New South Wales Supreme Court CITATION : Julie Dawn Rhodes v Christine Elizabeth Fletcher & Anor [2002] NSWSC 637 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 5117/99 HEARING DATE(S) : By written submissions and 19 July 2002 JUDGMENT DATE : 24 July 2002 Julie Dawn Rhodes (Plaintiff) PARTIES : Christine Elizabeth Fletcher (First Defendant) Quasar Professionals ACT Pty Ltd (Second Defendant) JUDGMENT OF : Bergin J COUNSEL : N. Cotman SC / K. Odgers (Plaintiff) R. Commins (solicitor) (Defendants) SOLICITORS : Brown & Partners (Plaintiff) Chamberlains Law Firm (First & Second Defendants) CATCHWORDS : [INTEREST] - oppression suit settled by consent orders - Valuation of plaintiff's shareholding referred under Part 72 to referee - Report remitted to referee for denial of natural justice - Further report finds same value - Consent orders make no provision for interest - Plaintiff claims entitlement to interest - [COSTS] - Competing claims for costs of proceedings to date of consent orders and for Motion for remittal of the matter to referee - Plaintiff's claim for additional costs by reason of alleged unreasonable delay by first defendant in payment of purchase price. LEGISLATION CITED : Corporations Law Supreme Court Rules 1970 (NSW) Dynasty Pty Ltd & Ors v Coombs (1995) 138 ALR 64 CASES CITED : Lord & Anor v Dernacourt Investments Pty Ltd & Ors, unreported, NSWSC, McLelland CJ in Eq, 14 March 1994 Rankine v Rankine & Ors (1995) 18 ACSR 725 Shirim v Fesena [2002] NSWSC 10, unreported, Davies AJ, 25 January 2002 DECISION : See paras [63] and [64] - 22 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIvision BERGIN J JULY 2002 5117/99 JULIE DAWN RHODES v CHRISTINE ELIZABETH FLETCHER & QUASAR PROFESSIONALS ACT PTY LIMITED JUDGMENT 1 These are competing applications in respect of costs and interest in an oppression suit in which the parties finalised the settlement of the substantive issues in July 2001. To save additional costs the parties agreed to proceed by way of written submissions notwithstanding that they had filed affidavit evidence in these applications that put forward different versions of relevant events. 2 I listed the matter for mention on 19 July 2002 to ensure that all evidence on the applications was complete. Mr K. Odgers, of counsel, appeared for the plaintiff and Mr R. Commins, solicitor, appeared for the defendants. An affidavit of the plaintiff's solicitor sworn on 18 July 2002 was filed in Court and included the following: 4. The amount of the costs and disbursements incurred by the Plaintiff are sufficiently material that, if this Court is unable to determine the issue of liability costs, or the related issues, such as the existence or otherwise of the oppression alleged, on uncontroversial facts, the amounts involved may require a contested hearing to properly dispose of the matters. 3 The plaintiff's Submissions in Reply were also filed in court. These included the following: If the Court cannot determine the issue of liability for costs on the basis of an estoppel, or res judicata, or on the basis of the offers made, the Plaintiff submits that since factual issues have been contested for in the submissions which are said to be controversial, some form of hearing appears necessary to assist the Court in determining the issues. 4 Notwithstanding these matters, the parties confirmed that they wished to proceed without any cross-examination of the deponents and maintained their reliance on the written submissions as filed without the need for a "contested hearing". 5 The Summons commencing the proceedings was filed on 20 December 1999. The plaintiff, Julie Dawn Rhodes, sought a declaration that the first defendant, Christine Elizabeth Fletcher, was conducting the affairs of the second defendant, Quasar Professionals ACT Pty Ltd, in a manner that was oppressive and unfairly prejudicial to the plaintiff. The second defendant carried on business as a recruitment company. As at the date of the commencement of proceedings the only directors and shareholders of the second defendant were the plaintiff and the first defendant, holding 49% and 51% of the shares respectively. 6 The plaintiff sought an order that the first defendant purchase the plaintiff's shares in the second defendant for an amount to be determined by an expert to be appointed by the Court. After some negotiations between the parties Bryson J made consent orders on 22 February 2000, inter alia, remitting to Mr Greg Hollands (the referee) the question of the fair market value of the plaintiff's shares in the second defendant. The question of costs was reserved. 7 The referee produced a report dated 29 May 2000 valuing the plaintiff's shareholding as at 1 October 1998, a date agreed between the parties, at $231,002. On 20 June 2000 the first defendant sought orders by way of Notice of Motion that the matter be remitted to the referee for further consideration and report after taking into account further evidence and submissions. On 11 August 2000 I made orders remitting the matter to the referee so that he could provide the first defendant with certain information and allow the first defendant the opportunity to make submissions about that information. 