JUDGMENT No. socdecscteal stction CATCHWORDS CORPORATIONS - oppression action by shareholder - just and equitable ground - effect of breaches of Corporations Law and the Articles - fairness in all the circumstances of a family company set up upon family planning advice - grazing family in which father assisted sons in acquiring properties - whether applicant relevantly "locked in" ~ whether entitled to insist on dividends being declared - collateral benefits - claim against deceased person - method of valuation of shares where rights were limited by special provisions in Articles. Corporations Law, ss. 260 and 461 Plunkett v. Bull (1915) 19 CLR 544 Thomas v. H.W. Thomas Ltd (1984) 2 ACLC 610 Re G. Jeffery (Mens Store) Pty Ltd (1984) 2 ACLC 421 Buche v. Box Pty Ltd (1993) 31 NSWLR 368 Re Bagot Well Pastoral Company Pty Ltd (1993) 11 ACLC 1 Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165 Wayde v. New South Wales Rugby League Ltd (1985) 61 ALR 225 Gregory v. Commissioner of Taxation of the Commonwealth of Australia (1971) 123 CLR 547 RE: LOWES PARK PTY LTD; CHARLES BARRY HEADLAM AS TRUSTEE OF THE C.B. AND M.J. HEADLAM TRUST v. LOWES PARK PTY LTD & ANOR TG 3001 of 1993 Burchett J. Sydney (heard in Hobart) 30 September 1994 IN THE FEDERAL COURT OF AUSTRALIA ) TASMANIA DISTRICT REGISTRY TG 3001 of 1993 ) GENERAL DIVISION ) RE: LOWES PARK PTY LTD BETWEEN: CHARLES. BARRY HEADLAM AS TRUSTEE OF THE C.B. AND M.J. HEADLAM TRUST Applicant AND: LOWES PARK PTY LTD First Respondent AND: JAN EDWARD HEADLAM Second Respondent AND: IAN EDWARD HEADLAM Cross-Claimant AND: CHARLES BARRY HEADLAM Cross—Respondent CORAM: Burchett J. PLACE: Sydney (heard in Hobart) DATE : 30 September 1994 ORDERS OF THE COURT THE COURT ORDERS THAT the respondents, within fourteen days, bring in short minutes of orders, and the applicant file and serve within a further fourteen days a document setting out any objections to or variations of the short minutes for which he contends. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. TG 3001 of 1993 RE: LOWES PARK PTY LTD BETWEEN: CHARLES BARRY HEADLAM AS TRUSTEE OF THE C.B, AND M.J. HEADLAM TRUST Applicant AND: LOWES PARK PTY LTD First Respondent AND: IAN EDWARD HEADLAM Second Respondent AND: LAN_EDWARD HEADLAM Cross-Claimant AND: CHARLES BARRY HEADLAM Cross-Respondent CORAM: Burchett J. PLACE: Sydney (heard in Hobart) DATE : 30 September 1994 REASONS FOR JUDGMENT BURCHETT J. 2 This ia a very regrettable piece of litigation. It involves an application filed on 2 March 1993 to wind up a family company in which is vested a substantial grazing property known as "Lowes Park", Woodbury, Tasmania. Alternatively, an order is sought for the purchase of the applicant's shares at a value to be determined by the Court. The major protagonists are, on the one side, the applicant, and on the other, his brother, who is the second respondent, and their aged mother. The substantial 2. grounds on which the relief is sought are the ground of oppression and the just and equitable ground (see ss. 260, 461(e), (f), (g) and (k) and 467 of the Corporations Law) - At the outset, it should be noted that a cross-claim, brought by the second respondent, is not pursued, and may be dismissed. Before coming to the dispute which has arisen between the brothers, I must first go back to some family history. From about 1947, for a number of years, the late Charles Leonard Headlam, who was married to Emilie Patricia Headlam, owned the property "Lowes Park". He conducted it as a grazing property. Even earlier, it had belonged to his father. Mr and Mrs C.L. Headlam had four children, two sons and two daughters. The sons were the applicant Charles Barry Headlam, born 9 July 1941, and the second respondent Ian Edward Headlam, born 20 October 1942. For reasons which will become apparent, it is unnecessary to set out details in respect of the daughters. Both Barry Headlam and Ian Headlam, as I shall call them, worked on the "Lowes Park" property after leaving school, but Barry Headlam moved in 1963 to a property known as "Brandy Bottom" at Colebrook, about fifty kilometers (said to be three quarters of an hour's drive) from Woodbury, and he married his wife Mary June Headlam on 6 October 1964, since when he has visited "Lowes Park" only occasionally. Ian Headlam continued to work at "Lowes Park" (he did not marry his wife Margaret Eleanor Headlam until 1972), eventually becoming a manager of the property, until about 1970, when he 3. moved to a property known as "Thule" on Flinders Island. In the 19608, he also worked on a property known as "Kheme" at York Plains, which was held in the name of his mother, but was managed by his father. The property "Thule", on Flinders Island, was purchased in 1965 by a company the shares in which were owned by Ian Headlam and his mother, the purchase being partly funded by the sale of the property "Kheme". "Thule" was leased by the company, Thule Pty Ltd, to a partnership of the same persons, under the name E.P. & I.E. Headlam. Some time in the first half of 1966, Mr C.L. Headlam became concerned about the devastating effect which, he foresaw, the then state and federal laws in respect of probate and federal estate duty might have upon his family after his death. He consulted the family's accountants, W.S. McKay & Associates. A memorandum signed on their behalf, dated 5 July 1966, is in evidence. It contains detailed calculations based on the then value of "Lowes Park" assessed at $320,000, and "Brandy Bottom" assessed at $70,000. It was proposed that "Brandy Bottom" be transferred to Barry Headlam under a contract for value, but on the basis that the amount required (or much of it) would be given by Mr C.L. Headlam to his son. The document, which was headed "MEMORANDUM re PROBATE REDUCTION PROPOSALS," went on: "To enable you to retain control of the property and farming activities to be conducted at 'Lowes Park' while gifting for probate duty reduction, it is proposed that a land holding company be incorporated. 4. The share structure of the company envisaged is as follows :- Preference Shares - Entitled to maximum dividend of 5% per annum and to a maximum of par value on winding up or reduction of capital. Each share to have one vote. To be held by:- C.L. Headlam 10 shares Mrs. E.P. Headlam 10 shares Independent Shareholder (say Solicitor or Accountant) 1 share . - Entitled to all dividends after demands of preference shareholders, and to balance of capital on winding up or reduction of capital. Not to be entitled to any voting rights, nor to entitle holders to any notice of meeting inspection of accounts nor attendance at meeting of the company. To be held by:- Tan 1,000 shares Barry 1,000 shares , Thus the company is controlled by the preference shareholders, but any increase in the net assets of the company passes to the ordinary shareholders. If so desired, the equity shareholdings can be effectively deprived of any permanent benefit of such increases by future issue of a large number of ordinary shares. The company would then purchase 'Lowes Park' from yourself at the present Government Value, with the purchase price being left on deposit with the company. " It is apparent that this advice was accepted. Lowes Park Pty Ltd was incorporated on 19 August 1966. The usual wide ranging objects, set out in the Memorandum of Association, included an object to "hold develop and deal generally with real property". The subscribers were Mr C.L. Headlam, in respect of ten A class shares, Mrs E.P. Headlam, in respect of ten A class shares, and Mr W.S. McKay, in respect of one A class share. One aspect of the purpose of incorporation of the company was 5. indicated by Barry Headlam when he acknowledged in evidence that it "was set up ... as a land holding company", of which he said: "It was a vehicle - the company was there as a vehicle for the partners [in a partnership also set up by Mr C.L. Headlam] to derive a profit from the land". Indeed, his counsel conceded, in