Reported Decision : 71 ACSR 343 New South Wales Supreme Court CITATION : Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342 HEARING DATE(S) : 07/04/09, 08/04/09, 15/04/09 JUDGMENT DATE : 1 May 2009 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Orders for winding up on the just and equitable ground. CATCHWORDS : CORPORATIONS - membership, rights and remedies - oppression, unfair prejudice and unfair discrimination - shares held by three members in equal proportions - whether members in partnership - whether "quasi partnership" - whether understanding as to participation in day-to-day management - termination by the company of arrangement under which services of one member are made available to the company - whether exclusion in breach of understanding - whether denial of expectation of fair arrangement for withdrawal - where departure of relevant member followed physical altercation between him and another member - irretrievable breakdown superseded original understandings and expectations - just and equitable that company be wound up LEGISLATION CITED : Corporations Act 2001 (Cth), ss 232, 233, 461 CATEGORY : Principal judgment Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86; (2008) 66 ACSR 325 Belgiorno-Zegna v Exben Pty Ltd [2000] NSWSC 884; (2000) 35 ACSR 305 Brooker v Friend & Brooker Pty Ltd [2006] NSWCA 385 Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 Dosike Pty Ltd v Johnson (1996) 16 WAR 241 Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'Asia) Pty Ltd (1991) 6 ACSR 63 CASES CITED : Manning River Co-operative Dairy Co Ltd v Shoesmith [1915] HCA 32; (1915) 19 CLR 71 MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 O'Neill v Phillips [1999] 1 WLR 1092 Re Bell Bros Ltd (1891) 65 LT 245 Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251; (2005) 225 ALR 588 Saykan v Elhan [2006] VSCA 230 Smolarek v Liwszyc [2006] WASCA 50; (2006) 32 WAR 101 Thomas v H.W. Thomas Ltd [1984] 1 NZLR 686 Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 TEXTS CITED : H A J Ford, R P Austin and I Ramsay, "Principles of Corporations Law" at para 11.450 Daniel Nassar - First Plaintiff Marfern Pty Limited - Second Plaintiff Innovative Precasters Group Pty Limited - First Defendant PARTIES : IP Group Pty Limited - Second Defendant DGN Investments Pty Limited - Third Defendant Rosario Grasso by his Tutor the Protective Commissioner - Fourth Defendant Paul De Oliveira - Fifth Defendant FILE NUMBER(S) : SC 1599/08 Mr I R Pike - Plaintiffs COUNSEL : Mr A J McInerney - Fourth Defendant Mr B DeBuse - Fifth Defendant Esplins - Plaintiffs SOLICITORS : Lee and Lyons - Fourth Defendant Marsdens Law Group - Fifth Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY, 1 MAY 2009 1599/08 DANIEL NASSAR & ANOR v INNOVATIVE PRECASTERS GROUP PTY LIMITED & 4 ORS JUDGMENT Parties and proceedings 1 The natural person parties to these proceedings are Mr Nassar (one of the plaintiffs), Mr Grasso (fourth defendant) and Mr De Oliveira (fifth defendant). 2 The proceedings relate to the activities of the individuals as they concern three companies that were formed and are owned by them: Innovative Precasters Group Pty Ltd ("IPG") which is the first defendant, IP Group Pty Ltd ("Group"), the second defendant and DGN Investments Pty Ltd ("DGN"), the third defendant. The other corporate party is Marfern Pty Ltd (the other plaintiff), a company owned by Mr Nassar and his family. 3 IPG was registered on 7 September 2000. There are 900 shares on issue. The 450 "A" class shares are held, in parcels of 150 each, by Marfern Pty Ltd, Grasso Holdings Pty Ltd (a company controlled by Mr Grasso) and Orangestone Pty Ltd (a company controlled by Mr De Oliveira). The 450 ordinary shares are held as to 150 each by the three individuals. They are the directors. 4 DGN was registered on 13 November 2000. The capital structure is the same as that of IPG and the shares are held in the same way. Mr Nassar, Mr Grasso and Mr De Oliveira are the only directors. 5 Group was registered on 8 February 2007. The 300 issued shares are held, as to 100 each, by Mr Nassar, Mr Grasso and Mr De Oliveira. They are the only directors. 6 It is alleged by the plaintiffs, Mr Nassar and Marfern, in relation to each company, that the affairs of the company were conducted in a manner that is contrary to the interests of the members of the company as a whole or oppressive to or unfairly prejudicial to or unfairly discriminatory against the plaintiffs. I take the allegation to be made by Mr Nassar and Marfern in relation to the two companies of which both are shareholders and by Mr Nassar alone in relation to the company of which Marfern is not a member. (It will be convenient to refer, in a shorthand way, to shares held by Mr Nassar even though, in some instances, the actual holder is Marfern). 