8 There was a delay in this further process by reason of a number of matters. Firstly, the parties agreed to a change in the timetable; secondly, the referee took leave; thirdly, the introduction of the Goods and Services Tax (GST) and the requirements of the Business Activity Statement; fourthly, the final accounts of the second defendant were delayed by reason of the unavailability of the relevant accountant and the extra burden placed upon the accountant by certain requisitions received from the referee; and finally, the closure of relevant offices during the Christmas vacation. 9 The referee produced a second report on 6 April 2001 valuing the plaintiff's shareholding once again at $231,002. On 23 May 2001 the plaintiff's solicitors advised the first defendant's solicitors: We are instructed to proceed with the settlement contemplated in order 9 of the orders made by Justice Bryson on 22 February 2000 without prejudice to our client's right to make application in relation to the issue of costs of the above proceedings. 10 Order 9 of the consent orders made by Justice Bryson was: "Order that the first or second defendant purchase the plaintiff's shares in the second defendant at the valuation referred to in paragraphs 1 & 2". Paragraphs 1 and 2 were the orders for remittal to the referee of the question of the fair market value of the plaintiff's shares in the second defendant as at 1 October 1998. 11 It was on 23 May 2001 that the plaintiff's solicitors first raised the issue of interest on the Valuation Sum. The letter set out a schedule of calculations of interest on the Valuation Sum at 9.5% between 1 October 1998 and 29 February 2000, 10% between 1 March 2000 and 31 August 2000 and 11% between 1 September 2000 and 28 May 2001 totalling $61,455.50. That calculation was based on settlement taking place on 28 May 2001. By 1 June 2001 the plaintiff's solicitors had not received a response to their letter of 23 May 2001 and by letter of that date the plaintiff's solicitors threatened to re-list the matter "with a view to enforcing order 9". That letter also advised an increase in the amount due for "additional interest accrued for the period up to and including 8 June 2001". The total interest was calculated at $62,221.28. 12 The first defendant's solicitors responded on 4 June 2001 pointing out that the consent orders made on 22 February 2000 made no provision for interest and that, in any event, the first defendant should not have to pay for the referee's delays in producing "a proper report". The first defendant's solicitors also pointed out that the orders made no mention of the loan repayment. They also advised that the first defendant had drawn a cheque in favour of the plaintiff in the sum of $231,002, the Valuation Sum, and that settlement could occur at any time. 13 By letter dated 14 June 2001 the plaintiff's solicitors argued that the first defendant "has had the benefit of the whole of the assets and the purchase price since the date of the orders". After noting that there was dispute about the amount of interest payable it was suggested that settlement take place by payment of the Valuation Sum in exchange for the signed transfer and the Court could determine the issue of interest. 14 The loan of $75,589 made by the plaintiff to the second defendant at the commencement of the operation of the business has been a matter of dispute between the parties. The arrangement between the parties was that the plaintiff would invest the operating capital into the business and the first defendant would operate the business from day to day. The referee's first report referred to the loan and that it: "should be repaid in full". I have referred to the submissions of the parties in relation to this statement in my judgment delivered on 11 August 2000: [2000] NSWSC 797, [51] – [53]. 15 The plaintiff wished to extract herself from involvement in the second defendant and also wanted the loan repaid. The first defendant had maintained through her solicitors that the repayment of the loan would cause cash flow problems for the second defendant and therefore suggested a repayment schedule. The consent orders made by Bryson J on 22 February 2000 did not deal with the issue of the loan. The requirement of the repayment of the loan has been the subject of much negotiation and communication between the parties since the commencement of the proceedings. By letter dated 12 July 2001 the plaintiff's solicitors threatened to commence proceedings for recovery of the loan as follows: Unless the loan amount of $75,589 payable to our client, is paid by Monday 16 July 2001, we intend to file on behalf of our client a Motion for Summary Judgment and a Statement of Claim which will include, inter alia, a claim for interest on the amount due to our client, and will look to recover indemnity costs against your client. 16 The first defendant's solicitors replied by letter dated 19 July 2001 suggesting a payment of $12,589 on or before 31 July 2001 and $12,600 a month thereafter for a period of 5 months. On 17 July 2001 the plaintiff's solicitors advised that if the loan was not repaid in full by close of business on 19 July 2001 they were instructed to commence proceedings without further notice to the first defendant. 17 The plaintiff received the Valuation Sum on 29 June 2001 and that the share transfer was signed on 6 July 2001. It is also apparent that the parties executed a Deed on 6 July 2001. The loan has also been repaid. 