FEDERAL COURT OF AUSTRALIA Noble Investments Pty Ltd v Southern Cross Exploration NL; In the matter of Southern Cross Exploration NL ACN 000 716 012 [2008] FCA 1963 CORPORATIONS – application pursuant to s 232 of the Corporations Act 2001 (Cth) – whether possible for plaintiffs to obtain an order winding up publicly listed solvent company – if the Court is satisfied of oppression or unfairness relief which is best suited – winding up order would be rare but not impossible PRACTICE AND PROCEDURE – interlocutory application for summary judgment pursuant to s 31A of Federal Court of Australia Act 1976 (Cth) – whether proper use of the provision – s 31A not designed for striking out a defective or partially defective pleading – designed to give judgment where no reasonable prospect of success – application dismissed PRACTICE AND PROCEDURE – whether relief sought in originating application – relief sought would only be struck out if the Court convinced that relief would never be granted – two prayers for relief not pressed – application dismissed Corporations Act 2001 (Cth) s 232, s 233 Federal Court of Australia Act 1976 (Cth) s 31A Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 cited Jenkins v Enterprise Goldmines NL (1992) 6 ACSR 539 applied Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 referred to White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 applied Re William Brooks & Co Ltd [1962] NSWLR 142 cited Re Weedmans Ltd (1974) Qd R 377 referred to Latimer Holdings Ltd v SEA Holdings NZ Ltd [2005] 2 NZLR 328 distinguished Cumberland Holdings Ltd v Washington H Soul Pattinson & Company Ltd (1977) 2 ACLR 307 cited IN THE MATTER OF SOUTHERN CROSS EXPLORATION NL ACN 000 716 012 NOBLE INVESTMENTS PTY LTD ACN 007 998 914 IN ITS OWN CAPACITY AND AS THE TRUSTEE FOR THE NOBLE INVESTMENTS AND CONSULTING SERVICES TRUST AND THE NOBLE INVESTMENTS SUPERANNUATION FUND, LEADENHALL AUSTRALIA LIMITED ACN 007 997 248 and CHI INVESTMENTS PTY LTD ACN 064 569 035 v SOUTHERN CROSS EXPLORATION NL ACN 000 716 012 SAD 165 of 2008 LANDER J 22 DECEMBER 2008 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 165 of 2008 IN THE MATTER OF SOUTHERN CROSS EXPLORATION NL ACN 000 716 012 BETWEEN: NOBLE INVESTMENTS PTY LTD ACN 007 998 914 IN ITS OWN CAPACITY AND AS THE TRUSTEE FOR THE NOBLE INVESTMENTS AND CONSULTING SERVICES TRUST AND THE NOBLE INVESTMENTS SUPERANNUATION FUND First Plaintiff LEADENHALL AUSTRALIA LIMITED ACN 007 997 248 Second Plaintiff CHI INVESTMENTS PTY LTD ACN 064 569 035 Third Plaintiff AND: SOUTHERN CROSS EXPLORATION NL ACN 000 716 012 Defendant JUDGE: LANDER J DATE OF ORDER: 22 DECEMBER 2008 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. Paragraphs 7 and 9 of the plaintiffs' originating application be struck out. 2. The defendant's application for summary judgment be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 165 of 2008 IN THE MATTER OF SOUTHERN CROSS EXPLORATION NL ACN 000 716 012 BETWEEN: NOBLE INVESTMENTS PTY LTD ACN 007 998 914 IN ITS OWN CAPACITY AND AS THE TRUSTEE FOR THE NOBLE INVESTMENTS AND CONSULTING SERVICES TRUST AND THE NOBLE INVESTMENTS SUPERANNUATION FUND First Plaintiff LEADENHALL AUSTRALIA LIMITED ACN 007 997 248 Second Plaintiff CHI INVESTMENTS PTY LTD ACN 064 569 035 Third Plaintiff AND: SOUTHERN CROSS EXPLORATION NL ACN 000 716 012 Defendant JUDGE: LANDER J DATE: 22 DECEMBER 2008 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 This is an application by the defendant by way of notice of motion for summary judgment pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act). 2 The defendant seeks summary judgment in relation to paragraphs 3, 4, 6, 7, 8, 9, 10 and 11 of the prayer for relief in the originating process. 3 On 25 January 2007 the plaintiffs commenced a proceeding against the defendant seeking an order that Mr Timothy Owen Lebbon be appointed director of the defendant company and consequential orders relating to the constitution of the company. 4 The character of that proceeding changed during the course of interlocutory hearings to the point where the plaintiffs sought pre-trial discovery from the defendant. On 7 August 2007 Finn J made orders in favour of the plaintiffs giving the plaintiffs the right to inspect and copy a number of documents in the defendant's possession. 5 The orders were made on the plaintiffs' lawyers' undertaking to keep the documents confidential, even from their clients. 6 On 2 October 2008 this proceeding was commenced by the plaintiffs against the defendant by originating process in which the plaintiffs seek the following orders: 1. A declaration that the conduct of the affairs of the company is contrary to the interests of the members of the company as a whole. 2. Further, or in the alternative to 1, a declaration that the conduct of the company's affairs is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiffs. 3. In the alternative to 1 and 2, a declaration that the company's failure to demand repayment by Nadi Bay Beach Corporation Limited ("NBBC") is contrary to the interests of the members as a whole. 