7 The principal relief sought in relation to each of the three companies is an order that Mr Grasso and Mr De Oliveira purchase Mr Nassar's shares in the company. The alternative claim (not favoured by Mr Nassar) is that the companies be wound up. 8 The plaintiffs' claims are advanced principally under ss 232 and 233 of the Corporations Act 2001 (Cth). Those provisions alone are the basis for the claim that Mr Grasso and Mr De Oliveira be ordered to purchase the plaintiffs' shares. In relation to the claim for a winding up order, there is also reliance on aspects of s 461(1), including s 461(1)(k) providing for winding up on the just and equitable ground. 9 Upon interlocutory application made by Mr Nassar, orders were made on 2 February 2009 for the appointment of a liquidator of each of the three companies provisionally. Mr De Oliveira consented to the making of those orders, Mr Grasso did not oppose. The provisional liquidator has sold the pre-cast concrete business carried on by one of the companies to which reference will be made in due course. 10 The application for the appointment of a provisional liquidator was pressed by Mr Nassar in circumstances where he was no longer willing to be involved in the companies' affairs and Mr Grasso, by reason of an incapacitating injury suffered in November 2008, was unable to be involved. 11 Mr Nassar pleads a partnership among Mr Grasso, Mr De Oliveira and himself, being a partnership the business of which was the design, manufacture and supply of pre-cast concrete and investment in and development of real estate. Mr Grasso and Mr De Oliveira deny the existence of any partnership. They also deny the further allegation that the business of a partnership was operated "through" the three companies. 12 There is, however, substantial common ground as to the activities in and about the pre-cast concrete and property investment activities engaged in by the three companies. In particular, it is accepted that, until relationships became dislocated, each of Mr Nassar and Mr De Oliveira devoted substantial working time to those activities, while Mr Grasso, who is considerably older than the other two, spent less time directly on those activities. Mr Grasso had, however, provided more of the financial support needed in the early stages. The position of Mr Grasso in these proceedings 13 I have made brief reference to an incapacitating injury suffered by Mr Grasso. He has been unable since 27 November 2008 to attend to his affairs. His estate is now under the management of the Protective Commissioner. The Commissioner is Mr Grasso's tutor in these proceedings. 14 No evidence has been given by Mr Grasso, but Mr McInerney of counsel appeared for him on the instructions of the Protective Commissioner and made submissions. He also cross-examined Mr Nassar. 15 Mr Pike of counsel, who appeared for the plaintiffs, accepted that Mr Grasso has been unable, since his injury, to swear any affidavit or otherwise to give evidence. But, as Mr Pike observed, the pre-trial timetable was such that any affidavit of Mr Grasso should have been served well before he became incapacitated. Were it to become necessary to evaluate differences between Mr Nassar's evidence and that of Mr De Oliveira (with whom Mr Grasso is aligned, in terms of interests), it would be necessary to consider any significance that should be attached to the absence of evidence from Mr Grasso. The establishment of the companies and their operations 16 Mr Nassar and Mr De Oliveira worked together at Girotto Precast in the 1990s. That company manufactured pre-cast concrete panels for the construction of walls and floors. Mr Nassar and Mr De Oliveira left Grotto Precast at different times in 2000. They discussed the possibility of establishing a pre-cast concrete business together. Mr De Oliveira arranged a meeting with Mr Grasso. He was interested in becoming part of such a venture. 17 Various other people also expressed interest. An accountant, Mr Peel, was approached for advice about business structures. He wrote a letter dated 4 July 2000 addressed to: "The Parties, Paul De Oliveira and Others" at Mr De Oliveira's home address. The letter was headed: "PROPOSED JOINT VENTURE PAUL DE OLIVEIRA (A) DANIEL NASSAR (A) IGOR VAVILOV (A) ROSS GRASSO (A) WITH STAMBI ENTERPRISES GROUP (B)" 18 The letter referred to a proposal to form "a new venture", "with 50% of the venture jointly owned by the (A) group above and 50% of the venture owned by the (B) group". The letter's purpose was to "advise the A group on our recommendations for the new structure of the group". The letter went on to discuss a number of possibilities (partnership, company and unit trust) and to offer advice. 