address, that "it is not a trading company, and it has never traded". As the accountants' memorandum makes clear, another main purpose was to confer control on the holders of the preference shares, who had virtually no other tangible rights in return for the transfer to the company of "Lowes Park". The Articles of Association of the company excluded Table A in the Fourth Schedule to The Companies Act 1962 of Tasmania, and contained certain special provisions. Clause 4 dealt with the company's shares. It provided: "(a) The original capital of the Company is $50,000 divided into 50,000 shares of $1 each. Shares numbered 1 to 1,000 both inclusive shall be 'A' Shares. Shares numbered 1,001 to 50,000 both inclusive shall be 'B' Shares. (b) The said 'A' Shares shall confer on the holders thereof the following rights viz: 9 [sic] (i) The right to attend and vote at all meetings of members of the Company. (ii) The right to be paid out of the profits of each year a fixed dividend for such year at the rate of Five per cent per annum on the capital for the time being paid up thereon and the right to rank in a winding up as regards return of capital pari-passu with all other shares in the Company but shall not confer the right in a winding up to payment of arrears of dividend (whether earned or declared or not) or to any further participation in profits or assets. 6. (c) The said 'B' Shares shall confer on the holders thereof the following rights viz: (i) Subject to the rights of 'A' Shares the right to rank for dividend pari-passu with all shares other than 'A' Shares. (ii) The right to rank in a winding up pari~passu with all other shares to the extent of the amount actually paid up thereon and to receive all surplus assets thereafter in proportion to the amount paid up on such 'B' shares at the commencement of the winding up. (d) The 'B' Shares shall not confer on the holders thereof the right to vote either in person or by proxy at any General Meeting or to have any vote in the management of the business or control of the company or to interfere in such management or control or to inspect the accounts books and documents of the Company (except as by law entitled) and such holders shall be bound by the Accounts from time to time furnished by the Directors and passed at General Meeting of the Company." There were also restrictive conditions in respect of the transfer of shares in the company, clauses 22 to 26, as follows: "22. EXCEPT as hereinafter provided no shares in the Company shall be transferred unless and until the rights of pre-emption hereinafter conferred shall have been exhausted. 23. EVERY member or other person referred to in Article 28 who intends to transfer shares (hereinafter called 'the Vendor') shall give notice in writing to the Directors of his intentions. That notice shall constitute the Board his agent for the sale of the said shares in one or more lots at the discretion of the Company at a price to be agreed upon by the Vendor and the Board, or, in case of difference, at the price which a chartered accountant agreeable to the Board and the Vendor shall certify by writing under his hand to be in his opinion the fair selling value thereof as between a willing Vendor and a willing Purchaser. 24. THE Directors shall forthwith give notice to all the members of the Company of the number and price of the shares to be sold and invite each of them to state in writing within twenty-one days from the date of the 7. said notice whether he is willing to purchase any, and if so, what maximum number of the said shares. 25. AT the expiration of the said period of twenty- one days the Directors shall allocate the said shares to or amongst the member or members who shall have expressed his or her willingness to purchase as aforesaid, and (if more than one) so far as may be pro rata according to the number of shares already held by them respectively, provided that no member shall be obliged to take more than the said maximum number of shares so notified by him as aforesaid. Upon such allocation being made the Vendor shall be bound on payment of the said price to transfer the shares to the Purchaser or purchasers, and if he make default in so doing, the Board may receive and give a good discharge for the purchase money on behalf of the Vendor and enter the name of the Purchaser in the register of members as holder by transfer of the said shares purchased by him, 26. IN the event of the whole of the said shares not being sold under Article 24 the Vendor may at any time within six months after the expiration of the said twenty-one days transfer the shares not so sold to any person and at any price." The first directors of the company were Mr and Mrs C.L. Headlam. The proposed transfer of "Brandy Bottom" also occurred, and at about the same time Barry Headlam purchased (with some assistance from his father) another property at Colebrook, known as "Springfield". Ian Headlam continued to reside at "Lowes Park" until the retirement of the manager at "Thule" in 1970, when he moved, as I have said, to Flinders Island to manage that property. In 1971, Mr C.L. Headlam suffered a severe stroke. The evidence indicates that it left him partially paralysed and suffering from a somewhat distressing condition of inability to control weeping. He was incapacitated from carrying out farming 8. operations. Although a manager was engaged for "Lowes Park", it is plain that he needed the assistance of his sons, and it is equally plain, on the evidence, including the evidence of their mother and their brother-in-law Mr Bayne (which was not challenged by cross-examination), that it was Ian Headlam who provided that assistance. This was notwithstanding the fact that Ian was living at Flinders Island, while Barry Headlam was working a property which was only some 50 odd kilometers distant from "Lowes Park". Ian Headlam visited regularly from Flinders Island, at least once in every month or two, until it was decided he should return permanently to run "Lowes Park" and an adjoining property known as "The Braes", which was purchased in 1976 utilizing the proceeds realized by selling the property "Thule". So little was Barry Headlam involved in what was happening at "Lowes Park" at that time that he said he did not know his brother would be returning until he heard that "The Braes" had been sold. The events following Mr C.L. Headlam's stroke do not suggest the emergence of any conflict in the family. On the contrary, as I shall recount, Mr C.L. Headlam continued to give very considerable financial assistance to his son Barry Headlam. But I think an appreciation of the fact that it was Ian Headlam who came to his parents' aid in the years following the stroke is relevant to one area of conflict in the evidence which the parties themselves, or at any rate Barry Headlam, regarded as significant. That conflict relates to a partnership in respect of "Lowes Park". Therefore, it is appropriate that I indicate 9. the basis on which I accept Jan Headlam's evidence concerning the assistance he gave to his parents, and indeed his evidence generally. In the first place, I formed the view that Ian Headlam was an honest, though somewhat inarticulate and occasionally confused, witness. I formed a much less favourable opinion of Barry Headlam, and I do not accept his evidence where it is in conflict with other witnesses or with what seem to me to be the general probabilities of the situation. On a number of issues, Barry Headlam's evidence was quite unsatisfactory, and he gave me the impression that he was prepared to assert what he thought would assist his case, although he preferred to suggest a falsehood rather than to say it outright. On the matter of Barry Headlam's claim to have assisted his father during the difficult years following 1971, Mr Bayne, an accountant who married Mr C.L. Headlam's daughter Catherine in 1967 and thereafter visited "Lowes Park" at least once a month, confirmed that it was Ian Headlam who returned to assist his parents to run "Lowes Park", and he said that "from [his] observation the applicant [Barry Headlam] has given neither [Ian Headlam] nor his parents any material assistance to carry out those tasks". Similarly, Mr C.L. Headlam's widow swore: "From the time of my husband's stroke Ian travelled backwards and forwards from the 'Thule' property on Flinders Island to 'Lowes Park' in order to help oversee the property. ... In 1972 Ian travelled from Flinders Island once a month for the five months at the beginning of the year. My other son Barry took little interest in the running of 'Lowes Park' and did not come up for shearing and rarely came to visit his father following the stroke." 