4. Further, or in the alternative to 1, 2 and 3, a declaration that the company's failure to demand repayment by NBBC is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiffs. 5. An order for the appointment of a receiver over the company's interests pursuant to the mortgage granted by NBBC dated 30 November 1984 ("mortgage") pursuant to Section 233(1)(h) of the Act. 6. In the alternative to 5, an order requiring the company to require repayment pursuant to the mortgage pursuant to Section 233(1)(c) and (j) of the Act. 7. A declaration that NBBC is in breach of its obligations pursuant to clause 3 of the mortgage. 8. Upon the sale of the land the subject of the mortgage, an order determining the value of the plaintiffs' interest in the defendant. 9. An order pursuant to section 233(1)(d) of the Act requiring Boris Andrew Ganke and / or his nominee(s) to purchase the plaintiffs' shares in the capital of the defendant at the valuation determined pursuant to order 8. 10. In the alternative to order 9, an order pursuant to section 233(1)(e) of the Act requiring the defendant to acquire the shares held by the plaintiffs in the capital of the defendant at the valuation determined pursuant to order 8 and authorising and directing reductions accordingly in the defendant's capital. 11. In the alternative to orders 9 and 10 an order that the defendant be wound up pursuant to section 233(1)(a) and 461(1)(k) of the Act. 12. An order as to costs. AND 13. Such further or other orders as this Honourable Court deems appropriate. 7 The plaintiffs have now abandoned the relief sought in paragraph 7. In due course, I will make an order striking out that paragraph. 8 The originating process was accompanied by an affidavit of the plaintiffs' solicitor which exhibited the plaintiffs' proposed statement of claim. The plaintiffs adopted that procedure so as to ensure compliance with the orders made by Finn J to keep the contents of the documents confidential. Because of the undertakings given to the Court, the plaintiffs themselves and their director, Mr Lebbon, were unaware of the contents of the discovered documents at the time this proceeding was commenced. 9 After the proceeding was commenced and on the application of the plaintiffs, I made an order releasing the plaintiffs' lawyers from the undertaking they had given to the extent that they were permitted to provide Mr Lebbon (who is a director of the plaintiffs) with the documents which had been discovered by the defendant. 10 Subsequent to the hearing of this application I made an order allowing the plaintiffs to file the statement of claim, which is exhibited to Mr Clarke's affidavit sworn on 23 September 2008 but in a sealed envelope marked "Not to be opened other than by order of a judge of the Court". 11 The plaintiffs are shareholders in the defendant. They own in the order of 20% to 25% of the capital of the defendant. The defendant was incorporated in 1969 and is a publicly listed company being quoted on the official list of the Australian Securities Exchange Ltd (formerly Australian Stock Exchange Ltd) (ASX). Mr Boris Ganke has been a director of the defendant since 1976. Ms Goh has been a director since 1990. Mr Ganke is a substantial shareholder of the defendant. 12 Nadi Bay Beach Corporation (NBBC) is a company which was incorporated in Fiji in 1969, of which Mr Ganke and Ms Goh are directors. Mr Ganke and Ms Goh are shareholders of NBBC holding 145,001 shares of the 401,000 issued shares. 13 Acron Pacific Ltd (Acron Pacific) was incorporated in 1953 and has as its directors Mr Ganke and Ms Goh, who are also majority shareholders. 14 Northern Star Investment Pty Ltd (Northern Star) was incorporated in 1970 and is a wholly owned subsidiary of the defendant. Mr Ganke has been a director of Northern Star since 1976 and Ms Goh since 1991. 15 The defendant owns about 20% of the capital of NBBC. Northern Star also owns about 20% of the capital of NBBC. 16 As at 30 November 1984 NBBC was indebted to Aureole Investments Pty Ltd (Aureole Investments) in the sum of $2,577,605. At the same date, Acron Pacific was indebted to Offshore Oil NL (Offshore Oil) in the sum of $802,140. 17 The two debts were secured by a mortgage given by NBBC in favour of Aureole Investments and Offshore Oil as mortgagee over 39 pieces of land in Fiji owned by NBBC. 18 The plaintiffs assert that in August 1988 the mortgages were purchased by Mr Ganke who, in turn, transferred 50% of his interest as mortgagee to the defendant and Northern Star and consolidated the other 50% of the mortgage in a company controlled by Mr Ganke (Bonds and Securities (Trading) Pty Ltd) and another entity controlled by Mr Ganke (Mitre Securities Ltd) and Mr Ganke himself. The plaintiffs contend that since that date the defendant has been entitled to 50% of the principal outstanding on the mortgage and entitled to 50% of the interest payable on the mortgage. 