CATCHWORDS CORPORATIONS - management and administration - appeal against successful oppression application by minority shareholder - whether commercial unfairness - whether allotments of shares made at under value - using company assets to secure debts of others - removal of shareholder as director - fair value of shareholding APPEALS - role of appellate court - findings based on credibility of witnesses - findings not vitiated by erroneous admission of evidence - appropriate contents of notice of appeal Companies (Northern Territory ) Code s 320 Corporations Law s 260 Watt or Thomas v Thomas [1947] AC 484 Paterson & Anor v Paterson (1953) 89 CLR 212 Westpac Banking Corporation v Spice (1990) ATPR 41-024 S.S. Hontestroom v S.S Sagaporack [1927] AC 37 Duralla Pty Ltd v Plant (1984) 2 FCR 342 Minister for Immigration, Local Government and Ethnic Affairs v Hamsher & Ors (1992) 35 FCR 359 Wayde & Anor v NSW Rugby League Ltd (1985) 61 ALR 225 Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 Devries & Anor v Australian National Railways Commission & Anor (1993) 177 CLR 472 Scottish Co-operative Wholesale Society Ltd v Meyer & Anor [1959] AC 324 at 342 Warren v Coombs & Anor (1979) 142 CLR 531 Taylor v Johnson (1983) 151 CLR 422 Lend Lease Development Pty Ltd v Zemlicka & Ors (1985) 3 NSWLR 207 Ebrahimi v Westbourne Galleries Ltd & Ors [1973] AC 360 Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247 Hungerfords & Ors v Walker & Ors (1988) 171 CLR 125 Sanford v Sanford Courier Service Pty Ltd & Ors (1986) 10 ACLR 549 Scottish Co-operative Wholesale Society v Meyer & Anor [1959] AC 324 In re London School of Electronics Ltd [1985] 3 WLR 474 Re D.R. Chemicals Ltd (1989) 5 BCC 39 Virdi v Abbey Leisure Ltd & Ors; Re Abbey Leisure Ltd [1990] BCLC 342 Re Bagot Well Pastoral Company Pty Ltd; Shannon v Reid (1992) 9 ACSR 129 Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165 Re Bird Precision Bellows Ltd [1984] Ch. 419 In re Bird Precision Bellows Ltd [1986] Ch. 658 C.A. No. SG 74 of 1994 DYNASTY PTY LTD, WAYNE LEIGHTON THOMAS, THOMAS CHARTERS PTY LTD and THOMAS HOTELS PTY LTD v KEVIN JOHN COOMBS Spender, O'Loughlin and Branson JJ Adelaide 11 August 1995 IN THE FEDERAL COURT OF AUSTRALIA) ) SOUTH AUSTRALIA DISTRICT REGISTRY) No.SG 74 of 1994 ) GENERAL DIVISION ) ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA B E T W E E N: DYNASTY PTY LTD, WAYNE LEIGHTON THOMAS, THOMAS CHARTERS PTY LTD and THOMAS HOTELS PTY LTD. Appellants - and - KEVIN JOHN COOMBS Respondent CORAM: Spender, O'Loughlin, Branson JJ PLACE: Adelaide DATE : 11 August 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellants to pay the respondent's costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules IN THE FEDERAL COURT OF AUSTRALIA) ) SOUTH AUSTRALIA DISTRICT REGISTRY) No.SG 74 of 1994 ) GENERAL DIVISION ) ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA B E T W E E N: DYNASTY PTY LTD, WAYNE LEIGHTON THOMAS, THOMAS CHARTERS PTY LTD and THOMAS HOTELS PTY LTD. Appellants - and - KEVIN JOHN COOMBS Respondent CORAM: Spender, O'Loughlin, Branson JJ PLACE: Adelaide DATE : 11 August 1995 REASONS FOR JUDGMENT This appeal arises out of an action in which Mr Kevin John Coombs ("Mr Coombs") successfully sought relief as a minority shareholder in Dynasty Pty Ltd ("Dynasty"). The respondents (who are now the appellants in this appeal) were Dynasty, its two associated companies, Thomas Charters Pty Ltd ("Charters") and Thomas Hotels Pty Ltd ("Hotels") and Mr Wayne Leighton Thomas ("Mr Thomas"). Mr Thomas is, and was at all material times a director of Dynasty, Charters and Hotels. In the proceedings in the court below Mr Coombs sought remedies as an oppressed member of Dynasty under s320 of the Companies (Northern Territory) Code and s260 of the Corporations Law. The primary relief sought by him at the hearing was the purchase of his shares either by the other members of Dynasty - or by Dynasty itself with a consequential order for the reduction of its capital. By his application Mr Coombs made a number of additional alternative claims which included a claim for an order that Dynasty be wound up and a claim for an order for regulating the conduct of Dynasty in the future (see s260(2) of the Corporations Law). The learned trial judge held that Mr Coombs was entitled to relief under s260 of the Corporations Law. On 6 September 1994 it was ordered that:- "1. Pursuant to Section 260(2)(f) of the Corporations Law Dynasty Pty Ltd (ACN 009 614 279) (hereinafter referred to as "the Company") shall purchase the applicant's 2,296 shares in the Company (hereinafter referred to as "the shares") and the capital of the Company shall be reduced accordingly. 2. The Company shall pay the applicant the judgment sum of $518,000.00 being the net amount adjudged to be paid to the applicant for the shares after the Company has discharged the applicant's indebtedness to the Company on his loan account." Certain consequential orders were also made. The appellants have appealed against both the finding that Mr Coombs was entitled to relief under s260 of the Corporations Law and the valuation placed by the learned trial judge on his minority shareholding in Dynasty. The respondents in the court below had filed a cross-claim against Mr Coombs, seeking, in its final amended form, recovery of $37,850. Initially, Dynasty had alleged that a further $100,000 was also owing to it by Mr Coombs, but that claim was ultimately abandoned during the course of the trial; further mention of that particular issue will be made later in these reasons. The learned trial judge concluded that the amount outstanding on Mr Coombs' loan account, $37,850 should be reflected in the assessment of a fair value of his shares as part of the remedy to be given under s260. That finding has not been challenged. The following summary of the relevant facts is taken principally from the reasons of the learned trial judge. In September 1981 a consortium was formed comprising Mr Coombs, Mr Thomas and three other persons, namely Mr John Hoban, Mr Brian Smith and Mrs Judy Paget. The intention of the consortium was to build and operate a hotel/motel in Alice Springs on land which had been identified by one of the members of the consortium. Dynasty was acquired to act as the vehicle for the ownership of the venture. Dynasty purchased the land and entered into a contract for the erection of the hotel/motel. Trading in the hotel/motel commenced in about October 1982; it was called "The Gap Hotel". The initial paid up capital of Dynasty was $520,000 comprising 100 shares of $5,200 each held as follows:- Mr Coombs 28 Thomas Properties Pty Ltd 25 Mr Hoban 20 Mr & Mrs Smith 25 Mr & Mrs Paget 2 100 The initial directors were Messrs Coombs, Thomas, Hoban and Smith. The members of the consortium intended that their relationship be one of quasi-partnership: they were each to be involved in the management of Dynasty, and should any member wish to leave, the other members were to be consulted about the disposal of that member's shares. In January 1983 the shareholders resolved to subdivide each share into 52 shares fully paid to $100. At the same time the directors resolved to allot a further 3,000 shares which were taken up pro-rata by the existing shareholders. Their holdings became:- Mr Coombs 2296 Thomas Properties Pty Ltd 2050 Mr Hoban 1640 Mr & Mrs Smith 2050 Mr & Mrs Paget 164 8,200 Management difficulties in operating the hotel were encountered from the outset. Mr Hoban left the consortium shortly after the restructuring of the share capital and his shares were transferred to Hotels. In 1985 Mr and Mrs Smith and Mr and Mrs Paget also withdrew from the consortium and their shares were also taken up by Hotels. Mr Coombs did not wish to take up additional shares and consented to their being bought by Hotels. The shares changed hands at par value. In the result the Thomas interests came to hold 72% and Mr Coombs 28% of the issued shares in Dynasty. Management difficulties in operating the hotel continued and trading results were poor. Mr Coombs and a companion managed the hotel for a period of a little over a year ending in March 1986. They had undertaken the management at short notice after learning that the previous manager was unsatisfactory and was about to leave or be dismissed. In March 1989 Mr and Mrs Thomas moved in as managers and over the next two and a half years turned around the results. On 1 April 1993 Dynasty entered into an agreement with professional managers who have since become leaseholders and the trading results are now favourable. During the early years of trading injections of money were made from time to time by members of the Thomas group; one particular source of funds for Dynasty came in the form of distributions of income to it in its capacity as a beneficiary of a trust known as the Thomas Family Trust No 2 ("TFT2"). That income was available to Dynasty "tax-free" as it was set off against Dynasty's trading losses. Such distributions were not, however, paid in cash but were recorded as loans back from Dynasty to TFT2. In September 1985 Dynasty signed a contract to purchase land at Port Douglas. The deposit was paid by Dynasty; after allowing for vendor's finance the balance of the purchase price was lent to Dynasty by another company that was owned equally by the Thomas' and the Coombs' interests. The Thomas interests paid the stamp duty and other fees of $13,701.30 at settlement. As mentioned above Mr Coombs and a companion managed the hotel for a period which ended in March 1986. The financial position of Dynasty at the time was strained. Mr Coombs and his companion left Alice Springs upon his developing an illness which was thought to be serious. Whilst he was away Mrs Paget took over as manager of the hotel. Mr Thomas telephoned Mr Coombs to advise him of this development and to tell him that he was not required to return. Mr Coombs accepted that situation. He took up residence in Queensland and since that time has not been involved in the day to day management of the hotel. In or about March 1986 the hitherto happy relationship between Mr Coombs and Mr Thomas came to an end for reasons not material to this appeal. Thereafter, Mr Thomas showed hostility towards Mr Coombs. The learned trial judge found that