Case References: | Baini v The Queen [2012] HCA 59; [2012] 246 CLR 469 Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281 Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495; (2005) 54 ACSR 249 De Tocqueville Private Equity Pty Ltd v Linden [2006] FCA 1309; (2006) 59 ACSR 587 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688 Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26; [2007] 4 All ER 164 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 170 FLR 451 Leaney v Olmstead Pty Ltd (1994) 51 FCR 240 Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452 Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87 O'Neill v Phillips [1999] 1 WLR 1092 Rayney v The State of Western Australia [No 5] [2014] WASC 147 Re Back 2 Bay 6 Pty Ltd (1994) 12 ACSR 614 Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165 Re DG Brims and Sons Pty Ltd (1995) 16 ACSR 559 Re Kenyon Swansea Ltd (1987) 3 BCC 259 Re Lowes Park Pty Ltd (1994) 62 FCR 535 Re The Companies (Western Australia) Code; Re Spargos Mining NL (1990) 3 WAR 166 Re Weeden (a bankrupt) [2008] FCA 1597; (2008) 7 ABC(NS) 1 Re Westbourne Galleries Ltd [1970] 3 All ER 374; [1970] 1 WLR 1378 Rosen v Georges [2014] VSC 193 Shum Yip Properties Development Ltd v Chatswood Investment and Development Co Pty Ltd [2002] NSWSC 13; (2002) 40 ACSR 619 Szencorp Pty Ltd v Clean Energy Council Ltd [2009] FCA 40; (2009) 69 ACSR 365 Titlow v Intercapital Group (Australia) Pty Ltd (1996) 65 FCR 449 Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310 Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2011] WASC 171 Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2012] WASC 460 Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169 United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 405; (2003) 45 ACSR 271 William Buck (WA) Pty Ltd v Faulkner [No 6] [2013] WASC 342 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
SUPERIOR LAWNS AUSTRALIA PTY LTD
First Defendant
KINGSLEY CRAIG FLUGGE
Second Defendant
MARGARET FLUGGE
Third Defendant
JEROME MATTHEW FLUGGE
Fourth Defendant
LINLEY FLUGGE
Fifth Defendant
DAMIEN CRAIG FLUGGE
Sixth Defendant
Catchwords:
Corporations law - Statutory oppression - Conduct preceding membership - Conduct of other legal proceedings - Whether arguably capable of consituting oppression - Relevance of family ownership structure - Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165 and Re Lowes Park Pty Ltd (1994) 62 FCR 535, distinguished
Legislation:
Corporations Act 2001 (Cth), s 232, s 233
Result:
Application dismissed
Category: A
Representation:
Counsel:
Plaintiff : Mr S Penglis
First Defendant : Mr M Bennett
Second Defendant : Mr M Bennett
Third Defendant : Mr M Bennett
Fourth Defendant : Mr M Bennett
Fifth Defendant : Mr M Bennett
Sixth Defendant : Mr M Bennett
Solicitors:
Plaintiff : Corrs Chambers Westgarth
First Defendant : Bennett + Co
Second Defendant : Bennett + Co
Third Defendant : Bennett + Co
Fourth Defendant : Bennett + Co
Fifth Defendant : Bennett + Co
Sixth Defendant : Bennett + Co
Case(s) referred to in judgment(s):
Baini v The Queen [2012] HCA 59; [2012] 246 CLR 469
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281
Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495; (2005) 54 ACSR 249
De Tocqueville Private Equity Pty Ltd v Linden [2006] FCA 1309; (2006) 59 ACSR 587
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688
Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] UKPC 26; [2007] 4 All ER 164
General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125
Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 170 FLR 451
Leaney v Olmstead Pty Ltd (1994) 51 FCR 240
Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452
Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87
O'Neill v Phillips [1999] 1 WLR 1092
Rayney v The State of Western Australia [No 5] [2014] WASC 147
Re Back 2 Bay 6 Pty Ltd (1994) 12 ACSR 614
Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165
Re DG Brims and Sons Pty Ltd (1995) 16 ACSR 559
Re Kenyon Swansea Ltd (1987) 3 BCC 259
Re Lowes Park Pty Ltd (1994) 62 FCR 535
Re The Companies (Western Australia) Code; Re Spargos Mining NL (1990) 3 WAR 166
Re Weeden (a bankrupt) [2008] FCA 1597; (2008) 7 ABC(NS) 1
Re Westbourne Galleries Ltd [1970] 3 All ER 374; [1970] 1 WLR 1378
Rosen v Georges [2014] VSC 193
Shum Yip Properties Development Ltd v Chatswood Investment and Development Co Pty Ltd [2002] NSWSC 13; (2002) 40 ACSR 619
Szencorp Pty Ltd v Clean Energy Council Ltd [2009] FCA 40; (2009) 69 ACSR 365
Titlow v Intercapital Group (Australia) Pty Ltd (1996) 65 FCR 449
Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2011] WASC 171
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2012] WASC 460
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169
United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 405; (2003) 45 ACSR 271
William Buck (WA) Pty Ltd v Faulkner [No 6] [2013] WASC 342
1 KENNETH MARTIN J: Under a minute of proposed orders of 27 March 2014, the defendants apply to strike out parts of the amended originating process and substituted statement of claim filed 7 February 2014.
2 In addition to the arguments of counsel, I have before me the written submissions of the defendants of 27 March 2014, the plaintiff's response of 17 April 2014, and the defendants' reply submissions of 30 April 2014. The application was heard on 7 May 2014.
3 In the event, the magnitude of the application was greatly truncated following further conferral between counsel shortly before the hearing. This culminated in the plaintiff, Trafalgar West Investments Pty Ltd (Trafalgar), filing a minute of proposed amended substituted statement of claim the day before the hearing. For convenience, I will refer to this document as the 'Minute', although the lengthy acronym 'MOPASSOC' might better encapsulate the increasingly multitudinous nature of the pleadings. Arguments proceeded by reference to the newly proposed pleading.
4 By correspondence, counsel for the defendants foreshadowed that the strikeout application would be pressed only under the rubric of three residual, substantive, issues (which I have reformulated slightly for greater coherency):
1. Can the plaintiff rely on acts or events that occurred prior to the plaintiff becoming a shareholder in the first defendant corporation, Superior Lawns?
2. Whether the appropriate test in a close held family company is of the hypothetical shareholder or whether there has to be a consideration of the fact that the shares were held by members of the family. The question relates to the period before the plaintiff became a shareholder in Superior Lawns. The second substantive issue (related to the first) concerns objections raised in paragraphs 16 - 22 of the defendants' primary submissions.