19 The plaintiffs contend that it was a term of the mortgage that NBBC should sell and dispose of the land which was secured by the mortgage for the purpose of repaying the mortgage. The plaintiffs' case is that apart from two sales some time in March 2006 NBBC has not sold the land as required by the terms of the mortgage. They also contend that in 2007 the amount owed by NBBC to the defendant, including capitalised interest, amounted to $5,519,513. They contend that notwithstanding that the defendant has at all relevant times been entitled, the defendant has not required NBBC to repay the amount owing under the mortgage. 20 Essentially, therefore, the plaintiffs' case is that the defendant has failed to require NBBC to comply with two terms of its mortgage, namely to sell the land to repay the mortgage debt and to repay the mortgage. 21 The plaintiffs claim that the defendant's affairs have been conducted contrary to the interests of the members of the defendant as a whole and its conduct of the defendant's affairs is oppressive to, unfairly prejudicial to, or unfairly discriminates against the plaintiffs. I have identified the relief which the plaintiffs seek. 22 The proceeding is brought pursuant to s 232 of the Corporations Act 2001 (Cth) (the Corporations Act), which provides that the Court can make an order under s 233 if the conduct of a company's affairs or an act or omission by or on behalf of a company is either contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member or members whether in that capacity or in any other capacity. 23 Section 233 identifies the relief that may be sought. Relevantly, it provides: 233(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order: (a) that the company be wound up; (b) that the company's existing constitution be modified or repealed; (c) regulating the conduct of the company's affairs in the future; (d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law; (e) for the purchase of shares with an appropriate reduction of the company's share capital (f) for the company to institute, prosecute, defend or discontinue specified proceedings; (g) authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company; (h) appointing a receiver or a receiver and manager of any or all of the company's property; (i) restraining a person from engaging in specified conduct or from doing a specified act; (j) requiring a person to do a specified act. 24 Originally, the defendant sought summary judgment in relation to the whole of the plaintiffs' proceeding but, in written submissions filed before the hearing of this application, limited the application to the prayers of relief in paragraphs 3, 4, 6, 7, 8, 9, 10 and 11 of the originating process. As I have said, the plaintiffs have abandoned the relief sought in paragraph 7 of the originating application. 25 The plaintiffs oppose the application. For the reasons that follow, in my opinion, the application should be dismissed. 26 The defendant by limiting its application under s 31A to the prayers for relief mentioned above accepts for the purpose of the application that the plaintiffs' statement of claim identifies an arguable case under s 232. That is implicit in the revised application which does not seek judgment on the proceeding but only seeks "judgment" in relation to part of the relief sought. 27 For the plaintiffs to succeed in this proceeding they will need to establish that the defendant has acted oppressively, in the sense of unfairly, to the members or to the plaintiffs: Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459. 28 In Jenkins v Enterprise Goldmines NL (1992) 6 ACSR 539 at 550, the Full Court of the Supreme Court of Western Australia said: In our opinion the application of the test involves a question of fairness. It is for the court to decide whether in balancing the interests of the company as a whole against minority interests the directors have acted so as to unfairly prejudice the interests of the minority. The court decides this "according to ordinary standards of reasonableness and fair dealing". Whether the conduct is unfairly discriminatory will be judged on standards which reasonable directors with such skills as directors should have, acting bona fide, would think to be fair. 29 In Jenkins 6 ACSR 539, the Court held that once the Court is satisfied that there has been oppression or unfairness within the meaning of s 232 "it is the obligation of the Court to grant whatever relief is best suited to deal with that conduct": p 561. The Court said at 562: There is nothing in any of the authorities, however, which would tend to place a limit on the grant by the court of an appropriate remedy once it is found that the conduct complained of is oppressive, unfairly prejudicial, or unfairly discriminatory. The powers given to the court are extremely wide. They include the power to make orders regulating the conduct of the affairs of the company in the future. This necessarily involves the court making orders which may interfere with the internal administration of the company. There is nothing in the language of s 320 which suggests that the court should be reluctant to interfere where that is necessary or desirable to give effective relief. There is express power to order the appointment of a receiver and manager. 30 In my respectful opinion, the Court's comments are consistent with the wide powers given to the Court by s 233 and the scheme of s 233 which gives an unfettered discretion to the Court to fashion the appropriate remedy for the particular circumstances proved at trial. 