it was because of this hostility that Mr Coombs did not seek to be further involved in the management of Dynasty. Late in February 1987, an extraordinary general meeting of the members of Dynasty was convened at Mr Thomas' direction to consider the allotment of additional shares. The meeting resolved to offer 1,296 shares to Charters and 504 shares to Mr Coombs at their par value of $100 per share. Charters accepted the offer but Mr Coombs, who was represented at the meeting by his proxy, declined. The 504 shares were then offered to Charters who accepted them. Mr Coombs, by his proxy, apparently voted in favour of the second resolution. A total of 1,800 shares was thereafter issued to Charters thereby raising $180,000 as additional capital for Dynasty. There were then 10,000 shares on issue and Mr Coombs' holding had been reduced to 22.96%. The learned trial judge was not prepared to find that the share issue of 6 March 1987 was oppressive to Mr Coombs. He found that the shares were issued well below the net tangible asset backing of the shares, and to this extent it was prejudicial to Mr Coombs. However he found that the company required support at the time and that such support came solely from the Thomas interests. He did not consider that it was unfair at that time for Charters to gain the benefit (which it did) from the acquisition of the shares. These findings have not been challenged. In 1987 and 1988 the hotel was being operated at a substantial loss and Dynasty had liquidity difficulties. By December 1987 a restructuring was underway at the instigation of Mr Thomas and his advisers; this led, ultimately, to a further par issue of 5,000 Dynasty shares to Hotels on 31 March 1988. The restructuring was a complex transaction which affected a number of the Thomas interests. They derived benefit from it as did Dynasty into which $1.5 million was transferred by the Thomas interests. Approximately $869,000 of this figure was applied in payment of the debts recorded in the books of Dynasty as a consequence of earlier distributions of income that had been made by TFT2 to Dynasty and lent back to Dynasty to that trust. $0.5 million was subscribed as new capital by the par issue of the 5,000 shares to Hotels. The remainder was recorded in the books of Dynasty as a loan from another Thomas company, Centrenorth Australia Pty Ltd ("Centrenorth"). During the course of the restructuring, Mr Thomas asked Mr Coombs to sign documents guaranteeing the indebtedness of Centrenorth. It had been Centrenorth which had borrowed heavily from its banker so that cash, including the $1.5M, became available to the Thomas group and Dynasty. His Honour found that Mr Coombs refused to do so as he had not heard of Centrenorth and did not understand the implications of the restructuring transactions. The learned trial judge accepted the evidence of Mr Coombs that Mr Thomas became very upset over this refusal to sign the guarantee documents. His Honour found that at this time Mr Thomas repeated a threat made earlier to devalue Mr Coombs' shares in Dynasty. Shortly before 31 March 1988 Mr Coombs received a notice calling a special meeting of members of Dynasty at The Gap Hotel on 31 March 1988. The agenda items shown on the notice were as follows:- "(a)it is proposed to refinance the National Australia Bank loan to improve the financial position of Dynasty Pty Ltd; (b) that the company exercise the powers contained in regulation 9(1) of the Memorandum and Articles of Association to call for additional share capital; (c) to effect the termination of Kevin J Coombs as director; (d) any other business; (e) additional share capital." Mr Coombs was in Queensland at the time of the meeting and did not attend the meeting either personally or by proxy. The minutes of the meeting record resolutions "to refinance the National Australia Bank loan as per approval"; that the directorship of Mr Coombs be terminated forthwith; and that the company "allot 5,000 ordinary 'B' class shares to Thomas Hotels Pty Ltd fully paid". Following the meeting an allotment of 5,000 shares at par value of $100 each was made to Hotels thereby increasing the paid up capital of Dynasty by $0.5 million. The increase in the issued shares had the effect of further reducing Mr Coombs' percentage shareholding in Dynasty from 22.96% to 15.31%. The learned trial judge found that the course of conduct that was pursued in the restructure and the associated decisions (which included dismissing Mr Coombs as a director and having Dynasty execute in favour of the bank a guarantee to secure Centrenorth's borrowings) disregarded the minority shareholder's rights. He further found that the allotment of shares at 31 March 1988 was deliberately made at below net tangible asset backing of the shares to achieve a watering down of Mr Coombs' interest. His Honour also found that it was conduct that was prejudicial and unfair to Mr Coombs. That finding is considered further below. By a second mortgage of the Port Douglas land dated 21 April 1988 Dynasty had guaranteed the obligations of Brooksea, another company in the Thomas group but one in which Mr Coombs had no interest. The learned trial judge found that Mr Coombs had not been informed of the Brooksea transaction during the discovery process and had only learned about it close to trial as a result of searches undertaken by his solicitors. His Honour found that the business conducted by Brooksea was inherently risky and that had the business failed it was likely that upon a realisation of assets there would have been a substantial shortfall to be made good by the guarantor. He concluded that there was no commercial benefit to Dynasty arising from the Brooksea transaction and that the transaction was entered into in breach of directors' duties by the directors of Dynasty. His Honour found that the transaction was an act oppressive or unfairly prejudicial to or unfairly discriminatory against Mr Coombs, and that by allowing that liability to continue the affairs of Dynasty were being conducted in a manner that was oppressive or unfairly prejudicial to or unfairly discriminatory against Mr Coombs. This finding is also considered further below. Some time was devoted during the course of the trial to the 1990 and 1991 Annual General Meetings ("AGM") of Dynasty. At the 1990 AGM Mr Coombs' proxy asked when the company's land and buildings were last revalued. He was informed that the last revaluation was carried out some years earlier. This answer was false, and, as his Honour found, deliberately false. The 1991 AGM was called for 4.30 p.m. on Christmas Eve on Hamilton Island, Queensland. His Honour found that the arrangements for the 1991 AGM provided further evidence leading to the conclusion that Mr Thomas was seeking to conceal information about the affairs of the company so as to disadvantage Mr Coombs by keeping him out of information needed to assess his position and sensibly negotiate over the value of his shares. Indeed, his Honour was satisfied that from 31 March 1988 onwards Mr Coombs was excluded from the company, and that, from that time onwards, the directors and other members treated the company as their own in disregard of his interests where they conflicted with those of the directors and other members. This finding is also considered further below. Finally, the learned trial judge placed weight upon what he regarded as an unjustifiable allegation, initially advanced strongly, but later abandoned. The allegation was that Mr Coombs was indebted to Dynasty in a sum of $100,000 on his loan account. His Honour found that the claim for this alleged liability had been held over Mr Coombs' head as a tactical manoeuvre so that Mr Thomas might seek to purchase his shares on terms unfavourable to Mr Coombs; his Honour also found that it was used in an attempt to gain a tactical advantage in the proceedings in the cross-claim as filed by the Thomas group. He regarded it as providing additional evidence of the course of oppressive and unfairly prejudicial conduct pursued by Mr Thomas and the other directors of Dynasty. This evidence and his Honour's finding are considered further below. GROUNDS OF APPEAL The Notice of Appeal in this matter is inappropriately and unhelpfully drawn. It would seem that the draftsperson has closely examined the learned trial judge's judgment and listed every comment and finding of his Honour which he or she did not regard with favour. This has led to 127 paragraphs extending over 40 pages containing so called "errors of facts" or "errors of law" or "failures" to take account of relevant matters; indeed the litany of complaints is the greater because, in many cases, there were numerous sub-headings within the numbered paragraphs. The role of an appellate court which is asked to interfere with a trial judge's findings of fact is well known. In Watt or Thomas v Thomas [1947] AC 484 Lord Thankerton described it in these terms:- "I do not find it necessary to review the many decisions of this House, for it seems to me that the principle embodied therein is a simple one, and may be stated thus: I. Where a question of fact has been tried by a judge without a jury, and there is no question of misdirection of himself by the judge, an appellate court which is disposed to come to a different conclusion on the printed evidence, should not do so unless it is satisfied that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge's conclusion; II. The appellate court may take the view that, without having seen or heard the witnesses, it is not in a position to come to any satisfactory conclusion on the printed evidence; III. The appellate court, either because the reasons given by the trial judge are not satisfactory, or because it unmistakably so appears from the evidence, may be satisfied that he has not taken proper advantage of his having seen and heard the witnesses, and the matter will then become at large for the appellate court. It is obvious that the value and importance of having seen and heard the witnesses will vary according to the class of case, and, it may be, the individual case in question." (pp487-488) That passage from the speech of Lord Thankerton has been quoted with approval in the High Court in Paterson & Anor v Paterson (1953) 89 CLR 