18 The plaintiff seeks costs of: (1) the commencement and conduct of the proceedings up to 22 February 2000 when Bryson J made the consent orders; (2) the preparation of the first report as part of the costs of the reference to the referee; (3) the costs of the motion for remittal of the first report to the referee; and (4) the costs of the intermediate steps to settlement including the costs of the second valuation report. The plaintiff alleges unreasonable delay by the first defendant in settlement and seeks interest on the Valuation Sum from the date when it is alleged settlement ought to have occurred, 29 May 2000, the date of the first report, until the date of settlement, 6 July 2001. 19 The defendants seek orders: (1) that the plaintiff pay the costs of the proceedings up to 22 February 2000; (2) that the first defendant have the costs of the reference leading to the first report or that each party pay their own costs of the reference up to the first report; (3) that the plaintiff pay the defendants costs of the first defendant's notice of motion for remittal. It is submitted that the plaintiff is not entitled to interest on the Valuation Sum. Costs up to 22 February 2000 20 The plaintiff submitted that it was reasonable to commence the proceedings. It was submitted that a review of the various offers that were made by the plaintiff and rejected by the defendant lead to the irresistible conclusion that the commencement of proceedings was reasonable in all the circumstances. 21 The first defendant on the other hand submitted that a review of the correspondence demonstrates that the commencement of proceedings was unnecessary and unreasonable. The first defendant's evidence is that the offers made by her were capable of resolving the matter "without the initiation of the current proceedings, or the subsequent obtaining of orders from the Court" (affidavit, sworn 22/02/2002, at par [12]). 22 I have reviewed the correspondence between the parties and it is obvious that as at December 1999, over a year after the plaintiff offered the first defendant first refusal on the sale of her interest in the second defendant, the first defendant was still arguing about the value of the shares, and how the value was to be assessed (letter 19/10/99). The thrust of the first defendant's submissions is that the steps taken by the plaintiff in commencing the proceedings were unnecessary and unreasonable. In this regard it is important to remember that on 24 December 1999, the first return date of the Summons, the court made orders without the defendants' consent noting that the defendants "wish to maintain their right to object to the jurisdiction of the Court". This position was somewhat at odds with the first defendant's solicitor's letter of 23 December 1999 in which consent was given to the interlocutory orders being made. 23 On 19 January 2000 the first defendant's solicitors made an offer "without prejudice save as to costs" in which the first defendant offered to purchase the plaintiff's shares in the second defendant for either the fair market value determined by an accountant as at a date between 1 October 1998 and 31 December 2000 or 50% of the retained earnings of the second defendant. A further part of the offer was that the plaintiff must resign as director whereupon the loan funds would be repaid. It was suggested that each party bear their own costs as at the date. The first defendant's solicitors advised that the suggested date range was designed to allow the plaintiff to have a valuation determined prior to the impact date of any alleged oppressive conduct. 24 The first defendant made a further offer on 17 February 2000 with specific adjustments in relation to the fair market value suggested in the 19 January offer and once again suggested that each party bear their own costs. Although reference has been made to the various offers made by the parties, no specific amounts have been offered in a manner that significantly impacts upon the orders to be made. The orders made by Bryson J on 22 February 2000 were made "by consent and without admission" with "costs reserved". 25 On a review of all the evidence it seems to me that to obtain agreement for the valuation to take place, the plaintiff had to commence these proceedings. It was only after the proceedings were commenced that the plaintiff obtained a position in which her interests were appropriately protected. She had been attempting for at least 14 months to extract herself from her involvement in the second defendant. It was the plaintiff who had provided the capital injection, by way of loan, and she wished to sell her interest and obtain repayment of the loan. When the plaintiff became concerned about the operation of the second defendant and the first defendant's involvement in that process and in the light of the delay in reaching agreement about her departure from the second defendant, proceedings were commenced. I am satisfied that such steps were reasonable and that the first defendant should pay the plaintiff's costs of the proceedings up to 22 February 2000. Costs of the Motion for Remittal 26 The plaintiff resisted the first defendant's Motion to have the matter remitted to the referee and failed in her opposition. The plaintiff's submissions focus upon the claimed dispute between the parties in respect of the loan and correctly point out that the loan was not an issue in the