31 The plaintiffs' case is that the defendant, by reason of the conflict which its directors have as shareholders and directors of NBBC, has acted oppressively or unfairly to the members. If the plaintiffs succeed, then they will be entitled to argue for any of the relief which is available under s 233. The relief which will be granted will be determined by reference to the circumstances of the case and will be fashioned so as to ensure that the defendant does not act in such a way as to be unfair to any of its members. 32 The defendant argued that none of the relief which is sought, except the declarations sought in paragraphs 1 and 2, would be granted. In particular, it contends that there is no possibility of the plaintiffs obtaining an order for the winding up of a publicly listed solvent company. The defendant's contention is, with respect, somewhat surprising. When analysed, it means that even if the plaintiffs prove that the defendant has by reason of its directors' conduct conducted its affairs unfairly to the interests of the members as a whole or in a way oppressive to or unfairly prejudicial to its members or some of its members, no relief could be given except by way of a declaration (paras 1 and 2) and the appointment of a receiver (para 5). In other words, even if the plaintiffs make out a case there is no reasonable prospect that under s 232 the Court could make an order which sought to stop or rectify the contravening conduct. 33 If the defendant is to succeed on this application the defendant must establish that there is no reasonable prospect of the plaintiffs successfully prosecuting those parts of the proceeding contained in the relief. In these reasons I need only deal with a defendant's or respondent's application for summary judgment under s 31A. 34 Section 31A is not an appropriate procedure for a defendant seeking to strike out the relief sought in an application or statement of claim. Section 31A is concerned with the substance of a proceeding and enables, relevantly, a defendant to apply for summary judgment in respect of the proceeding or part of the proceeding. The Court on such an application has to address the issue as to whether it is satisfied that the plaintiff has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding. An application under s 31A is not an appropriate procedure where a party is seeking to have part of an application or part of a pleading struck out. If the defendant's application were the appropriate procedure the Court would be called upon to give judgment in respect of the relief sought by the plaintiff. A court does not rule upon the relief sought and give judgment upon it. A court gives judgment in respect of the issues insofar as they amount to causes of action within the proceeding. The judgment that will be given in this proceeding in due course is upon the plaintiffs' claim of oppression under s 232. If the plaintiffs succeed the plaintiffs' judgment will be reflected in the relief which the Court fashions. If, on the other hand, the plaintiffs fail, the Court will not give judgment by dismissing the relief but will give judgment by dismissing the proceeding. 35 In Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401, French J said (at [19], [20] and [21]): The question which has to be answered in an application for judgment under s 31A is whether the party against whom the application is made has any "reasonable prospect" of successfully prosecuting or defending "the proceeding" or the "part of the proceeding" in issue. That question is not to be answered by a finding that a party's statement of claim or defence fails to disclose a reasonable cause of action or defence. A pleading may be rectified by amendment so as to raise a reasonable cause of action or defence. It follows that a finding that a pleading should be struck out under O 20 does not mean there must be judgment against the party whose pleading it is. There may yet, by amendment, be a reasonable prospect of successfully prosecuting or defending that proceeding. In order to secure judgment under s 31A it must be shown that the party prosecuting or defending the proceeding has no reasonable prospect of success. This judgment can be made, by reference to pleadings, where there is a defect in the pleadings which cannot be cured. Alternatively, it may be a judgment made by reference to evidence put on in support of an application under s 31A which reasonably excludes the possibility that facts essential to the success of the claim or defence will be able to be established. ... Section 31A is not a vehicle for simply striking out parts of pleadings that are deficient. Section 31A allows for "judgment" or nothing. Alternative remedies with respect to deficient pleadings must be found in the rules of Court. ... 36 In my opinion, what the defendant here seeks to do is to strike out part of the pleading because as it is contended no court could give the relief which is sought, notwithstanding that s 233 of the Corporations Act allows for such relief. That is not an application under s 31A because it would not give rise to a judgment for the whole or part of the proceeding. 