212 by Dixon CJ and Kitto J at p224; their Honours went on to say that an appellate court must abide by the finding of the trial judge unless it is vitiated by the erroneous admission of certain evidence. Commenting upon this observation, Wilcox and Burchett JJ said in Westpac Banking Corporation v Spice (1990) ATPR 41-024 at 51,397:- "This was because of the importance of the trial judge's assessment, not only of the general credibility of the witnesses, but also of the reliability of their detailed observation." In view of the contents of the appellant's notice of appeal and having regard to the intensive scrutiny to which his Honour's judgment was subjected by counsel for the appellants, it is timely to remember the warning of Lord Sumner in S.S. Hontestroom v S.S Sagaporack [1927] AC 37 at 47:- "What then is the real effect on the hearing in a Court of Appeal of the fact that the trial judge saw and heard the witnesses? I think it has been somewhat lost sight of. Of course, there is jurisdiction to retry the case on the shorthand note, including in such retrial the appreciation of the relative values of the witnesses, for the appeal is made a rehearing by rules which have the force of statute: Order LXVIII., r.1. It is not, however, a mere matter of discretion to remember and take account of this fact; it is a matter of justice and of judicial obligation. None the less, not to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own view of the probabilities of the case. The course of the trial and the whole substance of the judgment must be looked at, and the matter does not depend on the question whether a witness has been cross-examined to credit or has been pronounced by the judge in terms to be unworthy of it. If his estimate of the man forms any substantial part of his reasons for his judgment the trial judge's conclusions of fact should, as I understand the decisions, be let alone." The force of these judicial pronouncements is not to be overlooked; this court, as an appellate court should only be expected to perform a role that is consistent with those authorities. If, in the course of doing that, scant regard is given to some of the grounds of appeal, it is because they do not warrant discussion. The proceedings before this court constitute an appeal in the strict sense; they are not an appeal by way of rehearing; Duralla Pty Ltd v Plant (1984) 2 FCR 342; Minister for Immigration, Local Government and Ethnic Affairs v Hamsher & Ors (1992) 35 FCR 359 at 369 per Beaumont and Lee JJ. Overwhelming many of the appellants' complaints in their Notice of Appeal is the fact that his Honour chose to prefer Mr Coombs' evidence in areas of conflict with Mr Thomas. Such a finding is almost invariably the exclusive province of the trial judge; an appellate court would only intervene when it was clear that there was demonstrated error on the part of the trial judge. The appellants have not been able to satisfy that test. This court would not be justified in interfering with the findings that were made in the court below with respect to the credibility of witnesses. A Notice of Appeal in a case of this kind ought to indicate:- (a) the findings of fact (as opposed to subordinate or collateral facts) made by the trial judge which are challenged on appeal; (b) the findings of fact which the appellants contend ought to have been made at trial and, to the extent to which it is appropriate, particulars in support of those assertions; (c) any errors of law said to have been made by the trial judge; and (d) the principles of law for which the appellants contend on appeal. If the contents of the Notice of Appeal had been so restricted, the time taken on this appeal would have been materially shortened. Section 260(2) of the Corporations Law provides as follows:- "If the Court is of the opinion: (a) that 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 (in this section called "oppressed member or members") or in a manner that is contrary to the interests of the members as a whole; or (b) [not here relevant] the Court may, subject to subsection (4), make such order or orders as it thinks fit, including, but not limited to, one or more of the following: (c) an order that the company be wound up; (d) an order for regulating the conduct of affairs of the company in the future; (e) an order for the purchase of the shares of any member by other members; (f) an order for the purchase of the shares of any member by the company and for the reduction accordingly of the company's capital (g)-(k) [not here relevant]." Section 260 is concerned with "commercial unfairness" (Wayde & Anor v NSW Rugby League Ltd (1985) 61 ALR 225; see also Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 where Young J at 704 suggested that the court should ask "whether objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair"). His Honour adopted that test: so also do we. Mr Coombs, as a member of Dynasty who believed that the affairs of Dynasty were being conducted unfairly in terms of par260(2)(a), was entitled to make the application in this case: subpar260(1)(a)(i)) of the Corporations Law. The first matter upon which his Honour relied in determining that the affairs of Dynasty had been conducted in a manner that amounted to commercial unfairness against Mr Coombs was the course of conduct pursued in early 1988 that led to the restructuring of the company's affairs and the 31 March 1988 share issue. His Honour found that the restructuring and the share issue disregarded Mr Coombs' rights and that the share issue was deliberately made at below net tangible asset backing to achieve a watering down of Mr Coombs' interest. In his review of the history of the company and Mr Coombs' complaints, his Honour had earlier rejected a submission that a 1987 par issue in favour of the Thomas group had amounted to oppression or discrimination. He recognised that it was prejudicial to Mr Coombs (who did not have the funds to take up his entitlement) but, as his Honour pointed out, there were sound commercial reasons justifying the issue and the company and, indirectly, Mr Coombs had benefited. That finding has not been challenged. As to the 1988 restructure and share issue the appellants by their Notice of Appeal:- (a) challenge his Honour's finding that the relationship between the original members of Dynasty was one of quasi-partnership and that they were each to be involved in the management of the company; (b) assert that his Honour relied upon the above finding in holding that the dismissal on 31 March 1988 of Mr Coombs as a director of Dynasty was unfair; (c) say that even if the original relationship was one of quasi-partnership Mr Coombs caused the relationship to change by failing to maintain his original proportion of Dynasty shares and voluntarily ceasing further involvement with Dynasty from about March 1986; (d) challenge his Honour's finding that Mr Coombs' failure to involve himself in the affairs of Dynasty from about March 1986 was a consequence of hostility towards him shown by Mr Thomas; (e) challenge his Honour's finding that Mr Coombs was not given a proper explanation of the restructure and the role of Centrenorth in it; (f) challenge his Honour's finding that Mr Thomas made a threat to Mr Coombs between the 1987 and the 1988 share issues; (g) assert that the circumstances in which the 1987 share issue was made were materially indistinguishable from the circumstances in which the 1988 share issue was made; (h) challenge his Honour's finding that the 1988 share issue was intended to devalue Mr Coombs' holding in Dynasty; (i) challenge his Honour's characterisation of the restructure and assert that he underestimated its value to Dynasty and its cost to Centrenorth and over valued the net tax benefit to the Thomas interests of the trust distributions made by TFT2 to Dynasty; (j) assert that his Honour failed to have regard to the net contributions to Dynasty made by Thomas interests up to the time of the restructure, and to the failure of Mr Coombs to make timely contributions to Dynasty whilst receiving substantial benefit from the contributions made by Thomas interests; (k) challenge his Honour's finding that Mr Coombs was not consulted about the restructure; (l) challenge his Honour's finding that all of the directors of the company had conflicts of interest at the time of the restructure; (m) challenge his Honour's finding that it was patently reasonable for Mr Coombs to refuse to sign the guarantee in March 1988; (n) challenge his Honour's conclusion that the conduct of the directors in causing Dynasty to enter into the restructure was conduct that, according to ordinary standards of reasonableness and fair dealing, was unfair; (o) assert that his Honour failed to have regard to the fact that neither Dynasty nor the applicant suffered loss as a result of the restructure but rather Mr Coombs' interest in Dynasty thereafter has increased in value without his making contributions to, or involving himself in the operation of Dynasty; (p) assert that his Honour failed to give consideration to the relevant circumstances surrounding the restructure; (q) assert that his Honour failed to have regard to the fact that an effect of the restructure was to release Mr Coombs from liability under a personal guarantee given by him of Dynasty's debts; (r) assert that his Honour failed to have regard to inaction for some time on the part of Mr Coombs with respect to the restructure; (s) challenge his Honour's finding that Mr Thomas made a threat to render Mr Coombs' shares in Dynasty worthless and, in the alternative, challenge his Honour's finding as to the time that such threat was made; (t) challenge his Honour's findings as to the explanation for Mr Coombs' removal as a director of Dynasty; (u) challenge his Honour's finding that the course of conduct pursued in the restructure and associated decisions disregarded Mr Coombs' rights and treated Dynasty as if it were the sole property of the Thomas group; and (v) challenge his Honour's finding that the allotment of shares at 31 March 1988 at below the net tangible asset backing of the shares was intended to achieve a watering down of Mr Coombs' interest in the company. Little will be gained by this Court going through each of the