3. Issue estoppel/abuse of process grievances against the pleading by asserting that other (now resolved) proceedings in this Honourable Court (such as the audit requirement proceedings) and the costs determinations in those cannot now be the subject of a collateral challenge in these proceedings.
5 Mr Penglis, counsel for Trafalgar, made it clear it was on the basis of those three 'points of principle' that he appeared (ts 126 - 128).
The plaintiff's proposed pleading
6 As some background to this application, I mention my earlier reasons in Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2011] WASC 171.
7 In short compass, Trafalgar, pursuant to pt 2F.1 of the Corporations Act 2001 (Cth), seeks relief by reason of various alleged acts of statutory oppression in the first defendant corporation, Superior Lawns Australia Pty Ltd ('Superior Lawns'). Thus, Minute par 104 contends:
By reason of the matters pleaded in paragraphs 10 to 21, 22 to 31, 32 to 35, 38 to 42, 49 to 52, 53 and 54, 57 and 58, 60 to 63, 68 and 70, 71 to 73, 74 and 75, 81 to 83, 84 to 93, 95 to 100 and 101 to 103 herein, the conduct of the affairs of the Company has been:
i. contrary to the interests of the members of the Company as a whole; alternatively
ii. oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the plaintiff.
8 The chapeau of that paragraph was lately amended to augment a holus bolus allusion to all of the preceding paragraphs in the document, by adding specific paragraph references. In terms of the three specific issues now outstanding on this application, certain paragraphs present as particularly relevant.
9 First, I note that under pars 1(c) and 46, Trafalgar is said to have become a registered holder (that is, legal owner) of 230 ordinary shares in the first defendant, Superior Lawns, on or about 16 June 2006. This was pursuant to an 'Equity Agreement' of 8 September 2005.
10 Nevertheless, pars 10 to 21 and 22 to 31 address earlier dealings concerning Superior Lawns' land at 59 Sydney Road, Gnangara ('Sydney Road land') between June 2000 and March 2006.
11 Consequently, the defendants would argue Trafalgar is not relatively oppressed by acts or omissions in the conduct of Superior Lawns' affairs taking place well prior to Trafalgar even being registered as and thereby becoming a member of the corporation.
12 Second, pars 4 - 8, under the heading 'Dramatis Personae' describe some of the defendants involved. I shall collectively call them 'the Flugges'. In brief, as alleged by the Minute, the second defendant, Kingsley Craig Flugge, and the third defendant, Margaret Flugge, are married. Their children are the fourth defendant, Jerome Matthew Flugge, and the sixth defendant, Damien Craig Flugge. The fifth defendant, Linley Flugge, is married to Jerome. For ease of expression, I shall refer to each of the Flugges by their first name. The Flugges are all members of Superior Lawns, each holding ordinary shares. Following a rights issue in May 2011, by far the greatest proportion of shares are held by Craig and Margaret - on trust for the 'Jacaranda Trust', which I will explain shortly.
13 All the Flugges are, or have been, at various times, directors of Superior Lawns, with Craig effectively managing its day-to-day business and Margaret holding the office of company secretary. The only other director (for a time) was Patrick Gerard Gladwyn Jebb, also a director and now sole shareholder of the plaintiff, Trafalgar.
14 It may therefore be said that, prima facie, Superior Lawns was what counsel for the defendants termed a 'close held family company' (that is, of the Flugge family) at least up until the time Mr Jebb and Trafalgar entered the corporate scene.
15 Associated with Superior Lawns are three relevant trusts. First, the Jacaranda Trust, mentioned above, is said to be a discretionary trust - with Craig and Margaret as its trustees. They and the other Flugges are beneficiaries of this trust. Second, there is the 'Flugge Superannuation Fund', of which Craig and Margaret are again the trustees, and also its members. In that capacity, it is said Margaret and Craig held all issued units in a 'Flugge Property Trust'. The trustees and beneficiaries of that third trust, were Craig, Margaret, Jerome and Damien.
16 This is raised as relevant to pars 16 - 22, concerning impugned dealings with the Sydney Road land 'commencing in or about December 2001'. At that time part ownership of that land had been transferred to four of the Flugges. See pars 10 - 11 in terms:
Sydney Road - 1st transfer (22 undivided 100th shares to Flugge Property Trust)
10. With respect to Sydney Road:
(a) it was acquired by the Company in 1989 for $450,000;
(b) by a transfer of land instrument bearing the date 30 June 2000, stamped on or about 2 August 2001 and registered on 13 April 2004 (1st Sydney Road Transfer), the Company transferred to Craig, Margaret, Damien and Jerome (in their capacities as the then trustees for the Flugge Property Trust) 22 undivided 100th shares in Sydney Road for a stated consideration of $127,500.00.
11. No consideration was in fact paid to the Company for the 1st Sydney Road Transfer.
17 Emblematic of the expressed statutory oppression grievances to follow are pars 16 - 19:
Sydney Road Farm after 1st transfer - capital improvements by the Company and rent paid by the Company to December 2005
16. Commencing in or about December 2001, the Company paid rent in respect of the interest in Sydney Road transferred by the 1stSydney Road Transfer to Craig, Margaret, Damien and Jerome in their capacities as the then trustees of the Flugge Property Trust.
…
17. There was no lease agreement in respect of the interest in Sydney Road transferred by the 1stSydney Road Transfer.
18. The amount of rent paid was not based on any independent assessment of what constituted either a fair or market rental for the interest in Sydney Rd transferred by the 1stSydney Road Transfer.
19. Further, during the period from in or about December 2001 to in or about September 2005, the Company paid for improvements to Sydney Road costing at least $274,130.00.
18 Other paragraphs of the Minute also allege a course of oppressive conduct in Superior Lawns starting before Trafalgar became a member, and then concluding after Trafalgar's eventual registration as a shareholder. See in that regard par 32:
Rent paid December 2005 to 30 June 2008
32. Following the 2ndSydney Road Transfer, from in or about December 2005 until on or about 30 June 2008, the Company paid rent in respect of the 22 undivided100thshares of Sydney Road the subject of the 1stSydney Road Transfer and in respect of the 78 undivided 100thshares of Sydney Road the subject of the 2ndSydney Road Transfer.
Particulars
- The best particulars the plaintiff is able to give before discovery and inspection is that the Company paid rental for the interests in Sydney Road transferred by the 1stSydney Road Transfer and the 2ndSydney Road Transfer:
- (1) $87,409.00 to 30 June 2005;
(2) $100,737.00 to 30 June 2006;
(3) $94,300.00 to 30 June 2007; and
(4) $108,900.00 to 30 June 2008,
alternatively:
(d) $71,800.00 per annum with $15,800.00 paid annually to Craig and Margaret (and, until 29 June 2007, Jerome and Damien) as trustees for the Flugge Property Trust in respect of the 22 undivided 100th shares of Sydney Road; and $56,000.00 paid annually to Craig and Margaret as trustees for the Jacaranda Trust in respect of the 78 undivided 100th shares in Sydney Road.