37 In White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298, Lindgren J said (at [50]): Section 31A of the FCA Act, like O 20 of the Rules, is concerned with the bringing and defending of proceedings, not just with pleadings; with substance, not just with form. Section 31A(1) is comparable to O 20, r 1 in that they are both concerned with summary judgment for the party who is prosecuting the proceeding. Section 31A(2) is comparable to O 20, r 2 in that they are both concerned with dismissals of proceedings. The word "judgment" in s 31A(2) is defined in s 4 of the FCA Act to mean "a judgment, decree or order, whether final or interlocutory, or a sentence". It is convenient in the context of the present case to think of the judgment to which s 31A(2) refers as an order of dismissal of a proceeding. 38 It is wrong to attempt to use s 31A for something for which it was not designed. It was not designed for the purpose of striking out an application or pleading or any part of a pleading for some defect in the application or pleading. It was designed to enable the Court to give judgment in respect of a proceeding or part of a proceeding when that proceeding or that part of the proceeding has no reasonable prospect of success. It is designed to deal with issues whether it be by way of a cause of action or an issue within a cause of action. It is not designed to attack the adequacy or the sufficiency of a pleading. 39 If any of the prayers for relief were struck out as sought, the Court would not thereby be giving judgment in favour of the defendant for the proceeding or part of the proceeding. The Court could not on the defendant's application give judgment on any part of the proceeding. 40 If the defendant were able to show that the plaintiffs could not hope to obtain any part of the relief sought, that part may be struck out but that is not to give judgment for the defendant on that part of the relief. Indeed, if at trial the plaintiffs showed that they were in fact entitled to the relief which had been struck out, relief could still be ordered. Of course, that is another reason why this application is, with the greatest respect, misconceived. 41 For those reasons, I would dismiss the application insofar as it is brought pursuant to s 31A of the Federal Court Act. 42 However, the defendant could have applied under O 11 r 16 to have part of the application struck out on the ground that the prayers for relief have a tendency to cause prejudice, embarrassment or delay in the proceeding or are otherwise an abuse of process. 43 It would be difficult to sustain an argument that where a pleading raises an arguable statutory cause of action and seeks the relief given by the statute that it offends O 11 r 16. I think, however, that is how the defendant put its case, albeit under the guise of a s 31A summary judgment application. 44 If a party seeks relief which on any understanding must be plainly and obviously not available to that party, the Court would strike out the relief. The Court would need to be satisfied, however, that it was unarguable that the relief sought would not be granted. 45 If, on the other hand, the defendant was relying upon an abuse of process, the defendant would have the onus of showing that the proceeding was an abuse and was brought or maintained for a collateral or ulterior motive. The defendant did not assert an abuse of that kind. 46 Therefore, it seems to me, the statutory relief sought would only be struck out if the Court was convinced that the relief, even assuming the plaintiffs succeeded on their case of oppression, would never be granted. It would be a rare circumstance where a court would say, not having heard a word of evidence, that an arguable case of oppression could not entitle the plaintiffs to any part of the relief given by the statute except a declaration and the appointment of a receiver. 47 However, I shall address the relief sought. 48 The first four paragraphs of the originating application are for declarations. The defendant does not challenge paragraphs 1 and 2 but claims that it is unarguable that the Court would not make the declarations sought in paragraphs 3 and 4. 49 It simply cannot be said that the plaintiffs could never be entitled to the relief sought in paragraphs 3 and 4. The relief sought in paragraphs 3 and 4 are a more precise statement of the declarations sought in paragraphs 1 and 2. The declarations sought reflect the plaintiffs' pleaded case, which the defendant accepts for the argument is arguable. If the plaintiffs made out their claims I think there is a real chance that the declarations which are sought in paragraphs 3 and 4 would be made. 50 No quarrel is taken with paragraph 5. 51 The relief sought in paragraph 6 may be ordered by the Court if the Court is of the opinion, as the plaintiffs claim, that the defendant ought to have required repayment of the mortgage prior to the institution of this proceeding. It cannot be said there is no prospect of an order of that kind. The order reflects the plaintiffs' pleaded case. 52 The plaintiffs have abandoned the relief sought in paragraph 7. 