New South Wales Supreme Court CITATION : COOKE v. FAIRBAIRN; FAIRBAIRN v. COOKE [2003] NSWSC 232 HEARING DATE(S) : 17-20/03/2003 JUDGMENT DATE : 14 April 2003 JURISDICTION: EQUITY JUDGMENT OF : Bryson J at 1 DECISION : Proceedings claiming shares dismissed with costs. Oppression proceedings succeed: further consideration of orders. CATCHWORDS : CORPORATIONS-oppression-disputes as to entitlement to shares in private company- 100 shares-holder of 50 shares claimed to be entitled to remaining 50 under oral agreement with their holder, now deceased- claim failed on facts and 50 shares passed to executor of deceased holder- claim by executor for remedy for oppression and for winding-up succeeded on the basis of management of company in interests of continuing shareholder, irregular payments, absence of dividends and state of conflict- decision for compulsory purchase or, if not practicable, for winding-up. LEGISLATION CITED : Duties Act 1997 s.301 s.233, s.1072A of the Corporations Act Plunkett v. Bull (1915) 19 CLR 544 CASES CITED : Martin v. Australian Squash Club (1996) 14 ACLC 452 Reid v. Bagot Well Pastoral Co. (1993) 12 ACSR 197 Sandford v. Sandford Courier Service Pty Ltd (1986) 10 ACLR 549, PARTIES : Eric Fairbairn (Executor): Pltf in 2246/02; Dft in 2781/02 William Peter Cooke: Dft in 2246/02 and Pltf in 2781/02 FILE NUMBER(S) : SC 2246/02 and 2781/02 COUNSEL : R. Newlinds - Pltf; 2246/02 J. Wilson - Pltf in 2781/02 SOLICITORS : Markham Geikie Farrugia - Pltf in 2781/02 Webster O'Halloran & Associates - Pltf in 2246/02 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J. MONDAY 14 APRIL 2003 2246/02 Erik Fairbairn v. William Peter Cooke & Ors 2781/02 William Peter Cooke v. Erik Fairbairn JUDGMENT 1 HIS HONOUR: Two proceedings which relate primarily to entitlements to shares in Aluminium Louvers and Ceilings Pty Ltd (ALC) were heard together. ALC was incorporated in New South Wales on 6 May 1980 as a proprietary company. After some changes early in the company's life there were, from 1 May 1984, four holdings and a total of 100 shares in ALC. William Peter Cooke, who is a party to these proceedings, and William Norman Cooke whose estate is now represented by Mr Erik Fairbairn as executor, each held 30 shares. Mr W.P. Cooke is a son of the late W.N. Cooke. John Edward Cooke and Martin Cooke each held 20 shares in ALC. They are also sons of the late Mr W.N. Cooke. In 1993 Mr J.E. Cooke and Mr Martin Cooke each transferred his 20 shares to a son; from then on those two holdings of 20 shares each were held by Mr Matthew Cooke and Mr Paul Cooke. The registered shareholdings were still in that state when Mr W.N. Cooke died on 26 December 2000. On 28 February 2001 a transfer dated 22 November 2001 from Mr Matthew Cooke to Mr W.P. Cooke of 20 shares was registered; since then Mr W.P. Cooke has been the registered holder of 50 shares, half the issued shares. 30 shares continue to stand in the name of the late Mr W.N. Cooke, and 20 shares continue to stand in the name of Mr Paul Cooke. Mr Paul Cooke signed a transfer of his 20 shares to Mr W.N. Cooke on 20 November 2000; however, although the directors of ALC agreed by resolution on 19 December 2000 to approve the transfer, the transfer has not been produced to the company for registration and hence has not been registered. Indeed so far as evidence shows it was not stamped until 11 March 2003, and until that time could not have been registered even if it had been produced to the company: see Duties Act 1997 s.301. 2 Mr W.N. Cooke was married first to Verona Cooke, who was the mother of Mr W.P. Cooke and his brothers John Edward Cooke and Martin Cooke. Verona Cooke died on 30 June 1981. Mr W.N. Cooke married Dorothy Cooke in 1982. There are no children of that marriage. Mr Erik Fairbairn is the son of an earlier marriage of Mrs Dorothy Cooke. Mr W.P. Cooke made his last will on 11 December 2000. There are copies or references in evidence to several earlier wills which he had made, but any earlier will was revoked by cl.1 of the last Will. Mr Erik Fairbairn was one of two executors appointed by the will and he obtained probate on 9 February 2001. Dorothy Cooke renounced probate. Among the assets in Mr W.N. Cooke's estate in the probate inventory are 50 shares in Aluminium Louvers and Ceilings Pty Ltd and one share in Derizu Pty Ltd. The will gave some property not involved in the present dispute to various persons: a miniature steam tractor to Narara Steam Co. Op Inc, an opportunity to purchase a model locomotive to Narara Mode 1 Steam Club, land in the Bahamas to Mr W.N. Cooke's three sons and a villa in Mahon, Spain to Mr John Edward Cooke. 3 Then cl.7 of the will provided: I GIVE the rest and residue of my estate to my wife DOROTHY COOKE, including but not limited to my shares in Aluminium Louvres and Ceilings Pty Ltd, all moneys both in Australia and abroad, accounts in Natwest Bank England, Northern Rock Newcastle, Northern Rock Guernsey and ANZ deposits, all my shares, my house at 23 Fountains Rd, Narara, chattels and belongings and my machinery and accessories, the last to be sold by auction or otherwise as my said wife thinks fit. 4 In proceedings 2246 of 2002 commenced on 15 April 2002 Mr Erik Fairbairn is the plaintiff and Mr W.P. Cooke is the first defendant; ALC and Derizu are the second and third defendants. Claim 1 is the principal claim; it is a claim for a declaration that the shares in ALC are held by Mr Fairbairn as executor of W.N. Cooke – 50 shares, by Mr W.P. Cooke – 30 shares and by Mr Matthew Cooke – 20 shares. The last part of this claim has been overtaken by events as Matthew Cooke's shares have been transferred to Mr W.P. Cooke. Claim 3 is a claim for a declaration that the affairs of ALC have been and are being conducted oppressively; claim 4 is a claim for orders under Part 2F.1 particularly s.233, and s.461 of the Corporations Act that ALC be wound-up; and claim 6 alternatively claims a compulsory purchase by Mr W.P. Cooke of the shares owned by W.N. Cooke's estate. 5 There are also some ancillary claims. Claims 9 to 15 relate to Derizu Pty Ltd; the claims are generally similar to those relating to ALC and seek to establish (claim 9) that the only 2 issued shares in Derizu are held by Mr Fairbairn as executor as to one share and by Mr W.P. Cooke as to one share. Claim 17 claims an order that ALC and Derizu pay Mr Fairbairn all employee entitlements of the late W.N. Cooke. 6 Mr W.P. Cooke commenced proceedings 2781 of 2002 on 20 May 2002 and claims a declaration that Mr W.P. Cooke holds the 50 shares held by the late W.N. Cooke in ALC in trust for Mr W.P. Cooke absolutely; alternatively (claim 2) a similar claim as to 30 of those shares; and (claim 3) that Mr W.N Cooke and his estate hold 20 shares acquired from Paul Cooke in November 2000 in trust for Mr W.P. Cooke and for the estate as tenants in common in equal shares. 7 It is useful to observe the distinction between registered ownership of shares and beneficial ownership. There is no room for doubt that Mr Fairbairn as executor is entitled to have the 30 shares in ALC which at present appear in the register as owned by Mr W.N. Cooke transmitted into Mr Fairbairn's name as executor; under s.1072A of the Corporations Act the company must register Mr Fairbairn as the holder of those shares if he so elects. Registration of the transfer of 20 shares from Paul Cooke to William Norman Cooke is no more than a formality because the directors have already by resolution of 18 December 2000 approved the transfer, stamp duty has now been paid and it only remains for the transfer to be submitted to the company and registered. Evidence of Mr W.P. Cooke in cross-examination shows that it should be expected that transfer will be registered. Transferring registered ownership to Mr Fairbairn as executor requires formal steps only. 8 The primary basis of the claim that Mr W.P. Cooke is the beneficial owner of the 50 shares of which Mr Fairbairn should thus be registered owner is that an oral contract between Mr W.P. Cooke and Mr W.N. Cooke, made in 1989, created an entitlement of Mr W.P. Cooke to become the beneficial owner of all Mr W.N. Cooke's shares at Mr W.N. Cooke's death. 