10. I accept the evidence of Mr Bayne and Mrs Emilie Headlan. Anticipating matters a little, it is convenient to note here that Mrs Emilie Headlam gave evidence too: "Following my husband's death, Ian continued to care for my welfare being aware of my health and finances. I lived alone at the house at 'Lowes Park' with the help of Ian who found help for me including nursing and companionship. When I decided to move to Hobart, Ian and his sisters helped me to move and settle in my new home. The house in which I presently live was bought by Barry and Ian. [Provision in this respect was made by the will, of which they are executors. ] Ian has continued to help with its upkeep and maintenance. "* Of course, the performance and non-performance of filial duties cannot generally affect vested legal rights, but the particular matters to which I have referred are relevant to some of the issues in the present case, as I shall show. In 1973, Mr C.L. Headlam obtained further accounting advice, which I assume was sought because his stroke had raised doubts whether the programme of reduction of his estate by the making of regular gifts to members of his family could be implemented in time to avoid the incurring of a very substantial impost upon his death. A plan was devised involving reliance upon discretionary trusts, a Norfolk Island Scheme and a "Gorton" Scheme (see Gorton v. The Commissioner of Taxation of the Commonwealth of Australia (1965) 113 CLR 604). The rearrangement of family affairs involved led, amongst other things, to the B class shares held in Lowes Park Pty Ltd by Barry Headlam and Ian Headlam being transferred to discretionary trusts for the benefit 11. of each of their families. The discretionary trust relating to the family of Barry Headlam is known as the "C.B. and M.J. Headlam Trust". It is as trustee of that trust that he brings the present application. Mr C.L. Headlam, as the person then in control (by virtue of his wife's acquiescence) of Lowes Park Pty Ltd, arranged for that company to provide sufficient funds to enable Barry Headlam to increase his land holding by adding to "Brandy Bottom" and "Springfield" two further properties known as "Hardwick House" and "Lynwood" at a total cost of $490,000 plus a further substantial sum for stock. "Hardwick House" was bought in 1974, and Lynwood shortly afterwards. The assistance granted by Lowes Park Pty Ltd took the form of a loan to Hardwick House Pty Ltd, Barry Headlam's family company, of $200,000 at an interest rate of 5% per annum. In order to provide this sum, Lowes Park Pty Ltd had to borrow on mortgage from a bank. That mortgage still exists, and it is the first of four mortgages which featured in the evidence. Hardwick House Pty Ltd has repaid neither any principal nor any interest, so that at the present time, in round figures, some $400,000 would be outstanding, and, of course, the actual outlay incurred by Lowes Park Pty Ltd would be much greater, since it has had to pay commercial rates to the bank. This particular transaction provides an interesting illustration of Barry Headlam's attitude. Asked: "Did you pay 5% interest or was that a book entry or what?" he answered: "It was debited to Hardwick House Pty Ltd and credited to Lowes Park Pty Ltd." Pressed: "But not actually paid?" he replied: "Not physically 12. paid." He was then asked: "Do you acknowledge a debt in that amount, including the interest?" he answered: "We acknowledge the debt of the initial $200,000 with the interest component of $60,000 accrued to 1980." He was then asked: "Interest was not shown in the books of Lowes Park Pty Ltd since 1980 - are you aware of any reason for that?" he replied: "I have no reason whatsoever, your Honour." When it was put: "No reason why it should not continue to be shown, is that what you are saying?" he replied: "That's right, your Honour." While complaining of amaller transactions on the basis that they were for the benefit of his brother (they also benefited his mother), Barry Headlam was quite content to continue to accept their generosity in relation to this one, and even to ignore the obligation to pay the minimal interest rate of 5% per annum during the past 14 years. But being pressed, he had no reason to offer why he should not be obliged to pay interest during that period. In addition to the first mortgage, Barry Headlam had the benefit of a further mortgage, initially for the sum of $40,000, granted by Lowes Park Pty Ltd to assist farming operations at Hardwick House, under which $4,000 was still owing at the time the present proceedings were commenced. That balance has since been paid. This mortgage ranked as a third mortgage. Back in 1966, at the time when Lowes Park Pty Ltd was formed, the grazing business on "Lowes Park" was being carried on by a partnership known as "C.L. Headlam & Son", consisting of Mr and Mrs C.L. Headlam, Barry Headlam and Ian Headlam. On 1 13. July 1973, following the receipt of the family planning advice to which I have already referred, Barry Headlam's wife and Ian Headlam's wife were also admitted to the partnership. As I understand the position, the idea was that the shares in any profits of the partners other than Mr and Mrs C.L. Headlam would be applied towards the discharge of liabilities created by the family planning schemes. Of course, there were taxation implications, and the introduction of the wives of Barry Headlam and Ian Headlam produced appropriate splittings of income, But after the return of Ian Headlam following the sale of "Thule" and purchase of "The Braes", in order to assist his incapacitated father, the situation must have appeared in a different light. "The Braes" was not a property comparable, as I infer from the evidence, to "Lowes Park", but it was a significant property, and Ian Headlam was going to run the two properties together. Barry Headlam had by then acquired the properties I have mentioned, which totalled very substantial holdings. It must have seemed entirely appropriate that "Lowes Park" and "The Braes" should be run by a single partnership of Mr and Mrs C.L. Headlam, Ian Headlam and his wife. That is in fact how Mr C.L. Headlam instructed the family's accountants to record the position as from 1 July 1977. I accept Ian Headlam's evidence that he understood the arrangements were made with his brother's full knowledge. However, as Mr C.L. Headlam died on 9 October 1979, his version of the events cannot be obtained. Barry Headlam and his wife assert that they knew nothing of any dissolution or reconstitution of the partnership. As to Barry 14. Headlam's wife, in cross-examination she made it clear that she left anything to do with the partnership entirely to her husband. As to Barry Headlam, it is necessary to give some consideration to the probabilities, having regard to the opinion I have already expressed concerning his credit. I think Mr C.L. Headlam may well have regarded himself as entitled to take decisions on behalf of his family, including his adult sons and their wives, without always consulting them in advance. However, it is much less likely that he would have refrained from telling them afterwards. Although Barry Headlam did not often come to "Lowes Park" during his father's later years, Mr C.L. Headlam