53 The relief sought in paragraph 8 is a precursor to the relief which is sought in paragraphs 9 and 10. Ordinarily, one would have thought the value of the plaintiffs' interest in the defendant would be assessed by reference to the number of shares held by the plaintiffs and the market value of those shares at any particular time, especially when the defendant is a publicly listed company. The plaintiffs' holdings and the market value of their holding is, whilst the defendant remains listed, easily identified and calculated. One would have thought that this kind of order is more appropriate to a company with few shareholders and with shares of unknown value. However, it would not be appropriate to strike out paragraph 8 because it may be that the plaintiffs can successfully contend that the plaintiffs' interest in the defendant is to be valued by some other assessment other than the market value on the ASX. In any event, it could not be said that this prayer for relief had a tendency to cause prejudice, embarrassment or delay. 54 The relief sought in paragraph 10 is, as I say, consequential apparently upon an order made in paragraph 8. Paragraph 10 is an order that could be made. It may be the Court would decide that it is in the plaintiffs', the defendant's and the other members' of the defendant's interests that the plaintiffs' shareholding should be acquired by the defendant so that the plaintiffs could exit the defendant. Such an order would amount to a reduction in the defendant's capital. 55 In paragraph 9 the plaintiffs claim an order that Mr Ganke or his nominee purchased the plaintiffs' shares in capital of the defendant at the valuation determined pursuant to order 8. Mr Ganke is not a party to the proceeding. I raised with counsel for the plaintiffs, Mr S J Doyle, how the Court would order a non-party to purchase the plaintiffs' shares when the non-party had not been heard in relation to the claim of oppression by the defendant. He accepted that such an order would be unlikely unless Mr Ganke were joined as a party to the proceeding. Subsequent to the hearing of this matter, the plaintiffs' solicitors have advised that they do not intend to join Mr Ganke. 56 In those circumstances, I think the order sought in paragraph 9 ought to be dismissed because there is no prospect, in the absence of Mr Ganke being joined as a party, that he would be ordered to purchase the plaintiffs' shares. I would strike out paragraph 9, not pursuant to s 31A but pursuant to O 11 r 16, on the basis that the pleading has a tendency to embarrass or delay the proceeding. 57 That leaves for consideration the order sought in paragraph 11 which I think troubles the defendant most. The defendant claims that there is no prospect that a court could make an order for the winding up of the defendant in circumstances where the defendant is solvent and a publicly listed company. 58 The defendant submitted that the winding up of a publicly listed company in the absence of insolvency even for oppression is virtually unheard of, citing, so it was contended, the last reported case Re William Brooks & Co Ltd [1962] NSWLR 142 where a winding up order was set aside by consent in the High Court. 59 I think that contention is incorrect. In Re Weedmans Ltd (1974) Qd R 377 the company was listed on the Brisbane Stock Exchange: p 382. The trial judge (Lucas J) found that the directors of the company had acted in the affairs of the company in their own interests rather than in the interests of the members as a whole. He found that they had failed "to observe the requisite standard of commercial morality" and their conduct "reacted unfairly and unjustly against other members": p 398. He ordered the company to be wound up as "it seems to me that no other remedy is available to them": p 399. 60 The defendant relied upon a decision of the Court of Appeal in New Zealand in Latimer Holdings Ltd v SEA Holdings NZ Ltd [2005] 2 NZLR 328 in which the Court of Appeal upheld a decision of a trial judge to enter summary judgment against plaintiffs in an application for oppression. 61 However, I do not think that that case supports the defendant's contention. It was argued in that case that the equivalent to s 232 and s 233 of the Corporations Act, s 174 of the Companies Act (NZ), did not apply to a publicly listed company. However, the Court said (at [113]): The operative words of the provision express a general principle which is directed to "an unjust detriment to the interests of a member of the company" (Thomas at p693). That test is an objective one. The provision may be prayed in aid even if the conduct accords with the company's constitution, because even then inappropriate prejudice may still arise. Relief can be given even if the conduct complained of does not involve a want of good faith or a lack of probity. The fact that all members are treated uniformly as members will not necessarily make conduct fair. The reasonable expectations of members are distinctly relevant – though this factor is not in and of itself necessarily determinative – and those expectations are not necessarily restricted to purely "internal", or "formal" expectations. There are no fixed categories of cases to which s 174 apply. The provision is one of general application. Relief may be sought even with respect to a listed company. 