9 Mr W.P. Cooke's principal evidence on this subject was in para.19 of his affidavit of 20 May 2002 which was in these terms: In 1989 the Deceased who was then 72 years old said to me words to the effect of "At times I am not happy with Dorothy but I will persevere'. I was becoming concerned with what would happen to the Deceased's share of the ALC business if he were to die without making a will. We also discussed his failure to plan for his retirement. He said to me words to the following effect: The Company was to be my pension. I said: That is an unfair burden to put on the company. Who do you consider will provide for your should I leave the company, if it failed, or if a non family member took over. He said: My shares will never go out of the Cooke family. I said: Despite our differences I will always make sure that you receive wages for as long as you live. He said: What would you like to receive from my estate? I said: My only concern is your shares in the company. He said: You will get my shares. I had a will drawn up by the ANZ bank at Liverpool. You are getting my shares. 10 In a later affidavit Mr W P Cooke restated the terms of the conversation in terms supporting an agreement or bargain somewhat more strongly. 11 In 1989 Mr W.P. Cooke was about 45 years of age and Mr W.N. Cooke was 72 years of age. Mr W.N. Cooke established a tool making business in the United Kingdom in 1947; after some time that business encountered financial problems and Mr W.N. Cooke formed Air Distribution Diffusers Pty Ltd (ADD) in the United Kingdom. ADD made aluminium products, principally lighting louvres on the pattern referred to as egg crates. John Edward Cooke and Martin Cooke were directors of ADD as was Mr W.N. Cooke. As time passed Mr W.N. Cooke became less and less involved in ADD. With his then wife Verona Cooke he moved to Australia in 1980 and set up ALC. The operations of ADD continued in the United Kingdom. Mr W.P. Cooke who had not previously been involved in these businesses was asked by Mr Martin Cooke to move to Australia to take charge of the Australian company; with his wife and children he emigrated to Australia in December 1983 and from that time on he has been engaged in ALC's business and its operations at Chipping Norton and later at Wetherill Park. He became a director on 1 May 1984 and still is. 12 Mr W.P. Cooke gave evidence to the effect that Mr W.N. Cooke's involvement in the operation of the business lessened and that Mr W.P. Cooke in effect handed over the reins of control to Mr W.N. Cooke. By 1989 Mr W.P. Cooke was General Manger. Later he organised a move to larger premises at Wetherill Park; at the time of the move Mr W.N. Cooke was 73 years of age and was working two to three days a week. Mr W.P. Cooke gave evidence of a further conversation in which Mr W.N. Cooke renewed his assurance that Mr W.P. Cooke would get his shares although he was making another will, and Mr W.P. Cooke assured him that he would continue to draw a full wage for as long as he lived. Mr W.P. Cooke's evidence is (para 21): … he also assured me in return if you continue to employ me my shares in the company will be left to you. 13 An arrangement under which, in return for a benefit to himself, a director of a company gives a contractual commitment that the company would employ a particular person and pay wages irrespective of need for the services or their performance is not a proper arrangement for a company director to make. 14 There is no written record of making the alleged agreement, and there is nothing in writing which, to my mind, significantly corroborates the claim that there was such an agreement. A claim against the estate of a deceased person, where the claim depends on the evidence of the claimant of oral arrangements made with the deceased person, requires to be scrutinised very carefully; see Plunkett v. Bull (1915) 19 CLR 544 Isaacs J at 548-549. 15 Behaviour of Mr W.N. Cooke after 1989 shows that he did not regard himself as bound by any obligation to leave his shares in ALC to Mr W.P. Cooke, or to make any arrangements which brought about the result that Mr W.P. Cooke received those shares after Mr W.N. Cooke's death. On several occasions Mr W.N. Cooke made wills which made completely different dispositions of the shares. 16 On 9 April 1990 Mr W.N. Cooke made a will in which he gave assets including his shares to two other sons, John Edward Cooke and Martin Cooke, with a non-binding expression of wish that Mrs Dorothy Cooke was to receive an income from ALC, or from another company. This will was made in 1990, the year after the alleged agreement. Then Mr W.N. Cooke made a will on 19 October 1994 in which he gave his shares in ALC to Mr W.P. Cooke. On 30 October 1995 he made another will which dealt with his shares in the same way. On 9 January 1998 he obtained an acknowledgement from Mr Adams which records some arrangement in which it was contemplated that Mr Adams would become owner of Mr W.N. Cooke's shares; Mr Adams promised that Mrs Dorothy Cooke would receive a salary and expenses for the rest of her life from ALC and "Failing this the shares will go to Mrs D. Cooke." In 1998 Mr W.N. Cooke consulted Mr Patrick McHugh solicitor of Gosford and had draft wills drawn which provided for the shares to go to Mr Adams on trust for Mrs Dorothy Cooke for life and thereafter for Mr Adams. Mr McHugh gave oral evidence that a will was executed on 16 September 1998 but the terms of that will are not in evidence and it is possible that it departed from the drafts. The last will of 11 December 2000 was also prepared by Mr McHugh and appears to be a drafting development of the 1998 drafts. This series of events, and arrangements made with Mr Adams of which Mr Adams speaks in evidence, are inconsistent with any sense of obligation to Mr W.P. Cooke. 17 In the last years of his life Mr W M Cooke did relatively little work for ALC; Mr W P Cooke said in evidence that he worked no more 1 or 2 days each week for several years before his death; on the whole of the evidence this was an understatement, but I should find that Mr W N Cooke worked for something in the order of half ordinary working time for the company for the last 4 or 5 years of his life, and in the last year of his life he did little work for the company. 18 Evidence about Mr W.N. Cooke's conduct in the last two months of his life shows him taking energetic steps with a strong sense of his own interest in the shares in ALC and a strong wish to pass them to Mrs Dorothy Cooke on his death. He was a powerful personality and well capable of taking energetic measures in pursuit of what he saw as his own interests. His dealings with Mr Paul Cooke in November 2000 over the acquisition of 20 shares show that Mr W.N. Cooke had no sense at all that he had a shared or common interest with Mr W.P. Cooke in the acquisition of shares in ALC. At a meeting of directors on 28 November 2001 he behaved in a very forceful manner, to the point, it might be said, of making any real dispatch of business at the meeting impossible; he certainly showed no sense of obligation to Mr W.P. Cooke about disposal of the shares. He took careful measures to have his wishes recorded in the will executed on 11 December 2000, and also took steps to see that the will was executed before he went to hospital, because he felt that a will executed in hospital might be questionable in some way. 19 There is no evidence that Mr W.P. Cooke ever claimed, during Mr W.N. Cooke's lifetime, that Mr W.N. Cooke was subject to any contractual obligation to him affecting the shares. If Mr W.P. Cooke had any such claim it might well have been expected that it would have been voiced during the period of argument and conflict in November and December 2000, in the course of which transfer of 20 shares from Mr Paul Cooke to Mr W.N. Cooke was under consideration. The first written expression of any such claim was made in correspondence between solicitors on 29 March 2001. 