did from time to time visit his son at "Hardwick House". The distance was not great. There is one piece of evidence which makes it quite unlikely that Barry Headlam was left in ignorance of the position. That evidence is provided by his tax returns. For the year ending 30 June 1977, immediately prior to the change, Barry Headlam's tax return showed the receipt of a share of partnership income from the partnership C.L. Headlam & Son in the amount of $3,158, and for the previous year there was a similar return. When first asked about these documents in cross-examination, Barry Headlam conceded that, having signed the returns, he "would have been aware ... that [he was} deriving some income from the C.L. Headlam & Son partnership". That accords with my impression of Barry Headlam as a man who would have read with care the returns he signed. But when he was then shown the following two returns, in which there was no reference to income from that partnership, 15. he said: "I signed the returns on the faith of the tax agent, our accountants, and they were lodged along those lines." And pressed: "So, you did not bother to read where you were getting income from?" he answered: "No, I didn't." He asserted it was only after his father's death that he had "a close look at any incomes or tax returns". Asked: "So, you are just saying you did not know?" he replied: "I wasn't fully aware of what was going on, no." This final answer, it will be observed, is by no means a clear denial of knowledge of the substance of what had happened. If he did know, and said nothing, during his father's lifetime, it seems to me he must have acquiesced in the reconstitution of the partnership. He was taking no part in its affairs, and in particular, was doing nothing in the way of work to earn its income. This last aspect of the matter was put to him in evidence. The topic produced a flurry of answers which were either irrelevant or subsequently withdrawn. They had the appearance of clutching at straws, and in my opinion they were not frank answers. After reconsidering the whole of the evidence, I have come to the conclusion that the exclusion of Barry Headlam and his wife from the partnership was either agreed in advance or, at any rate, was accepted with full knowledge shortly afterwards, and well before the death of Mr C.L. Headlam. Although I have not found it necessary to rely on the special rule relating to claims first raised against a person after his death, I think that rule clearly applies. What is being said is that Mr C.L. Headlam unilaterally purported to reconstitute the partnership in breach of his obligations towards 16. his son Barry Headlam and his daughter-in-law, Barry Headlam's wife. Where it is claimed that a person who is now deceased incurred an obligation, in a case of conflict of evidence, there is no rule of law requiring corroboration. But it has been laid down that a Judge "ought to examine with care the evidence of the [claimant] and any other evidence offered, and if he should be dissatisfied with that evidence he ought to disallow the claim" (per Lord Russell of Killowen C.J. in Rawlinson v. Scholes (1898) 15 TLR 8). A somewhat stronger statement of the principle was endorsed by Isaacs J. in Plunkett v- Bull (1915) 19 CLR 544 at 549, where he said of a claim to recover money against an executor: "(I)t has always been considered necessary to establish as reasonably clear a case as the facts will admit of, to guard against the danger of false claims being brought against a person who is dead and thus is not able to come forward and give an account for himself." Plunkett v. Bull was cited by McLelland C.J. in Eq. in Eyota Pty Ltd v. Hanave Pty Ltd (1994) 12 ACSR 785 at 789, where he said that "in a claim based on communications with a deceased person, the court will treat uncorroborated evidence of such communications with considerable caution". The principle was applied by Bryson J. in Noonan v. Martin (1987) 10 NSWLR 402 at 404, where he said: "fhe burden of proof required is proof on the balance of probabilities but the circumstances, including the fact that his claim was only brought forward after the testatrix's death and that it depends almost entirely on his own evidence, require me to be careful in accepting his evidence ... ." 17. The older cases are interestingly summarized in a note in (1921) 37 LOR 268-269. Following the death of Mr C.L. Headlam on 9 October 1979, probate of his last will was granted to Ian Headlam, Barry Headlam and a nephew of the deceased Kevin James Headlam. The first bequest in the will was of the deceased's A class shares in Lowes Park Pty Ltd, which he gave to Ian Headlam "together with all my interest in the partnership of C.L. Headlam & Son". Clause 5 of the will was in the following terme: "I_RECORD that it is my desire that my son JAN EDWARD HEADLAM and his family should from the date of my death have the management and control of the Company Lowes Park Pty Ltd including the ownership of all B Class Shares therein." This clause could, of course, have had only a precatory effect. The B class shares held by the trust on behalf of which this application has been made were not the deceased's shares to dispose of. Nor could he directly dispose of a sufficient number of A class shares to give control of the company. An equal number of A class shares was held by his widow, and one A class share was held by the accountant, Mr McKay. After the death of the deceased, Mr McKay transferred the lastmentioned share to the widow, so that in fact it was she who could control by her voting power the decisions of the company. 18. The deceased left his personal effects to his widow, and there was also a provision devising his principal residence to his trustees "to hold the same to provide a residence for my wife for so long as she should survive me but should my said wife desire to reside at any place other than the principal residence owned by me at the date of my death then J DIRECT my Trustees to provide for my said wife such residence as she may reasonably require to provide her with a comparable living standard to that enjoyed by her at the date of my death." It is, I understand, in pursuance of this clause that the widow now resides elsewhere. What effect that has in relation to the residence on the property "Lowes Park", where she remained until 1988, it is unnecessary to consider. The will contains a trust for sale, subject to a power of postponement, in respect of residue with a life estate in favour of Emilie Patricia Headlam, and a gift of the remainder in equal shares to Ian Headlam and Barry Headlam. It also contains the following: "I_LRECORD that I have not made any provision in this my will for my daughters or further provision for my said wife as provision has been made for them during the joint lives of my said wife and myself." Immediately after the death of Mr C.L. Headlam, Ian Headlam was appointed a director of the company, and on 31 December 1982 he was appointed principal executive officer. His mother remains a director, and on 13 November 1992 Mr Bayne was also appointed 19. a director. Since the death of Mr C.L. Headlam, "Lowes Park" and "The Braes" have continued to be managed by Ian Headlam on behalf of the partnership, now consisting of himself (as to a 50% share), his wife (as to a 25% share) and his mother (as to a 25% share). Thus the income earned from "Lowes Park" has not been earned exclusively on behalf of Ian Headlam and his wife; it has also supported his mother. And, of course, insofar as the loan arrangements to which I have already referred have remained in place, Lowes Park Pty Ltd has gone on providing a substantial benefit to Barry Headlam. But, as was the case from the formation of the company until Mr C.L. Headlam's death, the company has continued to be operated as a land holding company which has paid no dividends. Each year the rental for "Lowes Park" has been adjusted to match the company's expenditure; it has not been fixed with a view to the earning of a profit through the company. Since 1966, that mode of operation was not at any time the subject of complaint by Barry Headlam until the institution of this proceeding. In 1983, a second mortgage was entered into by the company to secure amounts not to exceed $180,000. The proceeds were applied to the purchase of a property called "Roxford" at Westbury, in the north of Tasmania, quite some distance away from Woodbury. In his affidavit, Barry Headlam asserted: "I object strongly to the second and fourth mortgages over the Company's assets, and the use of the Lowes Park property as security for Ian's private ventures. I was neither consulted nor approved of these securities." 