20 There are, of course, other paragraphs of the Minute dealing entirely with events occurring after Trafalgar's shareholder registration in Superior Lawns, for example, pars 41 and 42:
41. Further, since in or around July 2009 until at least in about December 2010, the Company has paid to Craig and Margaret as trustees of the Flugge Property Trust $15,000.00 per calendar month as rental for Sydney Road.
…
42. The rental payments pleaded at paragraphs 39, 40, and 41 above were:
(a) caused or permitted to be made by those of the defendants who were then directors of the Company;
(b) made without notification being given to Mr Jebb and, therefore, were made without the plaintiff's consent;
(c) not made pursuant to a lease agreement in writing;
(d) not based on an independent assessment of what constituted a fair market rental for Sydney Road;
(e) for the benefit of Craig and Margaret, alternatively the beneficiaries of the Flugge Property Trust, and not for the benefit of the Company;
(f) not for any proper purpose of the Company, nor in its best interests;
(g) in the premises, breaches by each of the defendants referred to in sub-paragraph (a) above of each of the Directors' Duties and each of the Fiduciary Duties.
22 Paragraphs 41 - 42 are notable in that they do not in terms allege, for example, a payment of a 'super rent', or an 'uncommercial rent' (ts 129 - 130). Standing by themselves and viewed in isolation, they struggle to manifest an obvious case of corporate statutory oppression against a Superior Lawns shareholder.
23 Throughout the Minute much of the conduct asserted by Trafalgar as oppressive consists of dealings by Superior Lawns with the Flugges or with associated entities, for their alleged benefit.
24 I interpolate that the thrust of these paragraphs and, indeed, the proposed pleading as a whole, is that those persons in a position to control and direct management decisions of Superior Lawns used that corporation as an extension of the Flugge family finances and, by so doing, acted in disregard of the interests of Trafalgar as a member of that corporation.
25 Thus emerges an underlying scenario of a minority shareholder finding themselves or their capital 'locked in' to a proprietary company but also 'locked out' of decision making and then denied any real commercial return on their investment capital at the hands of a dominant decision making faction of other members and appointed directors. This is hardly a novel scenario. Such situations are familiar to courts in statutory oppression actions. Nevertheless, being locked into a company may not, of itself, constitute oppression without some further factor, such as a blocked attempt to sell minority shares, or a failure by the controlling majority to offer to buy out minority shares at a reasonable price: in that regard, see the seminal observations by Lord Hoffmann, in the English corporations law context, in O'Neill v Phillips [1999] 1 WLR 1092, 1102(h), 1104(f) - (h), 1107(a) - (b).
26 However, the defendants submit, in the context of a so-called close held family company, that pt 2F.1 must be applied by reference not to the position of any mere hypothetical member, but rather a hypothetical member who is also a member of the Flugge family. From that vantage point it is said that the impugned dealings in pars 16 - 22 could not be oppressive. Hence the defendants say those paragraphs should be struck out as wholly untenable as they fail to raise any viable cause of action advancing a basis for relief for statutory oppression.
27 Finally, pars 101 - 103 of the Minute raise as relevant the conduct by Superior Lawns of other proceedings in this Court, namely corporations matters (COR) 138 of 2010, 76 of 2011 and 105 of 2012. I refer to these matters collectively as the 'Concluded Proceedings'.
28 In COR 138 of 2010 and 76 of 2011, Trafalgar had sought orders under the Corporations Act for the inspection of Superior Lawns' books under s 247A, and to enforce compliance with a shareholder direction under s 293. On 25 June 2013, I made orders dismissing those proceedings, but on the basis that I was then satisfied Superior Lawns had complied with its relevant s 247A obligations.
29 When agitating COR 138 of 2010, 59 of 2011 and 76 of 2011, Trafalgar faced perennial problems in funding the legal representation required of a corporate litigant (see O 4 r 3(2) Rules of the Supreme Court 1971 (WA)). Faced with that difficulty, Trafalgar had sought unsuccessfully to circumvent the legal representation problem by transferring over its shareholding to a natural person, Mr Jebb, who could act without representation, but ultimately only requiring me to stay the actions: Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 2] [2012] WASC 169.
30 In COR 105 of 2012, Trafalgar had sought orders under s 78 of the Trustees Act 1962 (WA) and s 1071F of the Corporations Act requiring Superior Lawns to register a transfer of its shareholding from Mr Jebb back to Trafalgar. I ultimately granted that application: see generally Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [2012] WASC 460.
31 As regards the Concluded Proceedings, Minute pars 101 - 102 allege, inter alia:
101. The Company has paid and continues to pay the whole of the legal costs incurred by and on behalf of all of the defendants in this action, as well as related Supreme Court of Western Australia actions COR 138 of 2010, COR 76 of 2011 and COR 105 of 2012.
102 In doing so, the Company has paid and is paying legal fees beyond that which is merely protecting the discreet interests of the Company, and so as to amount to supporting Craig, Margaret, Jerome, Linley and Damien in their defence of this action and the related actions.
32 Paragraph 103 advances further allegations along the same lines as the Minute par 42(a), (e) and (f) above. The defendants characterise all this at pars 90 - 92 of their submissions as mere 'unparticularised assertion', or an attempt by the plaintiff to 'bootstrap its own oppression claim'.
33 Before moving to the parties' legal arguments, it is necessary to say a little more about the nature of a pt 2F.1 statutory oppression action.
Statutory oppression: some general legal principles of law
34 Oppression actions not infrequently display the citation of an oppressive number of case authorities, some of which I need to burden these reasons with shortly. I discussed much of the relevant case law in William Buck (WA) Pty Ltd v Faulkner [No 6] [2013] WASC 342 [117] - [149]. However, oppression is, as Murray J observed in Re The Companies (Western Australia) Code; Re Spargos Mining NL (1990) 3 WAR 166, 'entirely the creature of statute' (172). The question the Court must ultimately answer by s 232 does not change - it is no more and no less than whether:
(a) the conduct of a company's affairs;
...
is either:
(d) contrary to the interests of the members as a whole; or
(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
35 The High Court of Australia recently made clear in the context of criminal appeals, in Baini v The Queen [2012] HCA 59; [2012] 246 CLR 469, that paraphrases drawn from cases 'do not, and cannot, stand in the place of the words used in the statute' [14] (French CJ, Hayne, Crennan, Kiefel and Bell JJ).