20 Mr W.P. Cooke's counsel pointed to a number of matters which he said corroborated his claim. One was a statement which, according to the evidence of Mr Martin Cooke, Mr W.N. Cooke made to Martin Cooke in the course of conversations in the final weeks of Mr W.N. Cooke's life, in December 2000 during visits to hospital. At that time Mr Martin Cooke had recently become reconciled with Mr W.N. Cooke after a period of some six years when there had been no communications. Mr Martin Cooke's evidence was that Mr W.N. Cooke said: Bill should have my shares in the company. That's the fair thing. Bill has put 15 years into the company and he should inherit it. I did promise Bill that this would happen. 7. I replied: "You've got time to change your will". 8. He said: "I'm finished. I don't have the energy anymore." 21 I had the benefit of hearing Mr Martin Cooke's oral evidence, in which his evidence on this subject was tested and challenged in cross-examination. My finding is that I should accept Mr Martin Cooke's evidence, and that some statement to the general effect which he attributes to Mr W.N. Cooke was made, although it is not possible to come to any precise view about its exact terms. In the nature of things, and also on the terms of Mr Martin Cooke's evidence, these hospital visits were not occasions for precise or complete explanations on matters of business. It could well be true that Mr W.N. Cooke did at some time promise Mr W.P. Cooke that Mr W.P. Cooke would inherit the company; there had been long periods when Mr W.N. Cooke's will provided for Mr WP Cooke to be given the shares. The statements attributed to Mr W.N. Cooke by Mr Martin Cooke do not give a contractual or other binding promise to Mr W.P. Cooke as the reason why he should inherit the company; what was referred to was the years of work he had put into it. 22 Counsel also contended that a statement made by Mr W.N. Cooke to Mrs Dorothy Cooke, made in or about early 1998 and set out in para 52 of her affidavit, confirms or corroborates the existence of the alleged agreement. The passage includes the words "Bill thinks he is going to get the shares" but those words, taken alone or in their context, have no force to corroborate a contractual entitlement. To my mind the matter set out in para.52 has no force to corroborate the existence of the alleged agreement. 23 Mr W.P. Cooke's counsel also referred to evidence given by Mr Fairbairn and by Mr W.P. Cooke about statements made at a meeting between them in January 2001, when Mr W.P. Cooke was shown or was told something of the contents of Mr W.N. Cooke's last will. Mr Fairbairn's evidence attributed to Mr W.P. Cooke the statement, after reading the will, "I'm going to contest the will. I had an agreement with my father that I was to receive the shares in the company after his death and as far as I am concerned those shares belong to me." Mr W.P. Cooke gave evidence about the conversation (affidavit 20/5/02 para.5) which is much the same in this respect. I do not find it possible to make confident findings in detail about what happened at this interview; there was conflicting evidence about whether Mr W.P. Cooke was shown a copy of the will or was only told parts of what was in it. On neither account of the conversation did Mr W.P. Cooke assert that there was a bilateral arrangement or exchange of promises, or that there was a binding contract under which he had an entitlement; nor did he assert the elements which would have made the contract binding, that he was promised the shares in exchange for a promise to see that Mr W.N. Cooke was paid income by the company for the rest of his life. 24 In my view there is nothing in the evidence which I should regard as corroborating Mr W.P. Cooke's claim. 25 It is clear from the evidence that Mr W.P. Cooke is not a scrupulously honest person. In the management of ALC he as a director, and in later years the principal force in the company, was associated with some management practices and accounting entries which bear this out. As he says, and is plainly correct particularly for the last 12 months of Mr W.N. Cooke's life, Mr W.N. Cooke was paid far more in salary than his contribution of the company's affairs would justify, at least on the basis of considering what would have been paid in a market situation to get such services from another person. In view of Mr W.N. Cooke's large shareholding, directorship, position as founder of the company and as parent or grand-parent of other shareholders this was not an irregularity of great moment. On the other hand these circumstances mean that the continued payment of wages even though Mr W.N. Cooke's contribution became relatively small has no force as bearing out the existence of a promise such as Mr W.P. Cooke alleges. There were other and more serious irregularities. One is that, for 13 years, a significant salary was paid to Mr W.P. Cooke's wife although she in fact performed no work for the company. In the eye of reality the money paid to Mr W.P. Cooke's wife was remuneration for him, and treating it as salary to his wife has probably had inappropriate effects in reducing what would otherwise be his income tax liabilities. 26 There was also a gross irregularity in ALC's accounts over a number of years in that a large sum for which ALC was, on the face of the accounts, indebted to ADD was not in fact recoverable because ADD had been dissolved; ALC's balance sheet, and the position of the whole body of the shareholders would for about 7 years have looked better by a gross sum in the order of $1m, offset by a tax liability on writing the apparent debt out of the accounts, if this had not been treated as an obligation of the company. A proper accounting treatment would have generated an additional liability for tax, and possibly for penalties; company tax was not merely deferred but put off indefinitely. The incorrect apparent position of the shareholders was relied on in negotiation with one of the shareholders who was considering selling his shares. 27 The balance sheets of ALC for the financial years ending on 30 June 1998, 1999, 2000, 2001 were calculated on a basis which included among current creditors and borrowings a loan of $817,251.00 due to ADD. Mr W.P. Cooke told Mr Fairbairn's expert Dr Ferrier that all transactions between ADD and ALC are prior to 30 June 1999 and that ALC no longer holds any records in relation to those transactions; so that the true basis for treating ALC as indebted to ADD cannot be objectively verified. A certificate in Exhibit B contains information issued by Companies House in the United Kingdom and shows that Air Distribution Diffuser Ltd, which changed its name in 1986 to ADD Louver Sales Ltd was dissolved on 10 October 1998. Mr W P Cooke suggested in evidence that the debt to ADD was compromised in 1993 and 1994 down to $144, 639.00 which was then paid. However he did not prove in any formal way that the debt existed, or that it was compromised or that the payment was made, and he did not explain why the debt thereafter remained on ALC's account books; he said that he was not aware of why it so remained, meaning that he was unable to explain that. 28 When ADD was dissolved and was not in a position to collect any debt due to it, inclusion of a debt to it among current creditors and borrowings in the balance sheet gave an altogether wrong indication of the state of affairs of ALC; for the year ended 30 June 2001, the current creditors and borrowings were shown at $1,234,503, but about two-thirds of that sum represented a debt which had not been recoverable for several years. This greatly distorted the information available from the company's financial accounts. Writing that debt out of the accounts would generate a liability for company tax, either at the time of any arrangement with ADD which released the debt or made it unrecoverable, or at the date of dissolution; and making the write-off would generate liability not only for tax but potentially for penalties; so the final effect of writing the debt out of the accounts cannot be clearly seen. 29 Another serious showing of unreliability is that Mr W.P. Cooke took part in practices in which, when scrap metal was sold by ALC, significant parts of the receipts were not duly recorded, but were received in cash and distributed between Mr W.P. Cooke and Mr W.N. Cooke. These irregularities can be sheeted home just as much to Mr W.N. Cooke, who was a director and a recipient of part of the money received for scrap metal; but this does nothing to assist the credibility of Mr W.P. Cooke. 