above issues in detail. Most of them seek to challenge subordinate findings of fact made by the learned trial judge. His Honour's findings were in large part based upon his assessment of the credibility of the two principal witnesses as to narrative facts, Mr Coombs and Mr Thomas. As to their respective credibilities his Honour remarked as follows:- "Whilst Mr Coombs memory as to dates and detail was obviously suffering from the passage of time, as indeed were the memories of other witnesses, I was generally impressed by him as a witness. He was a careful witness who was prepared to concede matters that he could not remember and to stick with recollections which he did have, notwithstanding a sustained attack upon many of them in cross-examination based substantially upon assertions relating to the $100,000 loan which were, as subsequent evidence showed, contrary to the common position adopted by parties at earlier times. I accept him as a witness of credit. I prefer his evidence on important issues, such as whether the threat was made, to that of Mr Thomas. Mr Thomas displayed at times lively ability to manipulate his evidence to suit his arguments." As the majority of the High Court (Brennan, Gaudron and McHugh JJ) in Devries & Anor v Australian National Railways Commission & Anor (1993) 177 CLR 472 at 479 remind us:- 'More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge "has failed to use or has palpably misused his advantage" or has acted on evidence which was "inconsistent with facts incontrovertibly established by the evidence" or which was "glaringly improbable".' In our view his Honour's findings of fact on this issue were not 'glaringly improbable'; nor were they 'inconsistent with facts incontrovertibly established by the evidence'. We do not consider that it has been shown that the trial judge 'failed to use or has palpably misused his advantage'. As to the communications which occurred between Mr Coombs and Mr Thomas at the time of the 1988 restructuring and the 31 March 1988 share issue, his Honour expressly preferred the evidence of Mr Coombs. Mr Coombs' evidence was that he did not sign the guarantee documents relating to the restructure as he did not understand the implications of the transaction; he said, and his Honour accepted his evidence, that they were not explained to him. Mr Coombs gave evidence that this caused Mr Thomas to get very upset and that he said that he would make Mr Coombs' shares worthless, put his family in the company and sack Mr Coombs as a director if he did not sign the documents. In our view his Honour was entitled to accept this evidence - as he did. The evidence provided an important backdrop to the share issue of 31 March 1988. Another important part of that backdrop was his Honour's finding, which in our view was justified on the evidence, that Dynasty was, at the time, being treated by the other members and directors as their own to the exclusion of any consideration of the interests of Mr Coombs as a member. In this regard we consider that his Honour rightly placed weight on the letter from Mr Gamble, a chartered accountant, to Mr Thomas in which he provided "a summary of the method adopted to refinance your group". That letter makes it plain that its author, who gave evidence that he devised and implemented the restructure and the share issue of 31 March 1988 on Mr Thomas' advice, was concerned principally, if not exclusively, to advance the Thomas interests. Mr Gamble also gave evidence that he and Mr Thomas discussed the fact that the share issue of 31 March 1988 would have the effect of diluting the value of Mr Coombs' minority shareholding in Dynasty. His Honour found that the allotment on 31 March 1988 was made well below the net tangible asset backing of each share. We consider the evidence of the value of the shares below. It is sufficient to note here that, provided that his Honour's finding as to value is upheld, the facts already referred to were more than sufficient to justify a finding that, by the restructure and the allotment of the shares the affairs of Dynasty were being conducted in a manner which was commercially unfair to Mr Coombs. In coming to this conclusion it should not be thought that no consideration has been given to the undoubted benefits that flowed to the company and to Mr Coombs as a result of contemporaneous and earlier actions on the part of Mr Thomas. As a contemporaneous transaction with the 1988 restructure, Mr Coombs was released from his obligation as a guarantor of certain of the company's debts; he undoubtedly benefited as a result. And the fact that Mr Thomas was instrumental in achieving this (notwithstanding his motives) is entitled to weight. We have earlier referred to the distribution by the TFT2 of trust income to Dynasty. This was a myopic exercise on the part of those advising the Thomas group which constituted a windfall for the company when the trust was forced to pay over in cash the accumulated distributions as part of the 1988 restructure. His Honour was inclined to treat this distribution as having a benefit for the Thomas group; we do not see it as being, at the end of the day, beneficial to the Thomas group. It is true, as his Honour said, that by using Dynasty and its tax losses as the recipient of trust income, income tax was avoided. But it is also true that the other members of the Thomas group (who might have otherwise been the recipients of that income as beneficiaries of the trust) suffered a deprivation of 100 cents in the dollar. Moreover, the company by losing its opportunity set off its genuine trading losses against its future assessable income. Once again, Mr Thomas' motives might be called into question. But the fact remains that this rather naive exercise of "giving" trust income to Dynasty constituted a material benefit to Mr Coombs. However, even though we are of the opinion that the learned trial judge did not give sufficient weight to this issue in favour of the Thomas group, our contrary view does not thereby mean that his ultimate conclusion was flawed. Even though we have a different view on this particular aspect, it is not enough to interfere with the discretionary exercise that was undertaken by his Honour. The second matter upon which the learned trial judge relied in determining that the affairs of Dynasty were being conducted in a manner that amounted to commercial unfairness against Mr Coombs was the Brooksea mortgage. That was a second mortgage of its Port Douglas land whereby Dynasty guaranteed the obligations of another Thomas company, Brooksea - one in which, as we have said, Mr Coombs had no interest. His Honour found that Mr Coombs was not informed of this transaction and only learnt of it close to trial as a result of searches undertaken by his solicitors. His Honour found that the business of Brooksea was inherently risky and that had its business failed a substantial shortfall was likely to have to be made good by its guarantor. He considered that no commercial benefit arose to Dynasty out of the transaction and that it was entered into in breach of directors' duties by the directors of Dynasty. As to this matter the appellants by the Notice of Appeal:- (a) challenge his Honour's finding that the Brooksea transaction only came to light close to the trial when the applicant's solicitors searched for and obtained copies of documents from public registers, claiming instead that documents connected with the transaction were disclosed in the respondents' supplementary list of documents; (b) challenge his Honour's finding that the applicants' solicitors had made a request for information about all searches made by the company during the process of discovery; (c) challenge his Honour's finding that it was reasonable to infer that the proposal to purchase the Gold Coast Airport Transit business (i.e. Brooksea's business) was under consideration before March 1988 when the 1988 restructure was taking place when his Honour had already found in another context that the 1988 restructure was virtually complete by 31 March 1988; (d) challenge his Honour's finding that Dynasty incurred more than a merely theoretical risk in guaranteeing the obligations of Brooksea, by reference to the trading position of the Brooksea business, without having any regard to the indemnity Brooksea held as trustee and/or the extraordinary items included in the trading figures and/or the other substantial security support available to financiers of the Brooksea transaction; (e) assert that his Honour failed to have any, or any proper, regard to the fact that the Brooksea obligations had caused no actual loss to the company in the past 6˝ years of the business' operations, either by way of a loss of profit, or business, or assets, and that it had caused no diminution in the value of the applicants' shares in Dynasty; (f) challenge his Honour's finding that there was a risk of loss to the company from the Brooksea obligations and that the risk was one which was prejudicial to the applicant as a member of the company, when the Brooksea business has continued to flourish as a business; (g) challenge his Honour's finding that the evidence did not establish any benefits the company received from Brooksea and his failure to have regard to the evidence of Mr Thomas that one of his reasons for his decision to proceed with the Brooksea transaction was so that there would be another cash flow business available to support the company, and that such support was required and given in 1990 when the company experienced difficulties with the financing of the camping ground facility (that being an extension to the facilities at the Gap Hotel/Motel); and (h) challenge his Honour's finding that there was no commercial benefit to the company arising from the Brooksea transaction, that it was a transaction in breach of the directors duties, that the transaction was not disclosed to the applicant even during the discovery process and that the transaction was oppressive or unfairly prejudicial to or unfairly discriminatory against the applicant. As to this subject and this bracket of complaints the following observations can be made: first, it is difficult to imagine a more blatant act of oppression and discrimination against a minority shareholder