36 More specifically, concerning s 232, French CJ recently stated that the words of this provision must be 'read broadly' and that 'judge-made limitations on their scope [are to be] approached with caution': Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [72]. Likewise, with respect to the power to grant relief against statutory oppression under s 233(1)(d), Gummow, Hayne, Heydon and Kiefel JJ observed in Campbell that the provision 'should not be hedged about by implied limitations' [178]. As to the Court's task in applying s 232, see as well Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310[232] - [234] (Campbell JA), [331] (Young JA).
37 Moreover, there is nothing to be found in the words 'contrary to the interests of the members as a whole', 'oppressive', 'unfairly prejudicial to' or 'unfairly discriminatory against' to indicate that such broad language is either limited to, or exclusive of, conduct that is otherwise lawful: Campbell [176] (Gummow, Hayne, Heydon and Kiefel JJ).
38 Finally, it must be recognised that the threshold before striking out a pleading is always high: per Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125. Moreover, to strike down a cause of action in the interlocutory phase (as the defendants seek to do) because of points of principle hinging on one circumstance or aspect of the pleading carries a risk. That is, other actions which carry that same characteristic may be deemed unarguable as a matter of law, even if they are factually quite different. One could, in effect, be carving out an exception against the ultimately broad language of s 232, a step which may well be inimical to its object and statutory purpose.
39 With those principles in mind, I move to the arguments of the parties.
Submissions
40 I hold the written submissions of the parties, which were largely directed to technical pleading points - mercifully now resolved. The oral arguments of counsel focused upon the substantial legal points during the hearing on 7 May 2014.
41 Towards the first two substantive issues, counsel for the defendants, Mr Bennett, synthesised their basal challenge as being that Trafalgar could not legitimately run a case at trial that 'postulates the circumstance of a small family company, the shares for which are all held by members of the family', yet 'rely in key aspects on matters that occurred prior to the plaintiff becoming a shareholder and ceasing prior to the plaintiff becoming a shareholder' (ts 115).
42 Mr Bennett noted that Minute par 104(i) would appear to pick up the words of s 232(d), whereas par 104(ii) only paraphrased s 232(e). As regards that latter limb of the statutory cause of action, it was argued the plaintiff was being 'asserted as a member', as opposed to some other capacity, because s 232(e) only deals with conduct which is, for example, 'unfairly discriminatory of a member or members'. It was then submitted s 232(e), and hence par 104(ii), cannot rely on 'pre-membership matters' (ts 115- 116).
43 A distinction was drawn, in that regard, by Mr Bennett with Re Spargos. This was on the basis Minute pars 10 - 21 alleged 'discrete acts, not continuing acts', whereas it was argued Re Spargos only dealt with 'affairs [which] took place in a continuum between January 1988 and March 1990', with the petitioner in that case only having been registered as a member of Spargos on 6 December 1989 (ts 115 - 117). Specific paragraph references in par 104, and the marginal headings which preceded certain paragraphs or thematic groups, showed, it was put, that that they were 'discrete matters' not 'continuous acts' (ts 141 - 142).
44 In such circumstances, it was submitted that Trafalgar only stood in the category of an 'intermeddler', as Re Spargos termed it (ts 141). Mr Bennett accepted, properly, in my view, that this was a 'novel point' on which no prior direct case authority of assistance could be located. He nevertheless argued that 'proportionality would urge [me] to decide it now because it will limit discovery and it will limit the nature of the evidence at trial' (ts 142).
45 Mr Bennett further argued Re Spargos set no precedent for relief concerning underlying circumstances amounting to an attempt by someone who received shares in a corporation as a 'gift', to then 'troll back through the history of the company' (ts 115 - 117).
46 Against that last proposition, counsel for Trafalgar, Mr Penglis, argued that the taking up of shares in Superior Lawns by Trafalgar was an aspect of an overall agreement. That bargain also included work being personally performed by Trafalgar's member and director, and its nominee to the board of Superior Lawns, Mr Patrick Jebb, who did not otherwise earn a salary (ts 154). In other words, he submitted the circumstances in which Trafalgar had become a minority shareholder in Superior Lawns were, on the pleadings, more nuanced than that of a straightforward, selfless outright gift of shares - for no consideration.
47 Mr Bennett's relief observation concerning Re Spargos, at least, may be accepted. The relief sought by the petitioner in that case was plainly of a different character, including, inter alia, an appointment of a receiver and manager to investigate various transactions. The National Companies and Securities Commission, meanwhile, sought the appointment of a new, independent board. By contrast, and to paraphrase par 3(b) of Trafalgar's claims for relief, it seeks primarily an order for the purchase of its minority shares in Superior Lawns at a value calibrated to a notional reversal of dealings held to be oppressive. As I assess Mr Bennett's submissions, it is contended to be 'wrong as a matter of principle' to seek that the defendants be ordered not only to purchase Trafalgar's shares, but also to purchase at any price inflated by reference to events preceding Trafalgar's membership (ts 117).
48 The defendants also addressed the issue of proportionality, deprecating any prospect of a discovery exercise extending several years beyond Trafalgar joining Superior Lawns as a member (ts 122). In response, Trafalgar challenged the utility and proportionality of a strike out application, as opposed, for example, to an application for summary judgment (ts 146 - 147), submitting that considerations of proportionality run both ways. That a persnickety invocation of technical pleading rules can produce more harm than good is now uncontroversial as a principle of modern case flow management: see Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281 (Martin CJ) and Rayney v The State of Western Australia [No 5] [2014] WASC 147 [15] (Edelman J).
49 In reply, whilst accepting this case management principle, the defendants clarified their position to say that here proportionality was being raised not as a basis for striking out the pleading, but as a consideration that ought not otherwise prevent a deficient pleading being struck out (ts 160). In any event, as Mr Bennett effectively conceded, the extent, if any, to which striking out certain paragraphs would actually truncate a discovery exercise was unclear, since the same facts were likely to be relevant as background to other paragraphs otherwise not challenged on this application (ts 123).
50 Mr Bennett also said:
We understand that the case for oppression can be put up as the aggregate of many minor points and that there's a mistake in approaching oppression actions to look at them as separate items (ts 140).
51 Mr Penglis said that that was the way in which the Minute been framed (see ts 148, 150).
52 As regards the Concluded Proceedings, Mr Bennett submitted the holus bolus way in which the material facts underlying the Concluded Proceedings had been dragged into a plenary characterisation of oppression - had effectively left everyone scratching their heads. The inference, it was argued, was that those paragraphs must be undertaking some form of 'collateral abuse to re-litigate a concluded matter in this court' (ts 137 - 139). Mr Bennett said:
It's unintelligible to us as how it can constitute oppression without being an attack or some further development of concluded proceedings (ts 138).