30 These circumstances are a considerable disadvantage from Mr W.P. Cooke when I come to scrutinise, with care, a case which he advances depending solely on his own evidence of an oral arrangement with a person who died before he alleged that there was an oral arrangement. My view of the facts has also been influenced, to some degree, by an adverse impression of Mr W.P. Cooke's demeanour and the terms of the explanations which he gave while under cross-examination when his evidence was challenged, in this and some other respects. 31 The alleged promises were quite indefinite in character. While it is quite likely and indeed probable that there were discussions about the prospects of Mr W.P. Cooke's becoming the owner of all Mr W.N. Cooke's shares, and also about the prospects of Mr W.N. Cooke's continuing to draw a salary from the company for as long as he lived, the arrangements spoken of were in very uncertain terms. There was no discussion about how much the salary was to be, or whether it was ever to change, or what work actually had to be done in relation to being paid a salary; it was not said that any work had to be done, but it was not said that no work need be done. To my mind it would be difficult for people who understood that they were making a contractually binding arrangement to omit to go to much greater detail than Mr W.P. Cooke's evidence suggests was spoken of. 32 It is anomalous that, although it is his case in these proceedings that he gave a commitment to Mr W.N. Cooke that he would always make sure that he received wages for as long as he lived, and clearly Mr W.N. Cooke did receive wages until the end of his life, at a relatively high rate and regardless of what work if any he did, Mr W.P. Cooke maintained through correspondence from his solicitor that Mr W.N. Cooke and his estate should not receive long service leave or annual holiday pay; in a letter of 18 September 2001 Mr W.P. Cooke's solicitors said: The directors of the company believe that the deceased was not entitled to any long service leave or holiday pay because for the last five years he only worked about 2 days per week at most and he was paid for a full week's work. In the circumstances it is considered almost laughable that the deceased had been paid any long service leave or holiday pay which may have accrued. 33 The second sentence in the passage quoted is somewhat confused as the deceased was not paid accrued long service leave or holiday pay. Although the response does not take a clear line on whether or not Mr W.N. Cooke really was employed by the company, it seems to suggest he was: if he was employed, he was entitled to long service leave and annual holiday pay, calculated by reference to his earnings, as a matter of statutory entitlement. It is anomalous that Mr W.P. Cooke maintains his present case yet was not prepared to accept the obvious and, in practical terms, inescapable implications flowing from maintaining Mr W.N. Cooke on the pay roll, treating wages to him as a company expense, and actually getting the benefit of such work as he did. 34 I do not accept Mr W P Cooke's evidence to the effect that he consciously chose to keep his own salary at a lower level than it would otherwise be so as to allow ALC to pay wages to Mr W N Cooke; nor do I accept his evidence to the effect that he decided not to employ another employee so as to allow Mr W N Cooke to draw wages. 35 When I address what finding I should make, on the balance of probabilities, on Mr W.P. Cooke's claim that he had a contractual arrangement with the deceased entitling him, on Mr W.N. Cooke's death, to be owner of his shares, my conclusion is that I do not believe what he says, and I find that there was no such arrangement. 36 On another view of the facts some other matters relating to the alleged arrangement would call for consideration. It is not at all clear from its terms that, if the arrangement alleged were made, it was intended to be contractually binding. It has much more the air of an arrangement between closely related persons in control of a family company about how they contemplated dealing with family property, rather than an arrangement in which each of them undertook contractual commitments which were intended to be personally binding. It was not wholly within the control of Mr W.P. Cooke to see to it that Mr W.N. Cooke got wages for the rest of his life; that was a matter for the company and its directors from time to time; not really a matter upon which directors are at all likely to embark on making personal contractual commitments to each other. There is a significant difficulty of understanding whether the arrangement, if it were made in the terms alleged, extended only to the shares which Mr W.N. Cooke owned at the time the arrangement was made, or whether for some reason the reference to "my shares" was (as it would be in a will) ambulatory so as to cover whatever shares he might own at the time of his death. Even if Mr W.P. Cooke's evidence had been accepted, I see no reason, on the terms he alleges, for supposing that Mr W.N. Cooke should be understood to have been talking about any further shares which he later acquired as well as the 30 shares which he then had. 37 For these reasons the substantial claims made by Mr W.P. Cooke in proceedings 2781 of 2002 fail. 38 The transfer of shares from Mr Paul Cooke to Mr W.N. Cooke was preceded by some curious events. In September 2000 Mr Farrugia solicitor was conducting some correspondence on behalf of ALC and Derizu with Mr Paul Cooke who was a shareholder. In a letter of 8 September 2000 dealing with this Mr Farrugia also said: Mr William Norman Cooke and Mr William Peter Cooke are interested in purchasing your 20% interest in the company. However you appear to have grossly overstated the value. According to the balance sheet as at 30 June 1999 the total Shareholder's Equity is estimated at $125,869.00. We understand that the financial year ending 30 June 2000 is not expected to be much different from the previous year. Accordingly we have been instructed to offer you $25,000.00 for your shares. That $25,000.00 will be paid within 30 days of the signing of an Agreement for the sale. Our clients intend to [use] the 30 day period to obtain bank finance. We enclose a copy of the 1999 accounts for your reference and look forward to hearing from you. 39 Mr Paul Cooke replied on 10 October 2000 and offered to accept $50,000 for the shares. In a reply on 24 October Mr Farrugia offered $40,000 saying: We have been instructed to offer you $40,000.00 payable within 30 days of the signing of an Agreement for Sale. 40 Mr Paul Cooke replied on 27 October 2000 and said: I confirm that I accept your offer of $40,000.00 to purchase my shareholding in [ALC]. My acceptance is conditional upon the terms as detailed in your letter. 41 Mr Farrugia was then given instructions in a letter written by Mr W.P. Cooke on ALC's letterhead dated 30 October 2000 which instructed him that the $40,000 price was agreed and "Both my father and myself have agreed that we will fund the purchase of the shares ourselves." 42 Then on 7 November Mr Farrugia wrote to Mr Paul Cooke and said: I refer to your letter of 27 October 2000 and enclose two (2) Agreements for Sale of Shares and forms of Transfer of shares. Please sign and return the Agreements at your earliest convenience. We expect to be able to send you duplicate Agreements signed by the Purchasers by return mail. After the exchange of agreements you can expect us to contact you within 30 days to make final arrangements to hand over the purchase funds in return for the Share Transfers. 