62 In the circumstances of that case, however, the Court agreed with the trial judge that it was appropriate for him to have entered summary judgment. 63 I do not think that s 233(1)(a) is not available as a remedy because the defendant is a publicly listed company. I agree, with respect, that there is nothing in s 233 or the Corporations Act which suggests that s 233(1)(a) has no application to a publicly listed company. 64 I would accept, however, that it would be a rare circumstance where an order of that kind would be made and even rarer where the company is shown to be solvent. In the absence of a strong case and a clear need for the relief, the Court would not take the extreme step of winding up a solvent company: Cumberland Holdings Ltd v Washington H Soul Pattinson & Company Ltd (1977) 2 ACLR 307. 65 Now is not the time to enquire into the financial health of the defendant or to determine whether it is solvent. It is not alleged by the plaintiffs that the defendant is insolvent. It is not in the plaintiffs' interests to make such a case. 66 The following matters can be noted. First, the defendant's financial statements have been prepared upon the basis that the defendant is a going concern. Secondly, the defendant's auditor's opinion is unqualified. Thirdly, the defendant, being a publicly listed company on the ASX, has reporting requirements which would include an obligation to advise the ASX of any changes in its financial circumstances. 67 However, that having been said, there are a number of matters that emerge from the defendant's financial statements which have been exhibited to witnesses' affidavits. As at 31 December 2007 there were 56,000,000 fully paid shares and 60,000,000 partly paid shares issued. As at 31 March 2008 there were two substantial shareholders; Mr Ganke with 26,450,372 shares and the plaintiffs and associates with 21,429,716 shares. The plaintiffs and Mr Ganke hold a significant part of the capital of the defendant. The plaintiffs and Mr Ganke are the dominant shareholders in the defendant and between them hold nearly 40% of the defendant's shares. 68 Up to and including the financial year ended 31 December 2004, the defendant's financial statements were qualified by the auditor because the auditor was unable to obtain sufficient audit evidence relating to the NBBC mortgage to form an opinion on whether other information should be included in the financial report. The accounts have not been subject to a qualified audit report since that date. 69 Revenue, which mainly comprised interest payments, more than halved in the financial year ended 31 December 2007. Revenue from interest reduced from $715,559 to $339,593. In the financial year 2007, the defendant made a loss of $83,750. Current assets decreased from $2,258,373 to $700,867 because the directors reclassified $1,734,266 of the mortgage investment as a non-current asset. Non-current assets increased from $3,764,883 to $5,805,192 by reason of that reclassification. 70 Included in assets designated "Available for Sale Financial Assets (Non-current)" were shares in unlisted corporations at cost - $612,627 which apparently includes the defendant's investment in NBBC. 71 The defendant's current liabilities amounted to $1,120,572 up from $568,940. 72 Whereas in the financial year ended 2006 the defendant's current assets exceeded its current liabilities of in the order of $1,700,000, by the end of the financial year in 2007 the defendant's current liabilities exceeded its current assets by around $420,000. The auditor makes no comment on this reversal in his audit opinion. However, as I have said, the accounts have been prepared on the basis that the company is a going concern and there is no qualification in the audit opinion. The auditor must have concluded, notwithstanding the excess of current liabilities over current assets, that the company can pay its debts as and when they fall due and payable: s 95A(1). 73 The mortgage given by NBBC was shown as a non-current asset. A note (8) in the accounts showed: Mortgage Investment is secured over freehold property in Fiji owned by Nadi Bay Beach Corporation Limited. The mortgage investment shown under current receivables in 2006 was reclassified as non current. 74 The company's non-current assets included exploration and evaluation expenditure. Those expenses were included at cost $1,420,312 together with the director's valuation of $7,086,235. The directors revalued the company's 5% interest in a uranium exploration in 2006 from $413,765 to $7,500,000. The 2006 financial statements contain the following note: The Directors have revalued the company's five percent (5%) interest in the Bigrlyi Uranium Joint Venture from a cost of $413,765 to $7,500,000. Energy Metals Ltd, the Operator, has released a JORC compliant resource report to the ASX which estimated resources of 14,000,000 pounds of uranium and 16,000,000 lbs of vanadium. The Directors revalued the company's interest based on the resources estimates and using a price per pound of $75 for uranium and $6 for vanadium, reducing these values to long term contract prices, and allowing for mining costs and further discounting for risks and future timing of cash flows. The ultimate recoupment of costs carried forward in respect of areas of interest still in the exploration or evaluation phases is dependent upon successful development and commercial exploitation, or alternatively, sale of the relevant assets. 