proceedings. It is also noted that the matter upon which the first defendant succeeded, the denial of natural justice, was a matter raised late in the proceedings. It was, however, the successful claim. The plaintiff could have ceased her resistance to the remittal, but did not. 27 The plaintiff also emphasised the fact that after remittal, the valuation in the second report was the same as the valuation in the first report. It has been suggested that the whole process of requiring remittal to the referee was for the ulterior purpose of delaying the settlement date to enable the first defendant to obtain funds to purchase the plaintiff's shareholding at the Valuation Sum and to repay the loan. This submission is unsustainable. The plaintiff did not appeal from my judgment of 11 August 2000 in which I found that the referee had denied the first defendant natural justice. The fact that the Valuation Sum was the same in both reports cannot be a basis upon which a submission can be successfully made that the remittal was effectively a waste of time and that therefore costs of the Motion should be sheeted home to the first defendant. 28 The integrity of references under Part 72 is maintained by curial supervision. In this case it was a necessary step to remit the matter to the referee to ensure that the process was not infected and was not perceived to be infected by a denial of natural justice. The fact that the amount remained the same is, in this case, irrelevant. 29 Evidence in these applications has included evidence of discussions with the referee after my judgment on 11 August 2000. That evidence is led to suggest that the referee informed the first defendant that he was going to keep the respective parties' submissions confidential. The first defendant denies she was so informed. The appropriate approach would have been to challenge the judgment delivered on 11 August 2000 and/or make application to call additional evidence in respect of the judgment prior to the entry of the orders. None of this was done. I am not satisfied that I should have regard to this evidence in the light of my judgment of 11 August 2000. In my view even if such evidence were to be considered, the first defendant's denial and the failure to call the evidence in the earlier proceedings leads to a neutral position. It assists neither the plaintiff nor the defendants. 30 There were a number of claims made by the first defendant in respect of the referee's report that were not successful. These were matters that the plaintiff had to prepare to meet during the hearing and did meet successfully during the hearing of the Motion. It was not until the plaintiff observed the first defendant's written outline of argument just prior to the hearing that the natural justice claim was fully appreciated. Doing the best I can to make a fair and just costs order in respect of the Motion, I am satisfied that the plaintiff should pay 50% of the defendants' costs of the Motion up to the hearing date and the whole of the defendants' costs of the hearing of the Motion. Costs Otherwise 31 The plaintiff submitted that the first defendant delayed both the process of valuation and the settlement. The complaints made commence from the premise that the remittal to the referee was a waste of costs because the valuation remained the same and, in any event, the first defendant's conduct between the date when the matter was remitted and the date of the second report caused further delay and further costs. 32 The first submission must fail. As I have already said, the remittal to the referee was necessary notwithstanding the identical valuation in the second report. However it is necessary to consider the evidence in respect of the allegations that the first defendant's conduct caused further delay. The first defendant's evidence in her affidavit sworn 22 February 2002 is that the delay in the provision of the second report was due to events beyond her control. Those events included: (a) annual leave taken by the referee; (b) the referee's request for the production of a set of monthly accounts for July 1998 to October 1998; (c) complications in completion of the second defendant's final accounts to 30 June 2000 as a result of the introduction of the Goods and Services Tax; (d) a significant workload for the referee and the second defendant's accountant by reason of the Business Activity Statement requirements for numerous other clients; and, (e) the departure of the second defendants bookkeeper. 33 These are all matters that seem to me to be supported by the correspondence between the parties. Additionally it is alleged that the first defendant intentionally delayed the date of settlement because she did not have the money to effect settlement. There was a suggestion for staggered repayments of the loan which took up some time but the settlement was also delayed by the very late claim for interest, about which the first defendant was entitled to take advice. 