43 The enclosed two agreements for sale were separate documents, one on behalf of Mr William Peter Cooke and one on behalf of Mr William Norman Cooke, each for the purchase by one of them of 10 of Mr Paul Cooke's shares for $20,000. The two purchases were not interdependent. On the same day 7 November 2000 Mr Farrugia wrote to Mr W.N. Cooke and told him: As requested, I have prepared the necessary documents to enable you to purchase a 10% shareholding in the company for $20,000.00. I enclose for your approval a draft Agreement for Sale of Shares, which has been designed so that once signed Agreements have been exchanged there is no turning back for either party. If you are satisfied with the document, please sign where marked "X" in the presence of a witness who should sign where marked "W" and return it to us in the stamped address envelope enclosed. 44 Mr Farrugia also wrote to Mr W.N. Cooke in the same terms on 7 November. 45 Mr Farrugia's letter to Mr Paul Cooke could well have given the impression that it was an unconditional offer to contract in accordance with the draft agreements, and that the offer would be carried out by returning duplicate agreements by return mail and by making payment within 30 days. 46 Mr Paul Cooke replied on 9 November enclosing signed documents which had been sent to him and saying "Please find enclosed the agreements for sale of shares forms signed as requested." 47 Mr W.P. Cooke wrote to Mr Farrugia on 14 November and said: Enclosed please find the signed Agreement for Sale of Shares together with my bank cheque for $20,000.00. May I advise you that my father and I have had an '11th Hour" disagreement regarding the finalisation of this transaction. This is quite normal for him to do 'about turns' at the end of a negotiation of just about any kind. I have advised him that if his attitude jeopardises the conclusion of the deal I am prepared to raise the other half of the money myself and purchase the full 20% myself. I hope it will not come to this and the deal will be finalised as originally intended. I look forward to your confirmation in due course. 48 However Mr W.N. Cooke did not tell Mr Farrugia that he approved the sale or the contract of sale or would pay $20,000, so Mr Farrugia was not in a position to respond to Mr Cooke's letter of 9 November by sending duplicate agreements signed by the purchasers by return mail. 49 Then on 18 November 2000 Mr Paul Cooke wrote to Mr Farrugia and said: I refer to your letter dated 7th November and wish to advise that following a letter received from a director of Aluminium Louvres & Ceilings Pty Ltd and in the absence of the signed agreements being returned I wish to rescind the offer of my sale of shares. 50 So no exchange of contracts ever took place. In my opinion no binding contract between Mr Paul Cooke as vendor and either Mr W.N. Cooke or Mr W.P. Cooke, or both of them, as purchasers ever arose out of Mr Farrugia's correspondence. 51 There are several other possibilities none of which would show that there was a binding contract. If a contractual obligation to exchange arose on 9 November, Mr Paul Cooke was entitled to rescind because the documents were not sent back by return mail. Further, the better view is that Mr Farrugia did not have actual authority to form such a contract. 52 Mr Paul Cooke and Mr W.N. Cooke proceeded rapidly to complete their sale; the transfer was signed by Mr Paul Cooke, at an office in Gosford which he cannot now identify, on 20 November and he was paid $40,000. On the evidence of Mr Paul Martin Cooke, which I accept, there is no room for doubt that Mr W N Cooke signed the transfer. I also find that Mr Paul Cooke was paid $40,000 for the shares. With these events Mr W.N. Cooke became the beneficial owner of Mr Paul Cooke's shares, and with the decision of the directors on 19 December, became entitled to be their registered owner. Only formal steps remain outstanding for the transfer of the 20 shares to be effected. Rights of the parties should be addressed in substance on the same basis as if the transfer actually had been registered. Mr Fairbairn as executor is beneficial owner of the 20 shares. 53 Registration of the transfer was resisted, on various grounds; some of the grounds seemed to be lacking in substance but resisting registration was completely justified because the transfer was not stamped. Reliance on other supposed grounds, and maintenance, even in evidence, by Mr W P Cooke of the position that he did not accept that the transfer was in fact signed by W M Cooke, are further illustrations of the combative nature of the relationship and the likelihood of further conflict. 54 Although at an early stage in the hearing I was told that the basis of Mr W.P. Cooke's claim was contractual, his counsel in final address contended that the 20 shares purchased from Paul Cooke were subject to a constructive trust arising from an unconscionable departure by Mr W.N. Cooke from the terms of a joint or shared venture between him and Mr W.P. Cooke for the acquisition of the shares. However no evidence was offered, by Mr W.P. Cooke or by anyone else, of the creation or terms of the venture, and proofs of these would be necessary if it were to be concluded that Mr W.N. Cooke incurred some obligation in conscience by departing from the venture. It should not, without more, be concluded, that where persons enter together upon the purchase of property, without being partners or participating in an established venture, or without some reason having more than usual claims of reliance on each other, that they incur obligations in conscience when they do not go on with the purchase. No contract with Mr Paul Cooke for the two of them to acquire his shares was ever formed. If Mr W.P. Cooke alleged that there was such a venture or any circumstances giving rise to an obligation in conscience it was incumbent on him to show by evidence what it was; and in doing so he would, it seems to me, have been called upon to explain whether the venture extended, for example, to the 20 shares owned by Mr Matthew Cooke which he himself acquired on 22 November 2000. 55 In my opinion there is no substantial basis on which to consider whether any constructive trust of the 20 shares in favour of Mr W.P. Cooke ever arose. 56 Counsel for Mr Fairbairn contended that there has been oppression in the conduct of company affairs in various respects. He first contended that there had been numerous breaches of fiduciary duty as a director by Mr W.P. Cooke, and that these constitute oppression. These were self-interested dealings with money of ALC which cannot possibly have been intended to be dealings in good faith with the company's resources for the benefit of the company as a whole; they were wholly directed to special interests of Mr W.P. Cooke and persons related to him. The instances given by counsel were long continued payment of salary to Mr W.P. Cooke's wife, drawing excessive travel expenses including expenses for journeys which in truth had nothing to do with company affairs, participation in proceeds of unrecorded sales of scrap metal, and availability of petrol cards for private use by him and his relatives. 57 In the affairs of a relatively small company owned by family members others of whom did not participate in the self-interested distributions, these payments, both in their nature and in their scale, have operated oppressively on Mr Fairbairn and the shareholding to which he is entitled. It may well be that Mr W.N. Cooke, in his lifetime, was not in a position to object; he may well have known of these irregular dealings and approved of them, and he participated in inappropriate distributions of proceeds of sales of scrap metal; and he received wages at a rate in excess of his actual contribution to the company's affairs and his value to the company. Mr W.N. Cooke derived other benefits, such as the use of the company car, and petrol cards, it seems for himself and for his wife, and although he complained, in a very clear way, that Mr W.P. Cooke was taking money, and too much money out of the company, he was behaving in a generally similar way himself. From the time of Mr W.N. Cooke's death onwards, Mr W.P. Cooke's conduct in these respects constitute oppression. It is no less oppressive because he claimed that he was beneficially entitled to all the shares; that claim was not correct, and his behaviour should be judged on its objective effects. 