53 By contrast, Mr Bennett emphasised par 95, dealing with the Superior Lawns rights issue, which had only ever been the subject of an interlocutory injunction application, was not challenged on this basis, since it never gave rise to a 'determination on the merits' (ts 138).
54 Responding, Mr Penglis made two important points in relation to the Concluded Proceedings. First, they were not relied on as constituting oppression in isolation, but as part of an overall course of conduct. He submitted:
So whilst on its own, I don't stand before you and submit that that particular matter could of itself be sufficient to engage your Honour to order any relief. It is part of the circumstances relied upon to establish the overall allegation of oppressive conduct. (ts 149)
55 Mr Penglis' second point was that the Minute did not, by raising such matters, seek to challenge anything decided in the Concluded Proceedings:
Now, the simple point is that nothing heard [or] determined in COR 138 of 2010 in your Honour's reasons for it are challenged, directly or indirectly, by the pleading that is set out in those paragraphs. It's simply the fact of what occurred is said to be relevant to oppression. Now, that's either right or wrong, but it's certainly not a collateral attack on your Honour's reasons for decision. They take them as a given, and we proceed. The complaint is why it was necessary to engage the court's process to achieve the result that was achieved in those proceedings. That's the complaint. (ts 150)
56 This position, Mr Penglis accepted, was not necessarily manifest from the Minute document, but rather was a point to be made at trial.
Disposition
57 With the assistance of those submissions, I will proceed to address the three substantive issues.
Issue 1: pre-membership conduct and s 232 oppression
58 I do not consider, as a matter of legal principle, that a person may never hold a good cause of action under s 232 in respect of a corporation's acts or omissions preceding their accession to membership of a company. Indeed, that appeared to be conceded by the defendants, on at least a qualified basis, at par 17 of their submissions.
59 A person may hold a cause of action, with a sound basis for relief, even if all the conduct constituting the relevant oppression has ceased by the time of the trial, or at the temporal point an action is commenced. This question was addressed, with respect, very persuasively by Giles JA in Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 at [126] - [132]. His Honour began by noting that there were a number of cases holding that 'oppression must be continuing at the commencement of the proceedings … or at the time of hearing' [126]. These, I note, included cases constantly referred to in oppression matters, and amongst these the venerable authority Re Westbourne Galleries Ltd[1970] 3 All ER 374; [1970] 1 WLR 1378.
60 Giles JA noted that these cases dealt with statutory predecessors to s 232 addressing situations where a company's affairs 'are being conducted' oppressively. They took that language to refer to a 'continuous present'. By contrast, Re Spargos and some other cases had a different view [129].
61 Giles JA observed that s 232 differs from the statutory provisions considered in those earlier cases. It uses the word 'is', which is not the continuous present:
[131] It may refer to the temporal happening of the conduct in s 232(a), (b) or (c), or it may refer to the nature of the conduct as conduct past or present which meets one of the descriptions in s 232(d) and (e).
[132] As a textual indicator, one would not ordinarily say that a proposed act or omission, or a proposed resolution, is presently oppressive, but it can be said to be oppressive in nature. Similarly, to say of an actual act or omission that it is oppressive does not naturally refer to its continuance, but to its nature. Further, the relief available under s 233 suggests that the conduct need not always be continuing when the proceedings are commenced or when the court comes to consider whether relief should be granted.
62 Giles JA nevertheless noted relief could, but would not always, be refused in the exercise of a s 233 discretion, on the basis that the conduct complained of had wholly ceased.
63 In much the same vein, Basten JA, referring to the Privy Council decision in Gamlestaden Fastigheter AB v Baltic Partners Ltd[2007] UKPC 26; [2007] 4 All ER 164 (considering Jersey law) observed that 'neither the occasion nor the purpose of an order under s 233 need involve continuing oppressive conduct' [203]. However, Young CJ (in Eq) disagreed. He opined 'the authorities still require one to show continuing oppression at the date of hearing unless one is complaining about an act in the past of a director or other controller of the company which has a continuing effect' [382].
64 The views of Giles and Basten JJA were later preferred by Goldberg J in Szencorp Pty Ltd v Clean Energy Council Ltd [2009] FCA 40; (2009) 69 ACSR 365, at [69] - [77], notwithstanding Goldberg J ultimately declined to grant the relief sought.
65 Upon the appeal to the High Court in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [180] - [182] the plurality (Gummow, Hayne, Heydon and Kiefel JJ) only observed
the current form of the oppression provisions in pt 2F.1 was introduced with a view to making it clear that the Court may make orders even if the act, omission or conduct complained of has yet to occur or has ceased, it may very well be that the fact that there was no continuing oppression when this case came to trial does not entail that the Court had no power to make any of the orders for which s 233 provides. [182]
66 As English law was mentioned by Giles JA, I pause to address Re Kenyon Swansea Ltd (1987) 3 BCC 259. In that case, Vinelott J declined to strike out a petition under s 459 of the Companies Act 1985 (UK). The case dealt in part with the possibility of further, similar conduct in the future. But Vinelott J also said:
to found a petition it is sufficient that the affairs of the company have in the past been conducted in a way which was unfairly prejudicial to the petitioner even though at the date of the petition the unfairness has been remedied. The question whether an order is required to protect the interests of the petitioner from the consequences of unfair conduct or of an act which has been proposed and which may again be proposed is one to be answered at the hearing of the petition. (265)
67 It must be accepted that all these cases do not squarely address the present substantive point, which is whether pre-membership conduct can be oppressive. However, they assist.
68 In the first place, this body of cases strongly establish that s 232 and s 233 are not to be fettered by reference to any rigid, temporal constraints.
69 Second, standing under s 231 is basically determined by reference to whether or not a plaintiff can be found on the company's register of its members. If one accepts a person has standing to bring an application under s 232 once they are entered on the register of shareholders, and that an oppression application may complain of conduct which has been wholly discontinued when the application is made, it should follow logically that the person may complain over pre-membership conduct. A contrary position, to me, would only raise an artificial fetter - grating against the wide language of the Act.