20. It is, of course, apparent that if these transactions were proper transactions for the company to enter into, Barry Headlam was not entitled to be consulted, having regard to the strong terms in which the Articles commit management to the A class shareholders. However, the reference to "Ian's private ventures" suggests the argument was that the transactions were not proper transactions. But in cross-examination Barry Headlam conceded, although somewhat grudgingly, that, having regard to the assistance he had received in respect of "Hardwick House", the provision of security to assist his brother was not objectionable. He said his "real substantial objections to the second and fourth mortgages [were] that the company's procedure in procuring those mortgages might not have properly been followed". Asked: "Is that all?" he answered: "I think so." In fact, the description of the purchase of "Roxford" as a "private venture" of Ian Headlam is not entirely fair. I accept Ian Headlam's evidence that the property was bought, during a situation of drought at "Lowes Park", because there was a need for somewhere to put the "Lowes Park" sheep. In due course, after two years, the property was sold again, and the mortgage has been fully discharged. That was long before the institution of the present proceedings. The purpose this mortgage served involved the provision of a benefit to the partnership including Mrs Emilie Headlam and, of course, indirectly to "Lowes Park", which might otherwise have suffered the effects of over stocking in time of drought. I do not understand Barry Headlam to have 21. gone so far as to object to the provision out of the security of the company's property of a benefit to his mother. The complaint about the fourth mortgage is, in my opinion, quite unjustifiable. That mortgage was raised in the sum of $60,000 in order to construct a dam on "Lowes Park". The interest has been paid, and half the principal repaid, either by Ian Headlam himself or by the partnership; it has not been borne by the company. The company has simply provided security for a loan obtained to carry out capital works on the company's property. There was a suggestion - which I find not established - that the dam construction was unwise because of salinity problems. But whether that be so or not, the directors of the company were entitled to make their own bona fide decision upon the matter, and there is no suggestion that the dam was not constructed in the bona fide belief that it would advantage the property of the company. In fact, the applicant's own expert valuer treated the dam as contributing $60,000 to the present value of "Lowes Park". A further complaint made by Barry Headlam relates to a proposal to consolidate various borrowings relating both to "Lowes Park" and to "The Braes". It was when Barry Headlam learned of this proposal through his bank, and not from Ian Headlam, that he caused these proceedings to be instituted. The proposal did not in fact go ahead. Instead, Ian Headlam arranged for the sale of "The Braes", which he was able to achieve at a figure well in excess of $1 million, more than sufficient to 22. repay all the borrowings in question. Indeed, although as I have said some $400,000 due from the "Hardwick House" transaction has never been received by the company, the encumbrances on "Lowes Park" at the present time are, relatively speaking, extremely small - less than $300,000. Having said that, it seems the proposal, if it had been implemented, would have involved consolidating both loans and securities, so that "Lowes Park" would have provided security for loans applicable to "The Braes", although at the same time loans applicable to "Lowes Park" would have been secured also upon "The Braes". Of course, "The Braes" was a less valuable property. I should add that, while this appears to be the position, I accept Ian Headlam's evidence that he did not so understand the proposal as discussed by him with the bank. I have already stated my view of Ian Headlam. I do not think he had a clear understanding of what the bank meant by consolidation of the loans. At all events, the matter must now be looked at in the light of the fact that the proposal never was implemented. Doubtless, what has happened has made Ian Headlam well aware of the danger of not keeping the affairs of the company separate from his own affairs and the affairs of other entities. In evaluating the conduct of Ian Headlam in relation to the proposal with respect to the refinancing of the debts totalling $770,000, it is relevant to bear in mind that, at the time, his brother Barry Headlam had the benefit of almost $400,000 of the 23. company's money, at a cost to the company that must have been much higher. The applicant's case was presented on the footing that another matter of complaint was Ian Headlam's failure to give his brother notice of meetings of the company, or in any way to consult his brother about the company's affairs. It seems that neither brother communicates with the other. However, after at first asserting that there were a "few occasions" when he was notified of meetings during his father's lifetime, then that he "may have" received notice on two or three occasions after 1966, Barry Headlam finally admitted that he could not "honestly recall" ever "receiving any notice at all". It will be remembered that the company's Articles were drawn 80 as to exclude as far as possible any right in a B class shareholder to be concerned in the affairs of the management of the company. However, senior counsel for the applicant points to the rights conferred by the Corporations Law. Accepting that these rights override the Articles, a director acting honestly might well, particularly in the circumstances of this case, not have appreciated that fact. There was a long series of failures to comply with particular requirements of the Corporations Law, to which reference was made. Although accountants were engaged, their instructions do not seem always to have been understood or carried out. Probably, a realization of the problem may have been a factor in the appointment of Mr Bayne to the board within the last couple of years. However, some more vigorous action is plainly required. In particular, steps need to be taken with 24. regard to the audit of the company's books, although there has been no suggestion of any dishonesty. In a case involving "blatant breach of duty by the directors", failures to appoint auditors were not, in themselves, regarded as "oppressive or unfairly prejudicial": Coombs v. Dynasty Pty Ltd (unreported, von Doussa J., 8 July 1994, at 67-68). There have also been failures with regard to the keeping of the company's minute book and the due observance of the formalities required for execution of documents. Although formal resolutions have not been recorded, I have no doubt that in fact the directors agreed in the appropriate resolutions. It is unnecessary to list here each of the provisions of the Articles and the Corporations Law breaches of which were relied upon. I have considered in detail in these reasons the substantial transactions of which complaint is made, and I have referred to a number of the breaches of the Corporations Law. Undoubtedly, it