19 Mr Nassar gave evidence that John De Oliveira, Igor Vavilov and Hobbs Bros were all under consideration as participants in the project. Mr De Oliveira referred to a number of additional people with whom discussions occurred. In the end, only Mr Nassar, Mr De Oliveira and Mr Grasso participated. 20 It was Mr Peel's advice that two companies be established, one to manufacture pre-cast concrete cement panels and the other to act as an investment vehicle. These are the roles that were in due course adopted by IPG and DGN. 21 As noted above, IPG was registered on 7 September 2000 and DGN was registered on 13 November 2000. At the outset, in each case, Mr De Oliveira and Mr Grasso were the only shareholders and directors. Mr Grasso initially held 75% of the shares in IPG and 50% of the shares in DGN, while Mr De Oliveira held the balance. 22 Mr Nassar became a director and shareholder of each company on 17 December 2000. There are two versions of the reason why he did not become a director and shareholder at an earlier time. Mr De Oliveira says that Mr Nassar's entry and participation were dependent on his being able to use $100,000 equity in his home to finance his participation and that this would not be feasible unless the companies formed a relationship with St George Bank. Mr Nassar's home was mortgaged to that bank. It was only after the companies formed their relationship with St George that it was financially feasible for Mr Nassar to participate. 23 Mr Nassar's version is to the effect that he was working on a townhouse project at Merrylands when the companies were formed and could not leave staff unattended there while he went to Mr Peel's office to sign papers. Given that papers could have been sent to his home by post, signed at night and sent back by post, Mr De Oliveira's explanation has greater plausibility than Mr Nassar's. In the end, however, nothing really turns on the reason for the later entry by Mr Nassar. 24 The decision that the three investors should have equal shareholdings was a decision of Mr Grasso and Mr De Oliveira. Mr Nassar made this clear in his examination in chief. He participated in a discussion in November 2000 when Mr Grasso and Mr De Oliveira decided that, largely for what appear to have been psychological reasons, equal shareholdings were desirable. 25 It is a fair reflection of these events, in my opinion, that Mr Grasso and Mr De Oliveira, having formed the two companies and taken up the whole of the shares themselves at inception in September and November 2007, afterwards admitted Mr Nassar and decided that the shareholdings of all three should be equal. 26 From 27 November 2000, the shareholding position was as described in paragraph [3] and [4] above. 27 Very soon after Mr Nassar became a director and shareholder, DGN purchased a property at Smeaton Grange for use as IPG's factory. At a later stage, DGN bought properties for development and sale. 28 From late 2000 until late 2007, the three individuals – Mr De Oliveira, Mr Nassar and Mr Grasso – worked in the business. Mr De Oliveira, a qualified engineer, was largely responsible for production activities. Mr Nassar concentrated mainly on sales, accounts and administration. Mr Grasso's efforts were directed principally to the investment activities. 29 It is relevant to refer to payment arrangements. Mr Grasso was not paid anything for the first year of operations. Mr Nassar and Mr De Oliveira were not paid as employees or directors. Rather, consultancy arrangements were entered into between IPG on the one hand and companies controlled by Mr Nassar and Mr De Oliveira on the other (Marfern Pty Ltd in the case of Mr Nassar and Orangestone Pty Ltd in the case of Mr De Oliveira). Under this arrangement, the family companies supplied services to IPG, being, in one case, the services of Mr Nassar and those of his wife and, in the other, the services of Mr De Oliveira and those of his wife. The wives performed secretarial and clerical functions. 30 The family companies invoiced IPG for the services they provided. In the case of Marfern, the monthly charge was $11,305.82 plus GST. IPG also provided an annual car allowance of $15,000, a fuel card, a mobile phone and toll cards. Orangestone's like arrangement, initially with IPG, was transferred from IPG to DGN in July 2007. 