than the use of powers of control by a person (Mr Thomas) to have one company (Dynasty) commit itself and its assets, for no commercial consideration, as a guarantor of the debts of a second company (Brooksea) in which it has no pecuniary or commercial interest but in which the controller had a material interest. The fact that the controller of Dynasty has an interest in Brooksea can not constitute an acceptable explanation for the guarantee; it establishes the reason for the guarantee and in the course of so doing, highlights how Mr Thomas abused his position of control to advantage himself and his group to the possible detriment of Mr Coombs. The fact that no such detriment materialised is good fortune - that is all. It is no excuse for the conduct of Mr Thomas. As his Honour noted, that conduct was "burdensome, harsh and wrongful" and therefore oppressive: Scottish Co-operative Wholesale Society Ltd v Meyer & Anor [1959] AC 324 at 342: and unfairly prejudicial to Mr Coombs. Secondly, the complaints against these findings are, as with the first bracket of complaints, predominately challenges to subordinate findings of facts which do not warrant the intervention of this court. Subject to two observations, nothing has been advanced in the appellants' interests that would arguably justify the intervention of this court. The first of the observations is that in respect of these issues his Honour drew certain inferences from some of the proven facts: this court is, of course, equally free to examine the inferences that may have been open to the trial judge: Warren v Coombs & Anor (1979) 142 CLR 531; Taylor v Johnson (1983) 151 CLR 422; Lend Lease Development Pty Ltd v Zemlicka & Ors (1985) 3 NSWLR 207. But having acknowledged the power of this court to so intervene, we hasten to add that we see no cause to intervene; the inferences that the learned trial judge drew were reasonable and quite consistent with the evidence. There is no cause to interfere. The other observation concerns the complaint that his Honour mistakenly said that the Brooksea transaction only came to light close to the trial when, in fact, documents connected with the transaction were disclosed as part of the discovery process. Let it be assumed that his Honour had indeed, made a mistake - it is by no means clear that he did: the issue is quite confusing. The fact that such a mistake might have been made pales to insignificance when compared with the enormity of the prime finding. The prime finding (with which we agree) was that there was oppression when the guarantee was executed; the seriousness of this oppressive conduct was exacerbated by the failure to disclose the existence of the guarantee to Mr Coombs thereby depriving him of such opportunities (if any) as he may have had to take protective action. In this context it can be seen that the exact date of the discovery by Mr Coombs diminishes in importance to a degree where one could say with confidence that the learned trial judge would have made the same critical comments about the conduct of Mr Thomas irrespective of the date upon which the matter first came to the attention of Mr Coombs. The next issue that was the subject of submissions on the appeal related to the question of Mr Coombs' dealing with an amount of $100,000. There is a long and complex history to this matter and it was canvassed in detail by his Honour in his reasons for judgment. A very short version of the relevant facts are as follows: A company in which Mr Coombs was involved - CBC - built The Gap Hotel and submitted to Dynasty, as its final invoice, an account for $130,000. Because of alleged defects, the matter was settled upon the basis that Dynasty would pay only $100,000, that CBC would accept that sum in full settlement but that Dynasty would make the payment of $100,000 to Mr Coombs who had some ill-conceived scheme to evade income tax on the payment. The scheme was never implemented but Mr Coombs allegedly failed to account to CBC for the money. As a result CBC sued both Mr Coombs and Dynasty. CBC and Dynasty settled their differences but Dynasty continued thereafter to treat Mr Coombs as its debtor in the sum of $100,000. During the course of the appeal it was said that this scheme, which was instigated by Mr Coombs, was dishonest and designed to evade the payment of income tax; it was, so the appellants contended, a proper platform from which to launch an attack on Mr Coombs' credit. There are two answers to this emotional proposition; the first is that the fact that Mr Coombs may have, on an occasion in the past, in 1983, suggested participation in an improper tax evasion scheme (which was not implemented) has little, if anything, to do with a determination as to whether Mr Thomas' conduct in 1988 and thereafter was commercially unfair. The second issue is that of Mr Coombs' credit. Insofar as the scheme was raised as an attack on Mr Coombs' credit, it was a proper matter to put before the trial judge. And it was so put by the appellants and it was dealt with at length by his Honour in his reasons. The appellants may not like the manner in which his Honour dealt with it but the fact remains that he did deal with it in a wholly permissible manner and there would be no justification for this court to suggest that the issue should be re-opened. There were further complaints by the appellants about the manner in which his Honour dealt with the subject of the $100,000. For example, they complained that it had not been pleaded as an item of oppression by Mr Coombs. Such a complaint comes a little late when it is realised that it was the Thomas group who, during the course of the trial, first used the subject of the $100,000 as a trenchant attack on Mr Coombs and then, later, withdrew the claim that he owed Dynasty this sum. Another of the complaints may usefully be mentioned at this stage as an indicator of how the contents of the Notice of Appeal drifted into unhelpful detail and failed to grapple with hard-core issues. It was said in par2.6 that his Honour erred in his treatment of $100,000 "when that issue was not related to the applicant's role as a member of the company, but only to the applicant's position as a debtor of the company". It would be a curious situation if a party claiming oppression was unable to use, as an evidentiary aid, the conduct of the alleged oppressor with respect to another aspect of his or her management of the affairs of the company which impinged upon the rights of the complainant. In their Notice of Appeal the appellants also:- (a) disputed his Honour's finding that Dynasty received a benefit to the value of $100,000 for the payment that it made to Mr Coombs; (b) complained that his Honour failed to have regard to Dynasty's claim against CBC for faulty workmanship in the construction of The Gap Hotel; (c) challenge his Honour's finding that the Deed of Settlement between Dynasty and CBC constituted an acknowledgment by Dynasty and Mr Thomas that the sum of $100,000 was paid in discharge of CBC's claims; (d) complain that his Honour should not have found that the cross-examination of Mr Coombs about the history of the $100,000 was an unwarranted attack on his credit and probity; and (e) complain that his Honour failed to have any regard to the fact that the company did not take any legal action against Mr Coombs in relation to his loan account until mid 1993 and did not in that action pursue any claim for interest. The first four of these challenges must be put aside as items of dissatisfaction rather than grounds of appeal; as to the claimed failure to have regard to an aspect of the company's conduct, it need only be said that the mere fact that a trial judge does not make mention of a secondary or collateral matter in his judgment does not, without more, mean that he has overlooked it. Putting to one side the restructuring of the company and the other matters that have been the subject of specific discussion in these reasons, it was submitted by the appellants, with respect to Mr Coombs' conduct and events subsequent to March 1988, that his Honour either made incorrect findings of facts or, in the alternative, the findings of fact so made, were insufficient to constitute oppression. The findings that were made by his Honour that were adverse to the Thomas interests included the following:- - the unilateral decision of Mr Thomas to have Dynasty charge Mr Coombs interest on the money that he allegedly owed the company; - the failure between March 1988 and late 1990 to give Mr Coombs notice of shareholders' meetings and copies of financial accounts; - the non-disclosure at the 1990 AGM of information that had been requested by Mr Coombs' proxy (his Honour found that Mr Thomas had falsely stated that the last revaluations of the company's land and buildings had been carried on some years earlier when in fact there had been valuations made in 1990); and - the holding of the 1991 AGM on Christmas eve at Hamilton Island. (As to this, his Honour drew the inference that holding the meeting at such a time and at such a place amounted to Mr Thomas "seeking to conceal information"). In our opinion, each of these matters is consistent with a course of conduct, as found by his Honour, that commenced with the events of March 1988. Each shows, with varying degrees of intensity, an intention to push aside and disregard the interests of the minority shareholder to such an extent that the concept of commercial unfairness becomes all too apparent. It is appropriate at this stage to deal with the appellants' complaint with respect to his Honour's findings on the subject of a "quasi-partnership". His Honour had found that the members of the original consortium of investors intended that their relationship be one of quasi-partnership and that they were each to be involved in the management of Dynasty. That situation changed materially, of course, because by 1985 the Thomas interests had bought out all the shareholders apart from Mr Coombs. But the change was one of composition only; the buying out of the interests of Mr Hoban, Mr and Mrs Smith and Mr and Mrs Paget did not thereby constitute a dissolution; rather, absent any other material factors, it meant that the quasi-partnership was thereby reduced to Mr Thomas and Mr Coombs. The