75 The company's borrowings increased by $303,000 in 2007 which was used to meet its liabilities as and when they fell due. 76 The accounts show that the company's assets exceeded its liabilities by $15,174,657. 77 The defendant's most recent audited half yearly accounts to 30 June 2008 have been exhibited to one of Mr Ganke's affidavits. Again, the accounts have been prepared on the basis that the defendant is a going concern and, again, the audit opinion is unqualified. 78 The mortgage investment in Fiji is addressed: As shareholders are aware, the company has had, for many years, a substantial investment in a mortgage over freehold properties in Fiji, as well as a shareholding in the Fijian company, for many years. This project has been maturing slowly but surely. Political issues and bureaucratic procedures have been the major cause of delays. Southern Cross expects to receive full value for its investment and should in due course obtain extra benefits from its shareholding in the Fijian company. An independent valuation of the land holdings of about F$20,000,000 was obtained in 2006. This beachfront, freehold property has great potential for the development of holiday apartments and other tourist-oriented facilities, including an international hotel, all in close proximity to the Nadi International Airport. 79 The defendant's current assets are $678,705 (31 December 2007; $700,867). Its current liabilities are $1,719,072 (31 December 2007; $1,120,572). The defendant's current liabilities now exceed the defendant's current assets by $1,040,367. The defendant's liquidity has worsened by nearly $600,000. 80 The defendant's bank overdraft at 30 June 2008 was $998,202. It did not have an overdraft at the previous balance date, 31 December 2007. It would appear that the defendant's banker has supported the defendant over the last six months. The defendant's current liability for "Trade and other payables" was, at 31 December 2007, $484,012. That liability has decreased (i.e. improved) to $350,013. Of the $484,012, $165,278 was a liability to related parties. There are no notes to the 30 June 2008 half yearly accounts which would show whether the related parties' liability has been repaid or reduced. The defendant's liabilities in loans reduced from $636,560 to $370,857. 81 The defendant's consolidated cash flow shows that it made payments of $255,850 for exploration and paid $303,333 for investments during the half year. It incurred $314,703 in operating activities. It repaid $501,721 in borrowings. However, it borrowed $998,202 in an overdraft and borrowed a further $300,000. It made a loss of $46,142 for the six months. 82 The increase in the excess of current liabilities over current assets may indicate the defendant's need for support which may have been given by its bankers. 83 The defendant's fortunes will no doubt be examined at trial. Its directors will have the opportunity of explaining how the defendant is able to pay its debts as and when they fall due. It may be that the defendant has the support of its bankers. I have observed that the defendant's borrowings increased in 2007 by $303,000 and an overdraft liability of $998,202 was incurred. It may be that the defendant has the support of the shareholders associated with Mr Ganke, although this is less likely because there does not appear to be any increase in related party liabilities. 84 However, there is no need to speculate. If the defendant's solvency becomes an issue at trial, those matters can be addressed at that time. 85 It should not be understood that I am suggesting that the defendant is insolvent. I am merely explaining why it would not be appropriate to take away from, as it must be assumed, successful plaintiffs, one aspect of the discretionary relief given under s 233. 86 In the end, it will be a question at trial whether this defendant, if the plaintiffs make out their primary case, should be wound up. 87 I am not persuaded that paragraph 11 of the application should be struck out. I make the following orders: 1. Paragraphs 7 and 9 of the plaintiffs' originating application be struck out. 2. The defendant's application for summary judgment be dismissed. I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate: Dated: 22 December 2008 Counsel for the First, Second and Third Plaintiffs: Mr S J Doyle Solicitor for the First, Second and Third Plaintiffs: Cowell Clarke Counsel for the Defendant: Mr F Kunc SC Solicitor for the Defendant: Marque Lawyers Date of Hearing: 24 November 2008 Date of Judgment: 22 December 2008