70 Third, it is quite clear that temporal considerations can, and should, be taken into account by a court adjudicating an oppression claim. But this is not necessarily so at an interlocutory stage of proceedings, as opposed to at a trial, in the holistic context of an evaluation of the merits and correlative determination of appropriate relief if the plaintiff establishes its case. In De Tocqueville Private Equity Pty Ltd v Linden [2006] FCA 1309; (2006) 59 ACSR 587, Middleton J observed, by reference to Re Spargos, that:
it is not necessary that the conduct of which the plaintiffs complain be continuing at the time of the application or at the time when the court comes to consider the matter. However, that question may well be relevant as to whether relief is granted at all or what is the appropriate relief. [25]
71 For the defendants, Mr Bennett did submit that other, unspecified provisions and remedies might well apply in respect of pre-membership conduct (ts 162 - 163). These could mollify, to some extent, any potential concerns over closing the s 232 door to pre-membership conduct. However, as I have discussed, s 232 can also apply to conduct alongside other causes of action. That some fact, matter or circumstance engages alternative rights is no sound basis, in my view, for removing it from the reach of the broad words of pt 2F.1.
72 The particular circumstances of a given case might be at such a remote point in the past that an oppression case can be assessed as unarguable. However, I do not accept that this is such a case. The defendants sought to distinguish Re Spargosas dealing with a 'continuum' of ultimately oppressive conduct, whereas Trafalgar here only alleges 'discrete acts'. With respect, however, doubt is cast on that interpretation of Re Spargos from the first paragraph of the reasons of Murray J:
This is a petition by a shareholder in Spargos Mining NL (Spargos) for relief pursuant to the Companies (Western Australia) Code, s 320. The application is made by one David Jenkins who since 6 December 1989 has with his wife been jointly registered as the holder of 90,000 fully paid 25 cent shares in Spargos. He makes the application, as his evidence to the Court asserts, by reason of perceived oppression as he understood it to be, arising out of the activities of the directors of Spargos over a period of time. Mr Jenkins conceded that all of the matters, except for a sale of a half share in Spargos' principal asset, the operating Bellevue Goldmine, were past events at the time in late November 1989 when he acquired the shares providing the qualification to bring the petition. (168 - 169) (my emphasis)
73 To the same end is Murray J's summation of events at 177 - 179. The picture Murray J painted in Re Spargos was of a series of transactions, most occurring before Mr Jenkins joined Spargos, but one afterwards, connected as a continuous course of conduct by the common underlying direction of a board, affiliated to other forces and thereby affected by a conflict of interest. In that regard, it is not dissimilar to the impression gained from a reading of the Minute. And Mr Bennett properly accepted that it was open to view the pleaded conduct in the aggregate in deciding whether there had been oppression contrary to s 232. See Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165, 181, referring to s 320 of the then applicable Companies (South Australia) Code, the predecessor of today's s 232:
Section 320 invites attention not to events considered in isolation but to events considered as part of a consecutive story. As Young J noted in McWilliam v L J R McWilliam Estates Ply Ltd(1990) 20 NSWLR 703 at 711, the danger in dealing with events one by one is that the cumulative effect of the various pieces of unfairness might be overlooked. (citations omitted)
74 That concession was subject to the further issue the defendants advance, in terms of Superior Lawns being a closely held family company, prior to Trafalgar joining its share register. Nevertheless, as I say further on, I am not ultimately convinced by that contention either.
75 I am more than alive to the fact the relief as sought in Re Spargos was of a different character.
76 Indeed, there was cogency in the submission against the prayer for relief, which for the purposes of a valuation exercise following a positive finding of oppression at trial, plainly does focus attention on specific, discrete transactions and prejudice said to result. As I observed at the hearing, this is the real exercise of the relief sought (ts 141).
77 Mr Penglis accepted that as things may unfold at a trial, the Court ultimately might not value Trafalgar's shareholding by reference to a notional reversal of, for example, the 2001 transactions (ts 153). However, as he argued, the trial is the appropriate time for that to be raised and determined. Relief under s 233 is discretionary. Axiomatically then, the discretion is exercised after a trial upon the merits, after evidence having been taken, and the Court rendered in a proper position to make necessary findings of fact. Legitimate questions over whether or not pleaded conduct would ground relief sought at that time do not rise to overcome the General Steel threshold of painting Trafalgar's allegations of corporate oppression as so unarguable at this time that they should be struck out.
78 For completeness, I should briefly mention a point raised during argument over the meaning to be given to 'member' in an oppression context. Mr Bennett, for the defendant, pondered if Trafalgar was being asserted as a 'shareholder en ventre sa mere' or a 'putative shareholder [under] an equity agreement' (ts 116). Mr Penglis also invoked that terminology in his description of Trafalgar from the date it agreed to acquire shares (ts 155, 157).
79 Doubt may be cast on that putative shareholder notion by a decision of the Full Court of the Supreme Court of South Australia, Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87. That appeal dealt with applications under s 45 of the Companies (Acquisition of Shares) Code (SA), s 42 of the Securities Industry (South Australia) Code, and s 320 of the Companies (South Australia) Code.
80 As regards s 42 and s 45, White J, with whom Mohr and Millhouse JJ agreed, considered an applicant would not have standing, unless they were a member of the company both at the time of the alleged contravention and at the time they had commenced proceedings: (96, 99). As regards standing under s 320(1), White J appears to have taken a somewhat different view. His Honour observed '[i]t was crucial to Niord's standing under s 320(1) that it be registered at the time of issuing the summons' (103): see also Titlow v Intercapital Group (Australia) Pty Ltd (1996) 65 FCR 449, 451 (Lehane J) (citing Niord to that effect). At least in that context, White J considered (103):
Niord could not rely for standing or right to sue upon an equitable interest. Niord was nothing but an intermeddler, an outsider desperately seeking to throw itself into the way of being oppressed within the meaning of s 320. (original emphasis)
81 The decision in Niord was subsequently cited as authority for the inadequacy of an 'equitable interest' to confer standing under s 260 of the Corporations Law(which succeeded s 320 as the oppression provision) in Leaney v Olmstead Pty Ltd (1994) 51 FCR 240; see also Rosen v Georges [2014] VSC 193, referring to Niordas regards the current legislation. In Leaney Branson J struck out as unarguable a statement of claim pleading only that the plaintiff had 'agreed' to become a member. But, like Niord, Leaney was basically concerned with 'standing to seek relief' (241).