best known discussion of the concept of quasi-partnership is that found in Ebrahimi v Westbourne Galleries Ltd & Ors [1973] AC 360 where Lord Wilberforce said at 379:- "The superimposition of equitable considerations requires something more, which typically may include one, or preferably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence - this element will often be found where a pre-existing partnership has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be 'sleeping' members), of the shareholders shall participate in the conduct of the business; (iii) restriction upon the transfer of the members' interest in the company - so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere." In our opinion there was ample evidence, satisfying each of these elements, upon which his Honour could base a finding of quasi-partnership. There is no doubt that it started to wither; although it might not then have been known to him, it commenced with Mr Coombs' departure from Alice Springs. Thereafter - and the reasons matter not - he took less and less interest in the affairs of the company. But he still remained a director and he held that title because of his original involvement in the company. Perhaps it could be argued that Mr Thomas could have, on a much earlier date, used Mr Coombs' lack of involvement in the management of the company as grounds for having him removed as a director. But nothing will be achieved by exploring that avenue - if only because it did not happen. When Mr Thomas did remove Mr Coombs as a director, it occurred, not because of Mr Coombs' lack of involvement, but because of Mr Thomas' decision to treat the company as his own. The act of removing Mr Coombs as a director not only destroyed the last vestige of the quasi-partnership, it represented a most important evidentiary aid in categorising the conduct of the Thomas group as oppressive. In fact, that aspect of the matter is the more important; for if, as the appellants submitted, the quasi-partnership had long before come to an end, the Thomas group would have had justifiable grounds for removing Mr Coombs as a director on a much earlier date. The fact that his removal coincided with the other events of March 1988 merely adds emphasis to the conclusion that a carefully orchestrated plan was implemented in that month. Uppermost in that plan was the utilisation of Dynasty as part of the Thomas group; to do that it was necessary to get rid of Mr Coombs as a director. From the Thomas point of view that had to be done whether there was or was not then a quasi-partnership. It should not be thought that his Honour did not bring an open mind to the evidence. We emphasise this because of the unreasonable attacks in the Notice of Appeal about the manner in which his Honour proceeded to make certain findings that clearly prefer Mr Coombs to the Thomas interests. There were other complaints that were raised by Mr Coombs as particulars of oppression that were either dismissed or disregarded by his Honour. These included:- - the decision to build a camping ground facility as part of the Hotel complex; - an unsuccessful attempt by Mr Coombs to transfer half of his shares to a third party; - the failure to appoint an auditor of the company in earlier years, including the 1990 financial year; - the incurring of heavy expenses for consultancy fees paid to members of the Thomas group and heavy motor vehicle expenses; - the debiting of legal fees incurred by the Thomas group in defending these proceedings (as to this his Honour commented that the propriety of that conduct would have to await the outcome of the trial); and - the failure of the company to pay dividends. We have come to the conclusion that there is no substance in the appellants' attack on his Honour's primary findings. Our review of the evidence, based upon the submissions that were made by counsel during the course of the appeal, has satisfied us that there are ample grounds for his Honour's finding that Mr Coombs was an oppressed member of the company. His Honour ordered that pursuant to s260(2)(f) of the Corporations Law, Dynasty was to purchase Mr Coombs 2,296 shares in the capital of the company with a consequential reduction of capital. His Honour then fixed the sum of $518,000 as "the net amount adjudged to be paid to the applicant for the shares after the Company has discharged the applicant's indebtedness to the Company on his loan account". The appellants now challenge both orders; they complain about the value of $518,000 attributed to the shares and they further complain that if there is to be an order for the sale and purchase of Mr Coombs' shares, then that order should be in a form that is consistent with the mechanism in the company's articles. His Honour rejected that proposition, agreeing with the view expressed in Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247 at 254 that relief in the form of an order for the sale and purchase of Mr Coombs' shares should not be refused because of the availability of a mechanism in the company's articles of association for sale according to a valuation, because the valuation obtained may be wrong but nevertheless binding; we also agree. As his Honour said, in an oppression case it is the function and duty of the court to value the shares. VALUATIONS His Honour reviewed in detail the methods of calculation advanced by the parties during of the course of the trial; it will be sufficient to mention them in summary form. Mr Morris, a Chartered Accountant who gave expert evidence on behalf of Mr Coombs, considered that the value of Mr Coombs' shares should be assessed by reference to the present net tangible asset back of the company (the "NTA"). However, as the most recent financial statements available to him were those for the year ended 30 June 1993, he made his valuation at that date. Mr Morris adjusted the asset values that were included in those financial statements in respect of the Hotel and the Port Douglas land; he also reduced the amount of Mr Coombs' loan account to the agreed figure of $37,805. His Honour performed the exercise of adjusting Mr Morris' figures so that they would reflect the more recent valuations and made use of the company's trading results to 31 December 1993. By making these adjustments, the learned trial judge arrived at a figure of approximately $3.1M as the value of the net tangible assets of the company. Mr Morris had calculated that if the share allotments that were made on 6 March 1987 and 31 March 1988 had occurred at the then NTA value of the Dynasty shares, Mr Coombs would have held 20% of the issued share capital - not 15.31%. Using this revised percentage and deducting the amount owing by him to the company, this would attribute a final figure to Mr Coombs of $582,476. In his primary calculations, Mr Morris had made no allowance for realisation costs; his Honour noted that realisation costs of 4% based on the most recent valuations for the Hotel and the Port Douglas land would amount to $198,000. On the other hand his Honour also noted the substantial income that the company had derived since 31 December 1993 and the size of the legal costs that the company had incurred in unsuccessfully defending the proceedings. If those three further adjustments were made, the learned trial judge thought that the figure of $582,476 might grow to about $600,000. In his final submissions in the court below, counsel for Mr Coombs sought a figure in excess of $1.2M as the value of Mr Coombs' shares as at 31 December 1993. His approach was to take the NTA as at 30 June 1986, claiming that as the date from which Mr Coombs was excluded from the company. As at that date, Mr Coombs' 28% holding was calculated at $539,016 to which would be added, so counsel submitted, compound interest at deposit rates with quarterly rests upon the principles laid down in Hungerfords & Ors v Walker & Ors (1988) 171 CLR 125. The Thomas group challenged both those methods of calculation claiming that there should be four principle alterations. First, they claimed that no allowance had been given to the Thomas group for the injection of capital that had been made in 1987 and 1988 - both these figures, it was claimed, should be excised in valuing the NTA of the company; secondly, they advanced the same proposition with respect to the "gifts" to the company of the distributions of trust income - it should also be excised. Thirdly, they claimed that an allowance or "credit" should be given to the Thomas group because it had, during the course of the 1988 restructure, arranged for Centrenorth to take over some of Dynasty's liabilities. Finally, the Thomas group argued that it would be unfair to give Mr Coombs compound interest as it would exceed commercial interest rates and, in fact, commercial interest rates had exceeded the profits and capital growth of the company over the intervening period. Mr Gamble, Dynasty's accountant, had prepared a valuation of the company's NTA as at 31 December 1993 consistent with the submissions that have been referred to above. It was, however, based on book values and wrongly assumed that Mr Coombs should be regarded as having a 20% interest (as submitted by Mr Morris). As his Honour correctly pointed out, if a calculation of the value of the NTA of the company was to be performed upon the premise that the 1987 and 1988 share issue had not been made, then Mr Coombs had to be credited with his original shareholding of 28%. Making this adjustment and further adjusting Mr Gamble's figures to allow for the most recent valuations and the agreed size of Mr Coombs' loan account, his Honour arrived at an NTA of approximately $1.17M. Twenty eight per cent (28%) of that figure (less the loan account of $39,805) was $288,966. The Thomas group also pressed for a realisation factor of 4% which, if accepted, would reduce the value of Mr Coombs' notional holding as at 31 December 1993 to $233,513; they then sought a further reduction in value to reflect the transfer of liabilities to Centrenorth. His Honour was not prepared to accept any one of the three methods of calculations. He considered that Mr Coombs had chosen a date that was too early; his Honour felt that his interests had not been disregarded until the 1988 share issue and company