34 Problems have arisen for the parties because the consent orders, by which their conduct was governed since 22 February 2000, made no provision for the payment of interest and did not deal with the loan at all. The threat by the plaintiff's solicitors to commence separate proceedings in respect of the repayment of the loan recognised that the consent orders did not make any provision for repayment. The fact that interest was not mentioned until 23 May 2001 also caused delay. The first defendant relied upon the terms of the consent orders that, once again, made no express provision for the payment of interest. The issue of interest is dealt with later in this judgment, but the fact that the claim for interest was made so late is important in considering the allegation that the first defendant unreasonably delayed settlement. 35 Having regard to all these matters I am not satisfied that there was unreasonable delay. The first defendant was entitled to take the time to consider the issue of the claim for interest and a sensible course was adopted that enabled the plaintiff to receive the Valuation Sum on 29 June 2001. 36 In Submissions in Reply the plaintiff raised a further argument. It was submitted that although the consent orders were made "without admission" the first defendant is estopped from denying that oppression occurred. It was submitted that the jurisdictional basis for the court to make the consent orders was that oppression had occurred. The fact that a reference under Part 72 was part of the consent orders is said to support the proposition that the parties must have implicitly admitted the existence of any necessary condition of the court's power to make the order. It is submitted that the necessary condition was a finding that oppression had occurred. In support of these submissions the plaintiff relied upon Shirim v Fesena [2002] NSWSC 10, unreported, Davies AJ, 01 September 2000; and Lord v Dernacourt Investments Pty Ltd, NSWSC, unreported, McLelland CJ in Eq., 14 March 1994. 37 In Shirim the Court was considering a situation quite different to this case. In Shirim the plaintiffs commenced the oppression suit and filed three affidavits in support. The defendants did not file any evidence and the plaintiffs filed a Notice of Motion seeking summary judgment. In that application the plaintiffs/applicants read those three affidavits. The Motion was resolved by consent orders. At [9] Davies AJ held that "the orders of the Court were made on the footing that the Court had averted to those affidavits". The orders included an order for the purchase of the shares but importantly also included the following: 4. The Court notes that - The orders referred to in Order 1 hereof are made pursuant to section 260(2) of the Corporations Law and that in making such orders the Court is of the opinion referred to in that subsection. 38 Davies AJ held at [19]: In my opinion, the defendants were estopped from denying that oppression occurred and that of the nature of the oppression was to be found within the confines of the three affidavits of Dr Smith. The fact of oppression was not merely implicit in the order of 14 March 1996, it was made explicit by the note in the orders of 14 March 1996 that the Court was of the opinion referred to in s 260 (2). 39 This case is different. There was no evidence read by the court. The parties explicitly, and without admission, decided that the court would not determine the question of oppression. The parties choose a date for the valuation of the shares at a time prior to the alleged acts of oppression, agreed that such valuation would be the purchase price for the shares and agreed to the purchase at that price. That meant that the purchase price was not to affected by: (a) a reduction if oppression had occurred and the value had declined; (b) a reduction if oppression had not occurred and the value had declined in any event; or (c) by an increase if the value had increased. 40 In Lord v Dernacourt Investments Pty Ltd McLelland CJ in Eq. dealt with two appeals from a Master. Consent orders had been made referring the matter to the Master "to take such accounts and to conduct such enquiries as may be necessary to determine the market value" of the shares in question (BC9402299 at p 1). The Master had rejected a submission by the plaintiffs to the effect that it must be assumed as a sub-stratum for the valuation that it was a buy out of an oppressed minority shareholder and a discount to the relevant valuation was not justified. McLelland CJ in Eq said at BC9402299 at 5 and 6: So far as the law of New South Wales is concerned, I am of the opinion that by consenting to an order being made by the Court the parties must be taken to have implicitly admitted the existence of any necessary condition of the Court's power to make that order. … In the present case the consent of the parties was expressed to be given "without admissions". To the extent that that qualification is inconsistent with the implicit admission of the existence of any necessary condition of the Court's power to make the order, it is ineffective (see Ashenden v Stewarts and Lloyds (Australia) (1972) 2 NSWLR 484). Furthermore, in the case of a final order (as was the order of Brownie J) the making of the order is an implicit determination by the Court that any condition exists upon which its jurisdiction to make that order depends (see Commissioner of Payroll Tax v Group Four Industries (1984) 1 NSWLR 680 at 684), and creates an estoppel to that effect binding upon the parties.. 