58 The second matter was that the company has no dividend policy; ALC never has paid a dividend or had a dividend policy, and I regard it clear from Mr W.P. Cooke's evidence, and generally from his conduct, that there is no reasonable prospect that appropriate profits will be derived from the company's operations and distributed as dividend. The only thing that it is reasonable to expect is that the profits made by the company will continue to be distorted and, so far as Mr W.P. Cooke's influence goes, will continue to be distributed in the inappropriate form of large salary to him, fictitious salary to his wife, and other payments nominally for company expenses but in fact more or less directly for his advantage. As he in truth has 50% of the shareholding he is in a position to create a deadlock or impede or prevent any changes in the present state of affairs, and it is very probable that he will. 59 Counsel contended that practices of drawing up and presenting the company's accounts in ways which were not accurate, but treated the company as appropriately charged with what were truly private expenses, while containing large inaccurate entries relating to the ADD liability, is also oppressive. In my view this is correct; the accounts are very misleading and quite inaccurate, for many years correct information has not been available to shareholders, and this position is like to continue if Mr W.P. Cooke is in a position to maintain a deadlock in the affairs of the company. 60 There was an altogether different way to arrange the affairs of ALC; its affairs could have been organised on a realistically business-like basis. If salaries were market-based, there were no concessions cloaked as motor cars, petrol cards, travel expenses or other burdens in excess of any reasonable business need, the profits of the enterprise could have been ascertained on a reasonable basis and appropriate dividends could have been distributed. If that had happened Mr W.N Cooke would have had less need, or perhaps no need to be treated as an employee and paid wages; or the amount of directors' fees and wages paid to him could have been assessed on a basis which realistically represented the contribution made by his work. 61 Counsel finally pointed to the state of conflict and the personal relationship exemplified by this lawsuit between Mr W.P. Cooke on the one hand and Mr Fairbairn and Mrs Dorothy Cooke on the other hand. In an interview with Mr Fairbairn and Mrs Dorothy Cooke about 2 weeks after Mr W N Cooke died Mr W P Cooke declined to enter into discussion with Mr Fairbairn on whether of Mrs Dorothy Cooke could retain the car and pay out any lease, or any other negotiation; he insisted on taking the car forthwith. He also cancelled the petrol card used by Mrs Dorothy Cooke very promptly after Mr W N Cooke's death. In the context of a family company, and a car which had not been used for company business, it is surprising that he did not any entertain any proposal about Mrs Dorothy Cooke paying out the lease; this would have brought in money and ended the company's management responsibilities associated with the car. In doing these things he acted within the rights of ALC and in accordance with his duties as a director, and his conduct should not be criticised by the Court. At the same time his strict and correct regard to the rights of the company as against Mrs Dorothy Cooke, and in dealings with Mr Fairbairn, demonstrates that the relationship was very poor and is very unlikely to improve. He has never shown the same punctiliousness in the company's dealings with himself. 62 It was Mr WP Cooke's evidence that he never turned his mind to whether ALC should pay a dividend to Mr W N Cooke as opposed to wages. Mr W P Cooke and Mr W N Cooke, who between them were in control of ALC and its affairs, must be taken to have joined together in arranging its affairs in a different way; as part of the arrangements that they made, it is incontestably true that Mr W N Cooke was employed by the company, and entitled to wages, and entitled to any advantages of being in employment; and no less so if the wages he was paid were actually far more than the value of the contribution made by his work. Mr W P Cooke's evidence shows that Mr W N Cooke actually did do work for the wages. He said, " I would expected him to do work for it, he insisted on doing (T-45). The entitlement of Mr W N Cooke and his estate to annual leave, long service leave and like benefits is altogether clear. When he came to give evidence Mr W P Cooke said that he had no objection to Mr W M Cooke being paid long service leave and his legal entitlements and the fact that earlier in the controversy these entitlements were not admitted, but were disputed on insubstantial grounds, is an indication of the great difficulties which stand in the way of cooperative action. Mr W.P. Cooke has been prepared to give up some hopeless positions when confronted with their hopelessness in the witness-box. 63 In my view it would simply be unrealistic to expect that, after so much conflict and after his lack of success in the present proceedings, company affairs would be conducted by Mr W.P. Cooke in co-operation with Mr Fairbairn or Mrs Dorothy Cooke, or would be conducted on any reasonable basis. Mr W.N. Cooke is simply not to be expected to join willingly in pulling apart the structure of control and benefits which has existed for many years. 64 Counsel referred me to the judgment of Hodgson J. in Martin v. Australian Squash Club (1996) 14 ACLC 452. In his account of the submissions made by counsel his Honour gave at p474:1 a review of some case law on oppression and of the approaches which have been made to the facts in a number of earlier cases. Although the decision of Hodgson J. was special to the facts before him, it is to be noted that his Honour based the conclusion that there had been oppression on breaches of the fiduciary duty of a director, including mixing his own affairs with that of the company, inadequate records and difficulty of ascertaining true financial position of the company, and opposition to attempts by members and their advisors to have access to records and participate in a meeting. His Honour spelt out the unsatisfactory conduct relating to unauthorised mixing of funds and self-interested applications of the company's funds, failures in keeping records, and other matters at pp470 to 472. His Honour treated some matters which were relatively small in scale as supporting the overall conclusion that there had been oppression. 65 In Reid v. Bagot Well Pastoral Co. (1993) 12 ACSR 197 decision again turned on the facts of the case. The conclusion that there had been oppression was based on a number of matters of complaint and the decision was, again, special to the facts. The facts included that the company established in 1961 had paid a dividend only in one year by 1993. Counsel referred particularly to some observations on dividend policy in the judgment of Debelle J at 209; the Court treated the circumstance that payment of a dividend was never considered as commercially unfair, the product of self-interest in the part of the directors and as supporting a claim that there had been oppression. 66 Counsel also referred to Sandford v. Sandford Courier Service Pty Ltd (1986) 10 ACLR 549, in which high emolument by way of salary, provision of motor vehicles and benefits at an unreasonably high rate were treated as in effect a distribution of a significant part of the profit to directors and not to shareholders; Waddell CJ in Eq treated this as oppression. 