restructure. In the case of the Thomas group, the learned trial judge said:- "... their approach fails to recognise that the early distributions were made as gifts, that the distributions produced an immediate tax advantage in dollars of the day to the beneficiaries of the TFT2 trust at the expense of the tax losses which Dynasty would otherwise be enjoying from now on, and that the Thomas interests received 'value' from using Dynasty assets as security." We have already noted our views on the subject of trust distributions. To this we would add that the willingness of a party, such as Mr Thomas, to inject, voluntarily, money into a company which has a minority shareholder, is a matter that is entitled to the utmost weight in considering whether there has, or has not, been oppression. Indeed, the size of the largesse may be so generous that other conduct (which in isolation might have amounted to oppression) could, perhaps, be forgiven. But once the largesse has been given its due consideration and a proper decision has been reached that oppression nevertheless exists and that the oppressed party is to be bought out, the voluntary trust distribution becomes a thing of the past; the distribution is now reflected in the assets of the company and they are to be accorded their proper value. Although his Honour found more favour in Mr Morris' approach, he considered that it gave "an arbitrary result"; he therefore decided that Mr Coombs' shareholding should be valued immediately before the restructure that occurred on 31 March 1988 and that an interest factor should be allowed on that amount to the date of judgment so as to arrive at a fair price. His Honour decided to undertake a valuation exercise of the shares using book values for the assets. His justification for this approach is to be found in the following passage from his judgment:- "On any valuation exercise undertaken it is necessary to make assumptions about the value of the two major assets, Port Douglas and the Gap Hotel. Those assets were being carried in 1988 in the books of the company at cost in the case of Port Douglas, and at $2.8 million pursuant to the 1984 Ludlow valuation for the land and buildings in the case of the hotel. In 1988 the tourist trade in Alice Springs was suffering from an oversupply of tourist accommodation and from Expo. Those factors would have depressed the value. On the other hand the evidence is of favourable real estate conditions in Port Douglas. The Neven valuation in 1986 [for the Port Douglas land] was $467,905 above the book value which allows a considerable margin for possible overvalue in the case of the hotel. I think it is reasonable to undertake the valuation exercise on the assumption that the book values of the assets, including plant and equipment, were realistic at that time." Counsel for the appellants strongly urged that the primary judge had been in error in adopting this approach and, in particular, the book valuation of $2.8 million dollars of the hotel asset, which was based on the 1984 Ludlow valuation. As the passage from his Honour's reasons indicate, his Honour was alive to the question of whether the book values of the assets of Dynasty was a reliable reflection of their true value. He acknowledged a possible under-value of the Port Douglas land in the book value figure of that asset in conjunction with his appreciation that the book value of the Alice Springs Hotel was possibly sanguine. The appellants attacked the Ludlow valuation on a number of grounds, including that the valuation was based on projected and unachievable earnings. The Ludlow valuation derived a value of $2.8 million for land and buildings and $750,000 for "the business of the Gap Hotel/Motel". The basis upon which the separate components of the valuation were arrived at is not disclosed. The valuation was based on the capitalisation of budgeted cashflow from the year ended 30 June 1994 derived from a cashflow budget appended to the valuation. There was a large volume of valuation evidence directed to the value of Dynasty's assets at different times and on different bases. That material includes the valuation evidence from accountants on behalf of Dynasty and valuers engaged by it for the purposes of refinancing. That evidence tends to support the conclusion that a land and buildings value of $2.8 million for the hotel in 1988 was not inappropriate. In the light of that evidence, the assumption of the primary judge that the book values of the assets were realistic at the time is not able successfully to be attacked. Using the company's financial accounts for the year ended 30 June 1988, his Honour made adjustments by eliminating the March 31 share issue, by excising the last quarter's trading results, and by eliminating the trust distribution that was made in that quarter. He also reduced Mr Coombs' loan account to its agreed figure. In this calculation, as with all others, his Honour removed incorporation costs of $913 from his calculations. The resultant NTA was approximately $1.45M and Mr Coombs' shares (less his loan account) had a consequential value of $296,270. On this occasion, his Honour correctly treated Mr Coombs as if he had a 22.96% holding, that being his holding before the 1988 share issue reduced it to 15.31%. In considering an interest factor, his Honour rejected the proposition that compound interest should be used. He correctly pointed out that Dynasty, like many companies throughout the period in question, was not even earning rates commensurate with commercial interest rates. That conclusion has not been challenged. His Honour concluded that "a fair result would be achieved by allowing simple interest at 12%" calculated from 31 March 1988. Rounded off, the interest factor and the value of $296,270 for the notional shareholding as at that date came to $518,000. His Honour fixed that figure as "a fair price at which to order that the shareholding of Mr Coombs be acquired by one or more of the respondents...". After the parties had the opportunity to consider his reasons and make their submissions, his Honour made the orders that have been set out earlier in these reasons. The Thomas group faintly argued that a valuation based on NTA was inappropriate for a trading company such as Dynasty. Normally, there would be substance in such a submission and one would incline to dividend history or past and likely future earnings as a more appropriate method of valuation. However, as at the date chosen by his Honour as the appropriate date for valuing the shares in the company - 31 March 1988, the company had a history of losses since incorporation and its balance sheet was dominated by two major fixed assets - the Hotel and the Port Douglas land. In those rather unusual circumstances a valuation based on NTA was quite reasonable. INTEREST The appellants trenchantly attacked the learned trial judge's decision to allow interest on the value of Mr Coombs' shares at the rate of 12%. Before examining their arguments in detail, it is timely to mention also that they complained that his Honour should have, but failed to, allow them interest on Mr Coombs' debt to Dynasty of $37,805. That assertion is quite plainly wrong; what his Honour did was to ascertain the value of the shares as at 31 March 1988, deduct therefrom the debt of $37,805 and apply interest to the resultant figure. By doing his calculations in this manner his Honour therefore, effectively, gave Dynasty the benefit of interest on Mr Coombs' loan account at the same rate of 12%. We return then to the appellants fundamental attack. They advanced two basic propositions both of which are flawed. First, they submitted that the calculation of interest ignores the fact that Mr Coombs "has had the benefit of the shares since 31.3.88, albeit that their value was reduced by the allotment on 31.3.88". This proposition fails to appreciate that by choosing to value Mr Coombs' shares immediately before the March 1988 restructure, his Honour deliberately deprived Mr Coombs of those benefits. His Honour was alert to this issue. He pointed out in his judgment that such an approach "removes the need to quantify and bring to account all the commercial advantages received by the Thomas interest from the restructure including the use of Dynasty's assets as security for other ventures...". Secondly, the appellants submitted that the sum upon which interest ought to be assessed on his Honour's reasoning is the sum by which the oppressive conduct diminished the value of Mr Coombs' holding on 31 March 1988; it was said that to allow interest on the full value of the shares results in a windfall to Mr Coombs. Such an argument invites recognition of the change in value brought about by the oppressive conduct. That would be wrong; the oppressive conduct and the effects that it may have had on the value of the shares is to be disregarded in the valuation exercise: Re Dalkeith Investments Pty Ltd at 247; Sanford v Sanford Courier Service Pty Ltd & Ors (1986) 10 ACLR 549 at 562. What both these arguments overlook is that the Thomas group will have enjoyed, to the exclusion of Mr Coombs, all the benefits that have accrued to the company since 31 March 1988. If his Honour had chosen a later date as the appropriate date for the valuation exercise then Mr Coombs would have rateably shared in the additional benefits. The interest factor would have reduced but there would have been an increased value in his share holding. Whether those two variables are matching is, of course, a lottery, but it is not a factor that is entitled to any weight. It was the responsibility of the learned trial judge to fix a price for the shares that represented a fair value in all the circumstances of the case. His Honour approached that task by referring to the remarks of Lord Denning in Scottish Co-operative Wholesale Society v Meyer & Anor [1959] AC 324 at 369. The relevant passage from his Honour's reasons for judgment reads as follows:- "To arrive at a fair value to be paid now by valuing the shareholding at some date in the past and by adding to that value an allowance for the fact that the shareholder has been kept out of the enjoyment of that value in the meantime, to borrow the words of Lord Denning, is to give to the oppressed shareholder 'what