41 In that case McLelland CJ in Eq. found that the "without admissions" qualification to the consent orders precluded the implicit admission from being given more specific content by reference to allegations in the pleadings which were put in issue. In the present case, applying the principles to which McLelland CJ in Eq. referred in Lord v Dernacourt Investments Pty Ltd, the parties may be taken to have impliedly accepted that some form of conduct under s 260 of the Corporations Law had occurred for the purposes only of ensuring that the condition necessary to enable the Court to make the consent orders was present. That is not to say that all of the allegations made by the plaintiff, or indeed any specific allegations, can be taken to have been made out. This is particularly so having regard to be specific orders made on 22 February 2000. 42 The plaintiff submitted that because the valuation is an adjunctive order to acquisition and because acquisition flows from the Court's jurisdiction in respect of oppression the first defendant should pay the plaintiff's costs of the valuation. The facts in this case are that for whatever reason the parties agreed to the consent orders made by Bryson J on 22 February 2000, they agreed to valuation and also to such valuation being binding and conclusive and finally and importantly that the plaintiff's shareholding would be purchased by the first or second defendant at that valuation amount. 43 The consent orders were made "without admission". Those orders reflected a settlement of the dispute in the litigation. The parties agreed that the purchase would take place, but as a condition of the purchase, the valuation was to be made, not by the Court, but by the referee. The nature of the reference to the referee was a matter of dispute in the motion for remittal. I concluded, at [16], that Part 72 was the "closest "fit" for the reference" under the consent orders. There was no challenge to that judgment. 44 I am satisfied that the valuation was an adjunct to the consent orders and that the first defendant should pay the plaintiff's costs of the reference for valuation, both in respect of the first and second report. 45 I am not satisfied that the first defendant delayed settlement unreasonably after the production of the second report on 6 April 2001. In the circumstances I am satisfied that it is fair and just that each party pay their own costs after the second report up to the date of settlement on 6 July 2001. Interest 46 The plaintiff submitted that interest should be payable on the valuation figure arrived at by the referee because: (1) the first defendant has had the benefit of the whole of the assets of the second defendant and the purchase price since 1 October 1998; and (2) the authorities on valuation and purchase in oppression cases say that where valuation is done at a date before the oppression, interest from that date is allowed to account for the benefit, logically subject to giving credit for benefits received by the seller since that date. 47 The plaintiff also submitted that there is a separate basis upon which interest is claimed and from a different date. It is submitted that there was inordinate delay in the payment for the plaintiff's shareholding. It was submitted that this was occasioned by the preparation of the referee's second report on 6 April 2001 by reason of the first defendant's Motion for remittal. It was also submitted that had the first defendant complied with the consent orders made on 22 February 2000, and made payment promptly, the plaintiff would not have reason to seek an order for interest. 48 The plaintiff submitted that the first defendant did not provide the referee with accurate information, thus requiring him to requisition the second defendant's accountant for the purposes of producing special-purpose accounts. This is denied by the first defendant. It was submitted that the first defendant's conduct in bringing the Motion for remittal, providing inaccurate information to the referee and providing information slowly and unreasonably delaying the settlement payment, are grounds upon which this Court would exercise its discretion to order interest on the Valuation Sum. 49 The plaintiff relied upon Rankine v Rankine & Ors (1995) 18 ACSR 725 and Dynasty Pty Ltd & Ors v Coombs (1995) 138 ALR 64 in support of the application for interest. In Rankine the Queensland Court of Appeal was dealing with an appeal against an interlocutory order appointing a special referee to determine the value of the appellant's shares. Pleadings had been exchanged and it was common ground that the ultimate relief should be that the respondents or the company should purchase the appellant's shares at a price to be determined. The interlocutory order was preliminary in the sense that further submissions were to be made as to the date as at which the valuation was to be made, the sequence in which issues were to be determined, and the procedures by which the referee was to conduct the valuation. 50 The appellant objected to the interlocutory order on the basis that it would terminate the proceedings without any judicial determination of the allegations of oppression or their effect on the value of the shares. One of the orders made, order 12, was that payment was to be made to the appellant at the valuation determined by the referee. That is not dissimilar to orders 8 & 9 in the consent orders made by Bryson J in these proceedings. On appeal in Rankine, order 12 was set aside on the basis that (at 733): The obtaining of the valuation is a step that can reasonably assist towards eventual judicial resolution of the case, but the order in cl 12 pre-empts ultimate judicial resolution of the issues of oppression and their effect. 