is a matter of concern that any provision of the law should be breached. But the question is whether the applicant has made out a case for the relief he seeks. In considering that question in relation to the matters I have been discussing, it is relevant to remember that Barry Headlam did not complain at all to his brother about the failure of the company so to conduct its affairs as to be able to declare dividends, and indeed he never talked to him at all about the company. He did not give any notice of an address to which company documents should be sent, and when he learned of the proposal to consolidate the existing loans, he still did not 25. speak to his brother, or even write to him, but simply instructed solicitors to take steps to block the proposal. As to an address for service of notices, it should be borne in mind that Barry Headlam is not a shareholder in his own right, and that it was an address for service of notices to the discretionary trust which was required. In cross-examination, Barry Headlam said: "That address would be our accountants", but he conceded he had never given any notice about it. Not only did Barry Headlam not ask his brother; he conceded he did not ask his mother about the affairs of the company. This state of affairs, of course, is quite consistent with an acceptance, for some time, of the precatory clause in Mr C.L. Headlam's will. Notwithstanding the obligations imposed on Ian Headlam by the Articles and the corporations Law (as to which I accept that he placed reliance on the accountants who had always attended to these matters during his father's lifetime), I think there is some difficulty, so far as discretionary questions are raised in this case, about the proposition that Barry Headlam should be entitled, quite suddenly, to rely on these matters as grounds for the drastic relief he seeks. Counsel for the applicant was, of course, perfectly alive to these considerations. His argument was that all the matters of complaint should be considered together. So considered, he claimed to have made out the grounds contained in s. 260 of the Corporations Law - "that the affairs of a company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members ... 26. or in a manner that is contrary to the interests of the members as a whole", as amplified by the reference in s. 260(2)(b) to proposed acts, omissions and resolutions - and s. 46l(e), (f), (g) and (k) - "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; (£) affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; (g) an act or omission, or a proposed act or omission, by or on behalf of the company, or a resolution, or a proposed resolution, of a class of members of the company, was or would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or was or would be contrary to the interests of the members as a whole. (k) the Court is of opinion that it is just and equitable that the company be wound up." It is apparent that these grounds involve a considerable amount of overlapping. In considering whether the terms of either s. 260 or s. 461 have been made out, it would not be proper to take a narrow view. The sections are concerned with the notions of oppression, unfair prejudice, unfair discrimination, unfairness and injustice to 27. other members, and justice and equity. It is in this context that the sections also speak, as for example in s. 461(e), of directors acting "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" (emphasis added). Many discussions of these provisions take as their starting point the well known observations of Lord Wilberforce in Ebrahimi vy. Westbourne Galleries Ltd [1973] AC 360 at 379: "The foundation of it all lies in the words 'just and equitable' and, if there is any respect in which some of the cases may be open to criticism, it is that the courts may sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act and by the Articles of Association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The 'just and equitable' provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way." This passage was cited in the Court of Appeal of New Zealand by Richardson J. in Thomas v. H.W. Thomas Ltd (1984) 2 ACLC 610 at 28. 617, where that learned Judge also made it clear that the expressions "oppressive", "unfairly prejudicial to" and "unfairly discriminatory against" should not be read "separately in water tight compartments". He said: "The three expressions overlap, each in a sense helps to explain the other, and read together they reflect the underlying concern of the subsection that conduct of the company which is unjustly detrimental to any member of the company whatever form it takes and whether it adversely affects all members alike or discriminates against some only is a legitimate foundation for a complaint under sec 209 [the New Zealand section]." Richardson J., whose judgment has been frequently cited since, also said (at 618): "Fairness cannot be assessed in a vacuum or simply from one member's point of view. It will often depend on weighing conflicting interests of different groups within the company. It is a matter of balancing all the interests involved in terms of the policies underlying the companies legislation in general and sec 209 in particular: thus to have regard to the principles governing the duties of a director in the conduct of the affairs of a company and the rights and duties of a majority shareholder in relation to the minority; but to recognise that sec 209 is a remedial provision designed to allow the Court to intervene where there is a visible departure from the standards of fair dealing; and in the light of the history and structure of the particular company and the reasonable expectations of the members to determine whether the detriment occasioned to the complaining member's interest arising from the acts or conduct of the company in that way is justifiable. The company for its part does rely on the history of this family company and so on the understanding on the part of past shareholders and all current members, except [the complainant], that it should continue to operate in its specialised transport field continuing to adopt its traditionally conservative financial 29. management policies and providing employment on proper commercial terms for members of the family. It would be unrealistic in a family company to ignore family considerations of that kind." Somers J. (at 619) made it clear he did not think unfair discrimination or prejudice could be shown "because the affairs of the company have been managed in the interests of those shareholders who are employed by it". Nor did he accept that a shareholder was "locked in" who had not put the matter to the test by attempting to sell his shares under restrictive Articles. McCarthy J. (at 620) said that the powers in the section "should not be lightly exercised, especially so when a lack of probity or want of good faith is not established". He thought the court had to "give weight to the consideration that [the company] since its incorporation has been essentially a family company having as a central objective the provision of employment for members of the founder's family." Crockett J. in Re G. Jeffery (Mens Store) Pty Ltd (1984) 2 ACLC 421 at 426 emphasized the importance, as negativing unfair prejudice or unfair discrimination, of a continuance of a company to conduct business in much the same way as it had for many years, "including the period during which the applicant's father, from whom the applicant inherited his shares, was actively engaged in the businesses." He also said (at 428): "An order for winding up is not lightly to be made. If an order is made because it is just and equitable to do it must be just and equitable not just for the applicant but for all." 30. In Buche y. Box Pty Ltd (1993) 31 NSWLR 368 at 377-378, Brownie J. took account of the purposes of death estate duty and tax minimisation, without loss of control of the grazing business