is in effect money compensation for the injury done to [the shareholder]: but I see no objection to this. The section gives a large discretion to the Court and it is well exercised in making an oppressor make compensation to those who have suffered at his hands". The appellants complained that Lord Denning alone had addressed this notion of compensation; they said that the correct approach was that of Lord Keith of Avonholm who had said at 364:- "Lord Sorn [in the court below] has, in my opinion, approached this matter on a correct principle, by considering what would have been the value of the shares at the commencement of the proceedings had it not been for the effect of the oppressive conduct of which complaint was made." While Lord Denning speaks of "a fair value to be paid now" and Lord Keith makes reference to the value of the shares at the commencement of the proceedings, Lord Denning essentially is describing a methodology by which the value of the shares might be assessed. The date at which shares are to be valued in oppression cases varies having regard to all relevant circumstances. The remarks of Nourse J in In re London School of Electronics Ltd [1985] 3 WLR 474 at 484 are apposite:- "If there were such a thing as a general rule, I myself would think that the date of the order or the actual valuation would be more appropriate than the date of the presentation of the petition or the unfair prejudice. Prima facie an interest in a going concern ought to be valued at the date on which it is ordered to be purchased. But whatever the general rule might be it seems very probably that the overriding requirement that the valuation should be fair on the facts of the particular case would, by exceptions, reduce it to no rule at all. That that is so is already suggested by such authorities as there are on this question. In Scottish Co-operative Wholesale Society Ltd v Meyer [1959] A.C. 324 the shares were ordered to be purchased at the value which they would have had at the date of the petition if there had been no oppression. In In re Jermyn Street Turkish Baths Ltd [1970] 1 W.L.R. 1194 the order of Pennycuick J. discloses that the assets, undertaking and goodwill of the company were to be valued on an inquiry as at the date of the master's certificate. In In re A Company (No. 002567 of 1982) [1983] 1 W.L.R. 927 Vinelott J. held that the shares of a petitioner who had unreasonably rejected previous fair offers to purchase them ought to be valued at the date of the valuation and not at the date when he had been excluded from participation in the affairs of the company. However, Vinelott J. said that he could conceive of many cases where, in an application under section 75, fairness would require that the valuation should relate back to an earlier date such as, in that case, the exclusion of the petitioner: see [1983] 1 W.L.R. 927, 937D-E. That observation was approved by Mervyn Davies J. in In re O.C. (Transport) Services Ltd. [1984] B.C.L.C. 251, 258, where he held that the facts required the valuation to be made at a date earlier than the date of the petition, in fact at the date when the unfair prejudice had occurred. Finally, in In re Bird Precision Bellows Ltd. [1984] Ch. 419 the valuation was made as at the date of a consent order that the shares should be purchased at such price as the court should thereafter determine. That case is not of any real assistance on this point, because the date was no doubt implicit in the terms of the consent order." Scottish Co-operative Wholesale Society Ltd v Meyer was an appeal from the first case in which a purchase order under s210 of the Companies Act (UK) 1948 had been made. In that case the conduct constituting the oppression lead to a substantial decrease in the value of the shares. It was common ground between the parties that at the date of the petition it was just and equitable that the company should be wound up. It is not surprising then that the order which was the subject of the unsuccessful appeal required the shares be purchased at the value which they would have had at the date of the petition if there had been no oppression. In Re D.R. Chemicals Ltd (1989) 5 BCC 39, Peter Gibson J chose the date of his order as the date from which the shares in that case should be valued. He said at 54:- "[The minority shareholder], acting entirely within his rights and not unreasonably, has remained a minority holder and only now is he obtaining an order requiring the respondents to purchase his shares. Accordingly logic and fairness dictate that the valuation should be at the date of my order. To my mind this conclusion is strongly supported by the fact that a petitioner under sec. 459 is unable to obtain an order for interest running from a date before the purchase order is made (see Re Bird Precision Bellows Ltd. at p. 437; 99,006, approved on appeal in the Court of Appeal [1986] Ch. 658; (1985) 1 BCC 99,467). There will of course be cases where in the particular circumstances a date earlier than the date of the order will be shown to be the fair date, for example, where there has been a sea change in the company's business since the petitioner last associated himself in any way with the company. But that is not this case." When one accepts his Honour's finding that oppression commenced in March 1988, it seems to us that, in this case, there were only two dates that could have been appropriate for the valuation - either the date immediately before the acts of oppression were implemented or the date of trial. In opting for the former, his Honour permitted the Thomas group to benefit from its conduct for it enjoyed, wholly, all subsequent benefits. In that sense, we see nothing wrong in treating the interest factor as "compensation" for Mr Coombs not participating in those benefits. As counsel for Mr Coombs put it in his final submissions, the learned trial judge did not award Mr Coombs interest qua interest; rather he used interest as a proxy to measure the increment in the value of Mr Coombs' investment in the company appropriate to reflect the fact that the Thomas interests had the use of Mr Coombs' investment since March 1988. It might be thought by some that a rate of 12% from March 1988 to judgment was on the high side, but it is not the role of this court to engage in a fine tuning exercise; the rate of interest that was used by his Honour was within the parameters of his discretion. His Honour, in fixing upon a fair price for Mr Coombs' shares, did not apply a discount factor because of there being a minority holding. We believe that his Honour was correct. There are, of course, arguments that properly assert that a minority shareholder, being contractually aware of the provisions of his or her company's articles of association, should be bound by those articles and by any provision that gives pre-emptive rights to other shareholders. In ordinary circumstances a minority shareholder wishing to sell his or her shares should offer them to the other shareholders; if a dispute arises as to value, it is common place for the articles to provide that the auditor of the company shall ascertain the value of the shares. That exercise might well involve a discount factor in the value. But Mr Coombs was not a minority shareholder who was a willing seller; he had been forced into instituting legal proceedings because he had been oppressed. In the United Kingdom, the Court of Appeal in Virdi v Abbey Leisure Ltd & Ors; Re Abbey Leisure Ltd [1990] BCLC 342 at 347 explained that an oppressed minority shareholder was not a member of a company who desires to transfer his shares under the pre-emptive provisions of the articles of association. It is true that in Re Bagot Well Pastoral Company Pty Ltd; Shannon v Reid (1992) 9 ACSR 129, a minority oppression case, Cox J said at 146:- "[the petitioner] is not entitled to have the price assessed according to the company's net assets. That would be to ignore her very real disadvantageous position as a shareholder under the articles ...". It appears from the report of proceedings in the Full Court of South Australia Re Bagot Well Pastoral Company Pty Ltd (1993) 61 SASR 165, that the shareholder petitioner did in fact cross-appeal the finding that she was not entitled to have her shares valued according to net asset value. But as Debelle J noted at 184, no argument was addressed to the Court on that issue. However, in Re Bird Precision Bellows Ltd [1984] Ch. 419, Nourse J said at 430:- "On the assumption that the unfair prejudice has made it no longer tolerable for him to retain his interest in the company, a sale of his shares will invariably be his only practical way out short of a winding up. In that kind of case it seems to me that it would not merely not be fair, but most unfair, that he should be bought out on the fictional basis applicable to a free election to sell his shares in accordance with the company's articles of association, or indeed on any other basis which involved a discounted price. In my judgment the correct course would be to fix the price pro rata according to the value of the shares as a whole and without any discount, as being the only fair method of compensating an unwilling vendor of the equivalent of a partnership share." The decision of Nourse J was upheld by the Court of Appeal [1986] Ch. 658, and although this was on the basis that this was a proper exercise of the judge's discretion, Oliver LJ made it clear that he would not himself have come to any other conclusion: see [1986] Ch. 658 at 674. As Balcombe LJ, in Virdi v Abbey Leisure Ltd noted at 350: the cases "show a general inclination towards a pro rata basis for valuation". Furthermore, it is not just a question of value; it is a matter of fixing a price that should be paid to Mr Coombs: Re Bagot Well Pastoral Company Pty Ltd; Shannon v Reid 9 ACSR 129. In our opinion the appeal should be dismissed with costs. I certify that this and the preceding pages are a true copy of the Reasons for Judgment of Spender, O'Loughlin and Branson JJ. Associate: Dated: Counsel for the Appellants : Mr I Callinan with him Mr R Traves Solicitors for the Appellants : Creswicks Counsel for the Respondents : Mr R Whitington Solicitors for the Respondents: Sykes Bidstrup Hearing Date : 16 November 1994