82 Some distinguishing factors therefore present. In the first place, Niord was decided under the old Companies Code. Giles JA amply addressed the distinction between that legislation and the terms of s 232 now applicable in Campbell v Backoffice. Second, the only contravention complained of was significantly confined in a temporal sense. Third, not only was Niord not a member when the alleged contravention took place, it was also not a member when it commenced proceedings:
Niord was not a member (not a registered shareholder) of Adelaide at the time when the Notice went out on 6 April 1989 calling the shareholders' meeting for 28 April 1989. It is also clear that Niord was not registered as a member of Adelaide when these proceedings in the Supreme Court of South Australia were commenced on 24 April 1989. Finally, it is clear that Niord only became registered as a member of Adelaide on 28 April 1989, the day of the meeting, which was four days after the date on which these proceedings were issued. (92) (emphasis in original)
83 As White J commented, Niord had no 'completed cause of action' when the action began.
84 Finally, it is impossible to ignore the substratum of facts in that decision which showed, to quote:
there was extrinsic evidence which indicated quite clearly that Poseidon was using Niord as an agent (or instrument or puppet or front company) to camouflage the reality that any perceived aggrievement was that of [non-member] Poseidon and not Niord. (106)
85 Such matters had led a Master to strike out Niord's claim as an abuse of process.
86 Niord casts a prima facie pall over any notion of an 'equitable shareholder' in an oppression context. However, in light of the factors I have discussed above, I would not go so far as to assess that decision as excluding all possibility of a s 232 cause of action as arguable with respect to pre-membership conduct, particularly where the underlying facts were, as discussed, quite different.
Issue 2: Close held family company
87 The observations upon general principles, and the disposition of issue 1, deliver knock-on consequences for this point.
88 On this issue, Trafalgar contends that whether or not the conduct of a company's affairs is 'contrary to the interests of the members as a whole' is determined not by reference to the 'actual shareholders', but to the interests of an 'individual hypothetical member': see Re Bagot Well and Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 170 FLR 451 referred to at par 9 of Trafalgar's submissions.
89 In response, the defendants argue, invoking Re Lowes Park Pty Ltd (1994) 62 FCR 535, that the Court must evaluate whether there is oppression by reference to an 'individual hypothetical member [who], at the time of the alleged conduct, is necessarily a Flugge family member who is not likely to commence proceedings'. So viewed, it is said that the claims regarding pre-membership conduct are 'unsustainable, even at a strike out level': defendants' reply submissions, par 11.
90 During oral argument, Mr Bennett referred to these two cases as presenting a 'dichotomy' of approach. But, with respect, I disagree. There is a basis upon which to achieve some level of synthesis, which will become apparent.
91 I should say at the outset that, in my view, it would be incorrect in legal principle to approach this issue on a basis that there is some unlegislated category of corporation, whether one terms it a 'close held family company' or otherwise, the conduct of whose affairs can never be oppressive or which fall to be assessed at some lesser standard. The day-to-day experience of the courts rather suggests that loose or informal management practices, underlying personal relationships and frequently uncommercial conduct or decision making (from a company's perspective) routinely characterise the operations of family companies. Yet these circumstances are highly conducive to the manifestation of corporate oppression scenarios.
92 From that, it would be wrong to conclude that because the defendants are members of a family, they must all hold such a community of interest that whatever is in the interests of one or some cannot be contrary to the interests of the company as a whole. Indeed, as Mr Penglis submitted, here it is not clear that transactions conducted through a somewhat complex web of interconnected entitlements in terms of trusts, super funds, and so forth, would necessarily have benefitted all of the company's members equally or at all (ts 158 - 159).
93 Re Lowes Park does not require any other approach. Nor does Re Bagot Well necessarily rule a line through familial considerations. In fact, a close reading of the two cases shows that they do not manifest a 'dichotomy'. Rather, they simply present as two examples of ways that trial judges or appellate courts have conducted the required oppression enquiry after - and this is the key - underlying findings of fact have been reached at a trial.
94 Re Bagot Well did not establish that there is any absolute, immutable standard of 'commercial unfairness', by which oppression must be evaluated. Rather, Debelle J only observed that commercial unfairness is 'one example of conduct which may be unfairly prejudicial or unfairly discriminatory for the purposes of s 320. There may be others'. The question was one to be 'determined objectively' and, in determining it, it 'may often be necessary to weigh conflicting interests of different groups within the company' (173).
95 Later, Debelle J said:
Voting powers conferred on shareholders and powers conferred on directors must be used bona fide and for the benefit of the company as a whole. Those duties are no less applicable in the case of a life governing director with extensive powers and who has three quarters of the voting power, a power sufficient to alter the Articles of Association. The phrase 'the company as a whole' does not mean the company as a commercial entity as distinct from its shareholders; it means its shareholders as a whole. That is to say, the case may be taken of an individual hypothetical member and it may be asked whether what is proposed is, in the honest opinion of those who have voted in its favour, for that person's benefit (174 - 175). (citations omitted)
96 That, it will be noted, is the statement of principle which Trafalgar invokes and which in the end must be accepted as correct. Indeed, the defendants do not fundamentally cavil with it, although they say that Re Lowes Park requires a particular gloss on the terminology in this specific case.
97 In the event, a finding of oppression was made by the judge at first instance. In the circumstances, that finding looks to have been inescapable: as Debelle J said, it was 'unusual in that there is direct evidence of a plan to benefit a group of shareholders', a 'single-minded policy of building up assets for the benefit of his family and not for the benefit of the shareholders generally' (173). Pointedly, the fact that a life governing director's conduct might have been regarded as consistent with the way that many family companies were run, and with the subjective intentions of the company's originator, was not determinative (175). On the underlying facts as found, that was undoubtedly correct.
98 Re Lowes Park provides a similar example of a post-trial evaluation of how statutory oppression legislation is to be applied in the circumstances of a particular case. Notably, Burchett J did not state that 'family considerations' were determinative. Rather, his position seems to have been as follows:
Furthermore, if it is right, as some of the cases I have cited suggest, to take into account family considerations, I do not think Barry Headlam can be heard to say that the provision of support for his mother in her widowhood is something with which he has no concern. (551) (my emphasis)
99 Further on, his Honour noted a submission of counsel that the case should be assessed according to a standard of 'commercial unfairness'. To accept that argument in unqualified terms, his Honour concluded, would 'negate the purpose of the A Class shares' (551). Or, as a following passage makes clear:
When the history of this matter is taken into account, and the family circumstances are examined, it seems to me to be clear that there is neither oppression nor unfairness, nor any basis to wind up this company on the just and equitable ground. Numerous features of the situation, not by any means of equal weight, must all be taken into consideration. (552)
100 The essentially factual nature of the enquiry is also manifest at many points in Burchett J's reasons in Re Lowes Park. His Honour took a poor view of the plaintiff's credibility, in contrast to that of other witnesses (541), describing testimony at one point as 'clutching at straws'. He noted that the plaintiff seemed to be content to reap the benefits of the manner in which the company was managed over an extended period, only complaining about manifestations of this management style which did not benefit him directly (543).