51 In this case no order was sought setting aside orders 8 and 9 and the parties ultimately settled their differences without any need for "judicial resolution of the issues of oppression and their effect". 52 In Rankine Macrossan CJ referred to the need to take into account such matters as the value of corporate assets shown to have been misappropriated by the wrongdoers, the fact that their depredations or mismanagement might have reduced the value of those assets, and correspondingly the shares themselves, in arriving at a "payout" figure for the shares of the complaining shareholder (at 727). The Chief Justice said at 727: "Otherwise the essentially compensatory nature of the remedy would be defeated and the relief granted would fail to rectify the oppression complained of". Although his Honour suggested that logically an investigation into such matters should occur first, prior to a valuation, he expressed the view at 727: There appears to be no reason why the process of valuing the shares should not be entered upon before such questions are finally resolved, so as to arrive at a figure which, apart from further adjustments or allowance for the factors described, can at least be used as a starting point for arrival at a final value. 53 Thomas J noted that the order directed the valuation was to be determined on the basis that the appellant's shares "have a value equal to one-quarter of the value of the company either as a going concern or by reference to its underlying assets, whichever is the greater" (at 729). His Honour said that 729-730: To speak of the "date of valuation" of shares in oppression proceedings is apt to confuse unless one clarifies what is meant by "valuation". What needs to be assessed is the value of the shares at a selected date had it not been for the effect of the oppressive conduct ( Scottish Co-Operative Wholesale Society Ltd v Meyer [1959] AC 324, 364; Re Golden Bread Pty Ltd; at 50, 55). The underlined words show that the price is not the amount of a valuation at a particular time, but rather a finding of hypothetical fact. The figures attributable to each will commonly be different. The valuation of the shares at the given date will not necessarily provide the answer that the parties need. It may however take the parties some distance towards the goal if it can be used as a figure from which deductions or to which additions may be made in the light of subsequent findings as to the effects of earlier acts of oppression. 54 Thomas J (at 730) also referred to Waddell CJ in Eq's judgment in Sanford v Sanford Courier Services Pty Ltd (1986) 10 ACLR 549 in which his Honour adopted the approach in Re Golden Bread observing at 562: "What has to be arrived at is a value which is fair in all the circumstances, disregarding the effect of the oppressive conduct which has occurred". Thomas J also referred to Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 and then noted (at 730) the "subtle and complex" nature of the duty alleged to have been breached and the compensatory nature of the award in an oppression suit and said: "The ultimate finding of the price that should be paid cannot be made until the nature and effect of the oppression has been identified and its effect quantified or allowed for" (at 731). 55 Thomas J also noted that a wide range of misconduct was alleged and that "at some stage of this litigation, failing settlement, a determination will have to be made as to whether the respondents acted in breach of their duties, and whether such acts had any effect upon the value of the company" (at 731). In this case such determination was never made and the parties never required the court to make such a determination because they settled their differences. 56 In Dynasty the Full Court, (Spender, O'Loughlin and Branson JJ), referred to the trial judge's approach and in particular to his decision to undertake a valuation exercise using book values for the assets. The appellants attacked the trial judge's decision to allow interest on the value at the rate of 12%. The Full Court said, at 85, that "The date at which shares are to be valued in oppression cases varies having regard to all relevant circumstances". The trial judge found that oppression commenced in March 1998. The Full Court concluded that 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. The trial judge "opted" for the former and thus permitted the appellants to benefit from their conduct because they enjoyed, wholly, all subsequent benefits. The Full Court saw "nothing wrong in treating the interest factor as "compensation" for the" the respondent "not participating in those benefits" (at 86). 