conducted upon a property, which (at 374) he had found the corporators to have had when the company was incorporated, and of the fact that the plaintiff's shares were the gifts of her father made in circumstances which might well change and require modification of the company structure, in concluding that "the fiduciary duty which a company director ordinarily owes was modified in the circumstances of Box so as to permit {the father] to make allotments and determinations, for the purposes mentioned, and so long as he did so conscientiously." Brownie J. cited (at 377) the Canadian case Re Giroday Sawmills itd (1983) 49 BCLR 378, which involved class A shares conferring all the voting rights in a company, the majority of which were held by a father. Taylor J. of the Supreme Court of British Columbia said (at 381): "(T)he court cannot, I think, disregard the fact that the petitioners received their shares without charge and as a part of a scheme through which their father intended to benefit members of his family. Can these petitioners say that they are unfairly dealt with, prejudiced or oppressed when their father desires to use the scheme he has so created in such a way as to benefit other members of the family without also giving a similar benefit to them?" He answered that question in the negative. 31. The applicant placed reliance on the decision in Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165. That was a case bearing some superficial resemblance to the present, but with the important difference that the complaining minority shareholder (as appears at 171) had received her minority shareholding from her father as her "inheritance". Her shares were not B class shares issued for the special purposes for which Lowes Park Pty Ltd was incorporated, looking as those purposes did particularly to the question of value upon a winding up, but ordinary shares subjected to the control of a governing director provision. As Debelle J. said (at 176): "The duties imposed upon Mr Shannon as a director to act bona fide and in the interests of the company as a whole were not diminished by the extensive powers and privileges available to him as the holder of the life governor's share ... In the present case, the applicant complains that the lease of "Lowes Park" to a partnership, consisting of Ian and Margaret Headlam and the widow Emilie Headlam, has the result that the company is not providing any benefit to him as the holder of B class shares. But since 1974 the company has been providing him and his family with a very substantial benefit, though of a different kind, by way of the provision of the finance for the purchase of "Hardwick House" and "Lynwood", and it was only after that benefit had been secured that he and his wife were excluded from the partnership C.L. Headlam & Son. There was no attempt made in evidence to show that, over the years, the share of the partnership which he lost would have yielded a greater return 32. than the benefit of the loan of $200,000 at 5% per annum. The figures in the tax returns, to which I have already referred, must make this at least doubtful. 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. She has received 25% of the income of the partnership. Obviously, if Ian Headlam is to run the property so that it may make that return to their mother, while Barry Headlam is running his own properties, it is just and equitable that Ian Headlam should receive a higher return than his brother from "Lowes Park". I put this consideration in argument to senior counsel for the applicant, who conceded it, but asserted there was "commercial unfairness" in the situation, while adding: "(W)e have no particular objection to the money being used ... in part for the Support of Mrs E.P. Headlam as to which both brothers have an interest." Independently of the considerations I have just been discussing (which are not exhaustive - for instance, in the past few years, half the cost of the dam has been provided by Ian Headlam or the partnership, conferring a benefit out of the income of "Lowes Park" upon every shareholder), the applicant's argument, if correct, would negate the purpose of the A class shares. For it is plain that the object in view, when the company was set up, was to enable the holder of the majority of those shares to conduct the farming operations to be carried out 33. upon "Lowes Park". That is why the shares were reserved to Mr and Mrs C.L. Headlam, apart from the one held in trust by the accountant. The intention was to enable them to preserve the use of their property during their lives, while minimizing death duties. Nothing could have been further from the intentions of Mr C.L. Headlam, and the accountants who advised him, than the idea that the incorporation of the company reduced the holders of the A class shares to a position where a significant proportion of the income of the property had to be paid out to others. Nor is there any basis for assessing what that proportion would have been. It could not have been based merely on the numbers of shares, disregarding their class. That would have reduced Mr and Mrs C.L. Headlam to penury. Nor is there any reason, if it be conceded that Mr C.L. Headlam was not so bound, for thinking that during the life of his widow, who had an equal number of the same A class shares, the position would be different. Even if the applicant's argument were correct in respect of the situation which will obtain once his mother dies, which I do not think it is, I cannot see any basis for discriminating between the deceased and his widow in the way Barry Headlam's case requires. He said repeatedly in evidence that he did not object to the decisions concerning the company that were made by his father during his lifetime. In my opinion, fairness in relation to a family company, such as this is, can only be considered in the light of the history of the company and of the family with which that history is intimately bound up. Fairness cannot be considered, as it has 34. been said, in a vacuum; and that is because there is no such thing as the conduct of a transaction in a vacuum: see Wayde v. New South Wales Rugby League Ltd (1985) 61 ALR 225, where even a harsh singling out of a particular club was not, when all the circumstances were reviewed, unfairly prejudicial or discriminatory. 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. The shares on which Barry Headlam relies were the produce of his father's bounty and were issued pursuant to a plan, as class shares, on a basis that made it clear the shares were intended to confer a great benefit (though not without the possibility of change by further issues or otherwise) in the event of a winding up, but not to confer any right to control over the operations of the company so as to gain access to any income except at the will of the A class shareholders. "Lowes Park" was to continue to support its previous owners by virtue of the issue to them of the majority of the A class shares. It could not have done so if the income had been channelled through dividends, and that cannot have been the intention of the corporators. At the same time, the company's property was to be utilized as security to enable the acquisition of additional properties for Barry Headlam and Ian Headlam. In the event, that utilization greatly favoured Barry Headlam. But it was to Ian Headlam that the task fell of assisting their parents at "Lowes Park", and their mother after 35. their father's death. It is he who has provided, by working the property, and also the adjacent property "The Braes", the income stream by which the other A class shareholder, the widow, has been supported. At the same time, Barry Headlam has continued to receive the substantial advantage of the borrowing for "Hardwick House". It was in these circumstances, as they existed and as he may have foreseen them, that the founder substituted Ian Headlam for himself as a controlling shareholder by his will. Fairness