67 While passages in the cases cited are useful as illustrations it remains necessary to address the facts found in the present case as a whole and come to a conclusion special to those facts. The test of unfairness is objective, and the plaintiff's case must be adjudicated on the basis of the objective effect of the conduct of the affairs of ALC, not on the subjective intentions of Mr W.P. Cooke. See Wayde v. New South Wales Rugby League Ltd (1994) 180 CLR 459 at 472-3 (Brennan J). The plaintiffs must rely on oppression against themselves; they are not in a position to rely on any oppression practised on Mr W.N. Cooke, and they have not sought to do so. The events of real importance are events which have happened since his death. Any basis on which some irregularity ought to be disregarded or treated as not being oppressive because Mr W.N. Cooke was tolerating it, or participating it, can apply only to events during his lifetime. 68 Relationships between Mr W.P. Cooke on the one hand and Mr Erik Fairbairn and Mrs Dorothy Cooke on the other are plainly in a very poor state. Each side is beneficially entitled to half the shares in ALC, but nothing can be expected except deadlock if this continues. The manner in which this litigation was conducted and the nature of some allegations made in it show that there is a state of deep antipathy, which the outcome of the litigation can only make worse. In practical terms Mr W.N. Cooke is now and has long been in control of ALC's operations, its only other director being Mr Adams, who does not own any shares and is employed by the company. Mr Adams is not really in an independent position. 69 The total package of remuneration payable paid currently and otherwise allowed to Mr Adams at present is far higher than could be justified in market terms. ALC has never paid dividends. For many years Mr W.P. Cooke has received a large salary for himself, which does not in reality represent the whole of the money which has been directed his way, bearing in mind that his wife has also received a salary without actually performing any duties. While he continues to control ALC's practical affairs, or to be in a position, with half the shareholding, to maintain a state of deadlock for important decisions such as election of board members and declaration of dividends, there is no practical prospect that there will be any payment of dividends. The only practical outcome to be expected is that Mr W.P. Cooke will try to use his position to maximise his own salary or other benefits. The deadlock position makes it wrong to expect that there could be any proper outcome from a struggle in the context of the company's organisation for a proper allocation between salary and profits, or for proper recognition by dividend of the position of Mr Fairbairn as a 50 percent shareholder. 70 Mr W P Cooke was asked in cross-examination to address the situation in which he was the 50% shareholder with Mrs Dorothy Cooke. At T-63 are the following passages: Q: That will be most unsatisfactory situation, won't it? A: I don't know. Until the situation arises, I don't know what will happen. Q: Will the company be unmanageable won't it? A: Hypothetically, yes. I suppose so. Later he was asked: Q: It is a situation that you don't relish, isn't it? A: I would prefer it not to be that way, yes, of course. 71 Counsel for Mr W.P. Cooke made observations to the effect that Mr Fairbairn had not made any application or request on the footing that he was a disgruntled shareholder in ALC, such as a complaint about the level of expenditure on salaries, or about the lack of dividends, or the conduct of directors of ALC's affairs since Mr W.N. Cooke's death; and that no true situation of deadlock can be said to have emerged. I do not attribute any force to this observation because Mr Fairbairn has not been in a position, pending the outcome of this litigation, to establish an entitlement to the shares, or to attempt to take any effectual part in the company's affairs; until he establishes that his name should be on the share register, and gets his name on the share register, the most that he could do would be to make futile expostulations. He has put his position with altogether sufficient clarity by bringing his proceedings and resisting those of Mr W.P. Cooke. 72 The proceedings, the issues in them and the evidence given by the parties, particularly Mr W.P. Cooke, show that no realistic hope can be held that the affairs of the company would be managed, for a long future term, on a proper basis while its shares were divided equally between persons who have been parties to this litigation. Continuing deadlock is the only outcome which it could be reasonable to expect. Continued organisation of the company's affairs in its present form cannot produce a satisfactory outcome. Continuation since Mr W.N. Cooke's death of practices of which he while alive was not in a position to complain have constituted oppression of Mr Fairbairn. In particular, the absence of any declaration of dividend, and the distribution of the advantages of proprietorship in a form of salaries and nominal salaries, have been oppressive to Mr Fairbairn. 73 In these circumstances Mr Fairbairn has established entitlement to remedies on the basis of oppression. The Court should require a compulsory buy-out of his shares or, if those measures do not succeed, ALC ought to be wound-up. 74 I turn to address the evidence about the value of the shares. Doctor Ferrier the expert witness called by Mr Fairbairn pointed out the anomalies of the debt or supposed debt to ADD and its influence or the Balance Sheet. Doctor Ferrier also pointed to the possibility of there being an anomaly with respect to $40,358.50 owing by Essex Louvers Ltd and included in trade debtors in the balance sheet of 30 June 2001. It is not clearly established that there is any anomaly. 75 Doctor Ferrier's analysis suggested that ALC had transferred funds to Derizu in amounts totalling $49,376 more than the relevant expenses incurred by Derizu and chargeable as management fees. It is not established whether there was any anomaly in these but as Derizu has not provided services for some years, it is my view that it would have been appropriate for the directors of ALC to have established, long before now, the true state of dealings with Derizu and to have brought them to some clear conclusion. 76 It is clear, and indeed appears from evidence of Mr Ulloa called by Mr W.P. Cooke himself, that the salaries paid to Mr W.P. Cooke over some years have been in excess of the fair market value for a person exercising responsibility to the kind which he exercises. (The same is shown for wages of Mr W.N.Cooke). Furthermore there have for many years been entirely inappropriate payments to Mrs Kay Cooke. Mr W P Cooke acknowledged in evidence that he has made journeys for personal reasons and charged his and his wife's travel expenses to the company; these were not journeys for business-related purposes. There were expenditures for motor vehicle expenses which were plainly unjustified by any reasonable requirement for ALC needs; in relation to Mr W.P. Cooke and his wife for the year ended 30 June 2000 motor vehicle expenses totalled $50,814, a figure which plainly cannot be justified. There was expenditure attributed to travel expenses for Mr W.P. Cooke and his wife on a scale well beyond anything required by any reasonable view of the ALC's business needs. Mrs W P Cooke still has a petrol card on the company account. Mr W.P. Cooke acknowledged that he put personal expenses on his American Express Card and claimed them on ALC, with the effect of increasing the remuneration paid to him, and this has continued since Mr W M Cooke's death. He also acknowledged that, before the introduction of GST (that is before 1 July 2000) the practice was that scrap metal was sold to a scrap metal dealer who would pay cash and Mr W M Cooke and Mr W P Cooke would share the proceeds. At another place he said that the scrap metal cash sales ceased after Mr W M Cooke died, at the start of 2001 (T-60). 