57 This case is distinguishable from Dynasty. As I have already said the parties did not require judicial determination in respect of any alleged acts of oppression. The valuation process was one agreed between the parties and the valuation was agreed to be "conclusive and binding". The parties agreed by order 9 that the plaintiff's shareholding would be purchased for that value. The principles from the cases relied upon by the plaintiff as to an interest component being part of the compensation for the oppression are not applicable in the factual circumstances of this case. 58 What the plaintiff seeks to do is to revive the dispute that has been settled. Indeed the first defendant's evidence in her affidavit sworn on 22 February 2002 is as follows: 32. As to the matter of interest on the valuation amount, it was the Plaintiff who chose the date of the share's valuation. This concession was made following the Plaintiff's allegation that I was running down the business, and that this action would accordingly affect the value of her share. In order to refute this allegation, I offered to allow the Plaintiff to choose the date at which her share would be valued. The plaintiff specified the date as the date of her first offer the sell, being 1 October 1998. 33. In this regard, if interest was to be claimed on the valuation amount, I would not have agreed to the date chosen by the Plaintiff. 34. At no stage prior to the valuation being agreed upon and completed was this matter raised by the Plaintiff. Should the Plaintiff have been concerned about the benefit of the purchase price remaining with the Second Defendant until settlement of the matter, it was open to her to bring this issue up for discussion and/or seek orders dealing with it. 59 The plaintiff, in her affidavit sworn 18 January 2002, states: 36. As to the First Defendant's refusal to pay any interest on the valuation figure arrived at by Mr Hollands, I say that the First Defendant has had the benefit of the whole of the assets of the Second Defendant and the purchase price since 1 October 1998 being the date from which I contend that the affairs of the Second Defendant were being conducted in an oppressive manner. At the very least, I say that I am entitled to interest on the valuation figure of $231,002 from the date of the orders made by his Honour Bryson J on 22 February 2000. 60 In her affidavit sworn 19 March 2002 the plaintiff states: 53. In July 2001, I received from the First Defendant the valuation amount ascribed to me by Mr Hollands in the Second Defendant as at 1 October 1998. However, from October 1998 until July 2001, the First Defendant had the sole use of the goodwill, the benefit of my loan, share of retained earnings and personal financial guarantees with which to operate the business for her profit. During this period the First Defendant unilaterally drew in excess of $140,000 in salary and superannuation payments and received the benefit of dividends. 54. I made no attempt to withdraw from the factoring debt funding arrangements and at no stage did I disrupt the operations of the Second Defendant. 55. As to paragraph 32 of the Fletcher affidavit, the date of 1st October 1998 was selected as the date of valuation of my interest in the Second Defendant as it was date before which the oppressive conduct began. 61 This case is distinguishable from the facts of the cases relied upon by the plaintiff. This case never went to trial on the question of oppression. The implicit admission of the existence of the necessary condition of the Court's power to make the consent orders referred to earlier does not convert this case into one in which an award of interest is appropriate. The parties reached an agreement and made no provision for interest to be paid. The parties agreed that the valuation was conclusive and binding and that the first defendant would pay the valuation sum (orders 8 & 9). The plaintiff is unable now to impose upon the defendants a claim for interest that was never contemplated by the orders and not made until after the second report. In any event the valuation was made on 6 April 2001 and the obligation imposed on the defendants by the consent orders was to pay that amount. It was paid within 3 months in circumstances in which I have found there was no unreasonable delay by the defendants. 62 There was an obligation to pay only that amount. It is true that the defendants have had the benefit of the purchase price since October 1998 but the consent orders did not require the defendant to pay the plaintiff at any particular time. I am not satisfied that it is now appropriate to rewrite the arrangements that the parties made in February 2000 by increasing the amount the first defendant is required to pay the plaintiff by an award of interest. I refuse the plaintiff's application for an order for the payment of interest. 63 The orders that I make are as follows: (1) the first defendant is to pay the plaintiff's costs of the proceedings up to 22 February 2000; (3) the first defendant is to pay the plaintiff's costs incurred in the reference to the referee both for obtaining of the first report of 29 May 2000 and for obtaining the second report of 6 April 2001; (3) the plaintiff is to pay 50% of the defendants' costs of the Motion up to the date of the hearing of the Motion and the whole of the defendants' costs of the hearing of the Motion in respect of which I gave judgment on 11 August 2000; (3) otherwise each party is to pay their own costs; and, (4) I refuse the plaintiff's application for interest. 64 As each party has had a measure of success in respect of these applications, I am satisfied that a fair and just order is that each party pay their own costs of these applications. *********************************** Last Modified: 07/25/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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