in this context must include fairness to the widow. Barry Headlam has not indicated in the case any intention of assisting in the support of his mother. Counsel's concession that there is "no objection" to her being supported by the company in which she holds controlling shares is hardly an assurance of any contribution on his part to her support. The family planning, of which the incorporation of the company was part, involved her giving up personal assets of significant value, and receiving her A class shares. If orders were made as asked, there would be a real possibility that Ian Headlam would be unable to continue farming operations, and that the company's property "Lowes Park" would eventually be sold. Fairness should also take account of the fact that what ultimately loomed at the hearing - once it became clear the objections to the two mortgages were more technical than substantial - as the largest objection to the conduct of the company, the failure to declare dividends, which could have been 36. declared by reorganizing the lease to the partnership after Mr C.L. Headlam's death so that income could be earned and dividends paid, was never the subject of any complaint, or request for a change of policy, by Barry Headlam prior to the institution of the proceedings. (A general accounting between the brothers, involving a sale of Barry Headlam's B class shares to Ian Headlam, had certainly been sought earlier, and particularly at the end of 1991 when a tentative agreement was reached, and then abandoned by Ian Headlam.) Nor were a number of the other matters relied on, such as the failure to send out notices, of which he must have been aware as soon as twelve months went by without his receiving any. Counsel for the applicant urged upon me the proposition that relief was required because his client was "locked in", and there was a deadlock in the company. Neither of these propositions seems to me to be factually correct. A mechanism for the sale of the shares is provided, and Barry Headlam has taken no step to test whether a satisfactory result can be obtained by implementing that mechanism. There is certainly no deadlock in the normal sense of a situation in which the board of directors is paralysed from acting. The situation in which Barry Headlam finds himself, as a result of his father's bounty having been conferred upon him in a particular way, does not in law provide a ground for the relief he seeks. Even a refusal by other shareholders to buy him out would not provide such a ground: Re G. Jeffery (Mens Store) Pty Ltd (supra, at 426-427); Thomas 37. (supra, at 619-620); Swane v. Swane Bros Pty Ltd (1992) 10 ACLC 904. And the position of the recipient of a locked gift is not to be compared with that of an investor who discovers that his own money has become trapped in a company from which he cannot extricate himself. Had I taken a different view, the question would have arisen whether an order should be made requiring the purchase of the applicant's shares, and at what price. Senior counsel for the applicant argued that the shares should be valued on an assets basis, without any allowance for the special provisions in the Articles. I do not think this can be correct. In Re Bagot Well Pastoral Company Pty Ltd (1993) 11 ACLC 1 at 15-16 Cox J. said, with reference to a minority shareholding in a company controlled by a governing director: "She [ie the complainant] is not entitled to have the price assessed according to the company's net assets. That would be to ignore her very disadvantageous position as a shareholder under the Articles, including Article 5 which gives the holder of the Life Governor's Share the right in a winding up to all surplus assets. ... Nor, on the other hand, should the shares be valued as though the company were being or were about to be wound up, for that was not the position in 1985 [the year up to which the conduct in question in that case had occurred] just as it is not the position now." The use of the word "including" in this passage makes it clear that the disadvantageous position which his Honour had in mind was not limited to the right in a winding up mentioned by him; it also included the fact that the Life Governor had the powers of a governing director over the operations of the company. On 38. appeal, as appears from the report I have already cited in 61 SASR, at 183-184, Cox J.''s approach was confirmed by the Full Court. Other authorities support this view of the matter. In Australia (1971) 123 CLR 547 at 569, Gibbs J. said, of the valuation of a parcel of shares: "A purchaser of those shares would have acquired them with such disadvantages as the provisions of the articles entailed. It is true that the power given by the articles to the directors was a fiduciary power to be exercised bona fide for the benefit of the company -.. but that does not mean that the presence of restrictive articles has no effect on the value of a minority holding. From a practical point of view, the possibility of obtaining redress in the courts against a wrongful exercise of a power given by the articles is not a substitute for articles under which the power is not conferred. In the present case it seems to me clear that a prospective purchaser would have been influenced to some extent by the provisions of the articles, and I can see no reason in justice to ignore this fact in making a valuation." The effect of disadvantages arising out of the provisions of Articles upon the valuation of a company's shares was also the subject of some consideration in an earlier High Court decision, to which Gibbs J. referred in this case at 571. That was the judgment of Williams J. in Kent v. Federal Commissioner of Taxation (Martin's Case) (unreported, 22 October 1945). There Williams J. discussed at some length what he described as "the effect which the unusual Articles and the size of the parcel would have upon the value of the shares". The whole discussion, which deals with more than one type of unusual Article, proceeds 39. on the basis that, as a matter of fact, the value might be affected. Although the situation he was considering did not involve anything like the practical factors which would tend to reduce the value in the present case, he made the comment: "The fact that such shares are difficult to mortgage or sell makes then unattractive to buyers, who, like the ordinary investor on the Stock Exchange, attach great importance to negotiability, and they must be regarded as a long term investment. Some discount must ... be allowed on this account ... ." See also the comments of Stephen J. (with whom Mason and Aickin JJ. agreed) in Q'Donnell_v. Thor Industries Pty Ltd (1977) 51 ALJR 569 at 572; and of Brownie J. in Buche v. Box Pty Ltd (supra, at 376). In my opinion, the true value of the applicant's B class shares is much less than the figure which would be calculated if they were valued upon an assets backing basis. However, it is unnecessary, in view of the conclusion I have already reached, to proceed to an assessment. The application fails, and I direct the respondents to bring in, within fourteen days, short minutes of the orders that are appropriate in the light of these reasons. I also direct that the applicant file and serve, within a further fourteen days, a document setting out any objections to or variations of the short minutes for which he contends. If there is dispute, I shall then fix a date to hear the parties, or alternatively, give directions as to written submissions. 40. I certify that this and the preceding thirty-nine (39) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Burchett. Associate: frekipoe lea Date: 30 September 1994 Counsel for the Applicant: Solicitors for the Applicant: Counsel for the Respondents: Solicitors for the Respondents: Dates of hearing: Mr G. Garde Q.C. with Mr M. Chambers Messrs Shields Heritage Mr M. O'Farrell with Mrs C. Ingles Messrs Dobson Mitchell & Allport 21, 22, 23, 24 and 25 March 1994