77 Doctor Ferrier produced an indicative valuation of a 50 percent interest in ALC. He treated the value of a 50 percent shareholding as half of the value of 100 percent of the shares; that is to say there was no element of adjustment of the fair market value for a control premium or minority discount such as is commonly made where a minority shareholding is sold. I regard this as correct. Doctor Ferrier regarded it as appropriate to capitalise maintainable earnings to ascertain value: this method is appropriate where a company is earning a reasonable return on shareholders' equity. Doctor Ferrier proceeded to assess the fair value of the business by applying the capitalisation-of-maintainable-earnings method and assuming that a prospective purchaser of the business would acquire only plant and equipment, trading stock and intellectual property of the business; that is, would not acquire the cash flow items. Doctor Ferrier then determined the total funds likely to be available to shareholders by adding the value of the business to the net realisable value of other assets and liabilities, and applied 50 percent to the result. In approaching the maintainable earnings he made large adjustments for excess executive and office salaries, excessive motor vehicle expenses and adjustment in respect of payments and superannuation payments to Mr W.P. Cooke, whose life ended at about half way through the last of the three base years for the valuation. He made other adjustments, including an adjustment for sales of scrap, and produced an estimated maintainable pre-tax earnings figure of $365,500.00. 78 A number of elements in this estimate are themselves the products of adjustments based on assessment and opinion; the figure is not highly concrete. However it was not the subject of debate, as the other expert witness Mr Weber produced a corresponding figure of $350,000, which in a valuation context is practically the same. Doctor Ferrier and Mr Weber also each adopted a pre-tax capitalisation rate of 30 percent. Accordingly Doctor Ferrier and Mr Weber produced what were, superficially, closely similar figures for the value to be achieved in a sale of the company's business, but the similarity is superficial as Doctor Ferrier's hypothetical sale related to plant and equipment, trading stock and intellectual property, but not to cash flow items being the company's cash and receivables, against which should be set off creditors and borrowings and provisions for tax. Hence the two opinions produced different values for the shareholding as a whole, and for a 50 percent interest in the shareholding. In Mr Weber's concept, a hypothetical purchaser who agreed to buy the business and was prepared to pay a price ascertainable by reference to capitalisation of maintainable earnings would require to obtain all the financial assets employed in the business; in this concept the purchaser would take over the company's cash receivables and incur liability for creditors and borrowings and tax provisions. Again the assessment of the value of the assets which, in Dr Ferrier's approach, the company would retain is subject to some matters for opinion and assessment; Dr Ferrier made adjustments for capital gains tax on the value of the business, and for bringing into account unrecorded assets and liability, principally the ADD liability, with a corresponding offset liability for income tax incurred when the writing-off of the ADD liability was recognised. 79 Finally, Dr Ferrier's opinion supported the value of the net amount available to shareholders at $1,422,935.00, and a 50 percent interest, rounded off, at $710,000. Mr Webber's conclusion, expressed in his second report dated 19 March 2003 Exhibit 3, supports, on scenario 2, a value of the company at $1,222,000. (Scenario 2 makes adjustments to market salaries which were proposed by Dr Ferrier and which appear to me to be appropriate to adopt.) In relation to a subject as difficult as valuation of shares in a small private company without a dividend policy, the difference of about $200,000 in their valuations is not, to me, very striking. This is particularly so when I have regard to the elements in the valuation which are not concretely established by experience but which depend on adjustments evolved as matters of opinion. There remain striking differences in their approaches, and particularly significant is Dr Ferrier's allowance of $300,000 for capital gains tax on the disposal of the business, whereas Mr Weber makes no corresponding allowance. 80 Dr Ferrier makes assumptions about the projected views of the hypothetical purchaser of the business of ALC which tend to assume the relative ready availability of adjustments to ALC's actual recent practice and experience in favour of economic or market-based salary costs. These are maximising assumptions for value in the hypothetical sale. I feel that I should have regard to the difficulties, as seen by the hypothetical purchaser, of a ready transition to market-based salary costs, given that the two working directors Mr W.P. Cooke and Mr Adams, and the book-keeper Ms Smith, whose actual functions are wider than her title would indicate, would not readily accept the transition, while their departure would be disruptive. 81 I should say however that, quite apart from the supporting reasoning and calculations and argument in support of it, I regard myself as significantly in the hands of the expertise of the witnesses on such a matter, and their adopting and associating themselves with the conclusion has considerable weight with me as an assurance that the opinions they put forward are generally in the right order. I have to recognise that a precise evaluation of the 50 percent shareholding to which Mr Fairbairn is entitled is not available and, obvious as is the need for accuracy so far as it can be achieved, a broad view of a just result must be taken. My finding is that the appropriate price to be paid in a compulsory buy-out is $650,000. 82 Derizu is said, in the report of Mr Weber, to have negative shareholders funds. Derizu once had a function in the nature of a service company providing services to ALC and by so doing producing moderations in the Workers Compensation Insurance premiums for which ALC would otherwise be liable. Derizu has been inactive since 1999, and so far as evidence shows has no significant business apart from some unresolved transactions between it and ALC. The share in Derizu which stands in the name of Mr W.N. Cooke should, with appropriate formalities, be transmitted to Mr Fairbairn, to be held by him as beneficial owner as executor and to the ultimate advantage of Mrs Dorothy Cooke. Derizu is in the same state of deadlock as ALC. Derizu has not had any transactions since 1 July 1999. It only has two members, or two persons entitled to be members, and they are in such a state of conflict that co-operation is not really to be expected. Furthermore, Mr W.P. Cooke purportedly appointed a second director at a time when there was only one director and it was completely clear that he could not, on his own, constitute himself as a meeting of directors, and appoint another director of his own choosing. His behaviour has been partisan. There can be very little left for Derizu to do as the evidence suggests that it has been inactive for several years; and it seems possible that it has no outstanding dealings with anyone, except for ALC. As it is in a state of deadlock it would be appropriate for it to be placed in liquidation and for its affairs to be wound-up. However that may be a more complex outcome than is really required; if its affairs are really simple and it has no other creditor than ALC, there may be some other way to arrange its affairs and winding it up. The affairs of Derizu are a minor part of the controversy. As things stand I am prepared to make a winding-up order; but the parties should consider further how this can be achieved, and whether some less formal step is enough. I have not made any final order but reserve further consideration of the claims relating to Derizu. 83 Before I make orders in proceedings 2246 of 2002 I will give the parties an opportunity to consider the reasons and to address whether an order for a compulsory purchase can be made within the terms of s233, and also whether a compulsory purchase is practicable; or whether on the other hand ALC should be wound-up. The order should also deal with claim 17 relating to employment entitlements. 84 I make this order in proceedings 2781 of 2002: (1) The proceedings are dismissed with costs. ********** Last Modified: 04/16/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.