101 I respectfully agree with the observations of Heerey J in Re Weeden (a bankrupt) [2008] FCA 1597; (2008) 7 ABC(NS) 1 (reporting the case as 'Re Weedon'), cautioning against treating a case such as this, as strictly binding precedent to be applied absolutely, when one or other similar act, event, or circumstance crops up later:
A controlling majority which diverts assets and opportunities of the company to other entities under its control, and from which it will benefit, will be acting oppressively. This is essentially the kind of conduct held to be oppressive in Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 and a breach of fiduciary duty in Mordecai v Mordecai(1988) 12 NSWLR 58. Similarly, an inflexible policy of not declaring dividends can constitute oppression. It would be no answer to say that such conduct happened to suit the interests of the Weeden family. In Gambotto v WCP Ltd(1995) 182 CLR 432 the High Court has reaffirmed the willingness of the courts to protect minority shareholders - albeit in the context of a majority seeking to amend Articles of Association.
A hypothetical purchaser, properly advised, is to be credited with an awareness of the foregoing matters. The price a willing buyer would pay for the shares would reflect the availability of remedies for oppression and entitlement to a winding up order. Such a purchaser is not to be fixed with previous acquiescence in the policies of the controllers of the Weeden Companies. Rather the reasonable assumption is that the purchaser would be entitled to the rights conferred at law by the holding of the shares acquired. Cases such as Re Lowes Park Pty Ltd(1994) 62 FCR 535 where the minority shareholder had accepted the conduct complained of for many years (see at 548, 550, 553) are distinguishable. [37] - [38] (citations omitted)
102 In Re Lowes Park Burchett J made a similar point about Re Bagot Well, and its 'superficial resemblance' to the situation before him (550 - 551). With respect, it is a point well made.
103 Trafalgar is plainly not part of the Flugge family, or the family's multifaceted finances, except in a somewhat tangential sense. Of course, that seems to be why the defendants argue that events preceding Trafalgar's entry on the scene as a shareholder in Superior Lawns ought be evaluated in a more permissive light. That point might achieve a degree of traction at the trial, including as regards final relief. For example, it is well established, as both Re Bagot Well (183 - 184) and Re Lowes Park (553 - 554) recognise, that an order for a majority shareholding group to purchase an oppressed member's shares may set a price discounting the shareholding's value from a pure realization of assets figure, in recognition of the diminished value of a minority shareholding in a small proprietary company.
104 But as I have hopefully now made clear, at this stage I am not convinced that what is pleaded as a single course of conduct seeking relief on the exercise of a discretion ought be temporally segregated and then distinctly evaluated, morsel by morsel.
105 In sum, I accept this submission of Mr Penglis in argument:
The relevant principles don't change, whether it's a closely held company or a family company or BHP. Principles in regard to oppression don't change. How those principles operate on a particular factual matrix changes. Clearly what might be oppressive to a shareholder of BHP may not be oppressive to a shareholder of a small family company, particularly if there was unanimous assent. (ts 157)
Issue 3: Conduct of other proceedings
106 Again, it is important to recall what I have previously said about the danger in carving out from the text of s 232, exceptions which do not present from its words.
107 Conduct may be oppressive, even though it also engages with other causes of action. The fact that pleaded conduct has been the subject of other proceedings under other statutory provisions would not, therefore, necessarily dictate that it must be quarantined as incapable of being oppressive or as playing a relevant role in contributing to that overall conclusion. Moreover, conduct might be oppressive, even if it is otherwise completely lawful. It follows equally that conduct which is oppressive does not necessarily cease to be so merely because a Court has ultimately not granted relief whilst evaluating the conduct in a separate context of some distinct law.
108 There is persuasive case authority showing that refusing to provide information or documents to a member may constitute oppression: see Shum Yip Properties Development Ltd v Chatswood Investment and Development Co Pty Ltd [2002] NSWSC 13; (2002) 40 ACSR 619 [198] (Austin J), citing Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452 and Re Back 2 Bay 6 Pty Ltd (1994) 12 ACSR 614 (an interlocutory application). However, a failure to accord a member formal rights to information under the Corporations Act may not necessarily constitute oppression, without the presence of some further aggravating factor. In particular, when a failure to provide information is alleged to be oppressive, it might need to be proved that the information had actually been actively sought and then refused: see United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 405; (2003) 45 ACSR 271 [21] - [22] (Campbell J), also citing Squash Club. If that is so, then it would be incongruous to suggest that if a right to such information is unsuccessfully agitated under the Corporations Act, the company's conduct in that context cannot be viewed as oppressive. That view would force any member relying on such conduct into an impossible forensic dilemma: if they demand the information and make an unsuccessful application, they sabotage any possible oppression claim; if they refrain from attempting to exercise their rights to information, they sabotage any oppression claim by another means.
109 Importantly, Mr Penglis emphasised that the gist of those parts of the Minute dealing with the Concluded Proceedings was that they did not stand alone and had to be evaluated alongside other parts.
110 As a general rule, it seems to be uncontentious that for the purposes of showing relevant statutory oppression, conduct of a company's affairs may include the conduct of litigation: see for example Re DG Brims and Sons Pty Ltd (1995) 16 ACSR 559; Squash Club; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688, 734; Cassegrain v CTK Engineering Pty Ltd [2005] NSWSC 495; (2005) 54 ACSR 249, dealing with the conduct of actual oppression proceedings. Indeed, that proposition presents as perfectly logical, although the conduct of litigation is not referred to expressly in s 53 ('Affairs of a body corporate'). A key incident of the corporate personality is the capacity to sue and be sued.
111 This, of course, is subject to the addition of a necessary caveat that, self-evidently, a court will not tolerate abuses of its processes, such as what at base presents only a collateral attack upon its earlier findings or conclusions. Importantly, however, Mr Penglis reiterated that the Minute took the court's findings as they were. It was said that this aspect of the document was only addressed to the manner in which the Concluded Proceedings were conducted, rather than their subject matter stricto sensu (and, I would add, necessarily, their outcomes).
112 Of course, it may well be that an outcome in the Concluded Proceedings may bear on the weight the Court attaches to these facts, and to whether and how the Court would grant relief under s 233. For example, in Fexuto Young J noted that where the unjustified conduct of legal proceedings had been established as oppression, the usual order is compensation by the majority to the tune only of any wrongful expenditure (734).
113 However, as I have already emphasised, the present interlocutory strike out application is not the appropriate juncture to decide such issues.
Orders
114 All substantive issues must be determined in the end, therefore, against the contentions of the defendants. The defendants' application must be dismissed.
115 The plaintiff, as successful party, should prima facie recover its costs of the application to be taxed.
116 The parties should now confer over a minute of proposed orders and the plaintiff should have the carriage of providing to the defendants' solicitors and to the court within seven days of the publication of these reasons a minute of proposed orders giving effect to them.
117 I will deal with any contentious issues arising, including as to costs, on the papers.
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