31 Mr Grasso was paid $4,600 per month plus the other benefits. Mr Nassar characterised the payments to Mr Grasso as "a gratuity" – "a thank you for putting up his family assets as the bulk of the collateral", although, as I have said, Mr Grasso did spend some time working in the businesses. 32 Dividends were paid by IPG and DGN in July 2005. IPG paid a dividend of $50,000 to Mr De Oliveira. DGN paid dividends of $50,000 to each of Mr Nassar and Mr Grasso. 33 Apart from the dividends in July 2005, there were no distributions of profits. The monthly payments were fixed sums and therefore resembled salaries even though, as I have said, they were paid to the family companies as consultancy fees. 34 The third company, Group, was formed in February 2007 for a particular purpose, being the acquisition and exploitation of technology relating to structural floor slab construction. Group entered into a licence agreement with Associated Valaire Pty Ltd on 11 April 2007. By that agreement, Group acquired a five-year licence to exploit the relevant technology in New South Wales, Queensland and the Australian Capital Territory. 35 Although the pre-cast concrete business experienced both profits and losses over the years, all three companies appear to have operated in a relatively satisfactory way until events of late 2007 to which I now turn. Events of late 2007 36 On 9 November 2007, there was a physical altercation between Mr Nassar and Mr De Oliveira. The police were called and took statements. No charges were laid. The altercation followed an argument between them about treatment of an employee. 37 Tensions between Mr Nassar and Mr De Oliveira had been building for some time. Mr Nassar gave evidence in cross-examination that, by 2005, he wished to extract himself from the businesses. He informed Mr Grasso and Mr De Oliveira accordingly. He was unwilling to see the IPG pre-cast concrete business expand in the way Mr Grasso and Mr De Oliveira preferred. His interest lay more on the investment and property development side. 38 In mid-2005, Mr Grasso, Mr Nassar and Mr De Oliveira decided to adopt (or, perhaps, Mr Grasso and Mr De Oliveira did not oppose) a plan that had been proposed by Mr Nassar. It involved having an external expert express a view about the value of the IPG business. Mr Nassar arranged this and Marfern paid for it. Mr De Oliveira's evidence is that this was done with his knowledge and that he expressed a willingness to "talk" about the sale of the IPG business. 39 In the long run, nothing came of this, but Mr Nassar perceived that DGN and its investment and property development operations continued to provide financial support to IPG's manufacturing operations. This was a matter of concern to him. 40 With the emergence of this concern and apparent differences in philosophy among the shareholders, tensions grew. Mr Nassar says in his affidavit that by about November 2007, his relationship with Mr De Oliveira and Mr Grasso had begun to deteriorate. It was in that atmosphere that the episode of 9 November 2007 occurred. 41 It is the evidence of Mr Nassar that, immediately after the physical altercation, Mr De Oliveira said to him words to the effect, "When do you want to leave?"; and that he replied, "When you pay me out I'll leave". Mr Grasso's reaction, according to Mr Nassar, was to say, "This should never have happened." 42 Two days later, a representative of the companies' bank, St George Bank, came to the office by invitation. Arrangements were made to change the bank mandates so that every cheque or Internet banking operation needed the concurrence of any two of Mr Nassar, Mr De Oliveira and Mr Grasso. To that point, this requirement had applied only to transactions over $2,000, with any one of the three able to transact alone up to $2,000. All of Mr Nassar, Mr De Oliveira and Mr Grasso attended the meeting with the bank representative and concurred in what was done. Mr Nassar says that the meeting was arranged without his knowledge and that the other two had decided on the change in advance without telling him. He nevertheless participated willingly. 43 There is conflicting evidence about other events in the days after 9 November 2007, particularly as to whether persons outside the companies had been led to believe that Mr Nassar had left or would be leaving and whether staff were told not to put phone calls through to him. Mr De Oliveira said in his affidavit that, on several occasions, Mr Nassar directed customers to him. 44 Within a week, Mr De Oliveira and Mr Grasso had put a proposal to Mr Nassar. It was contained in a document of 16 November 2007 headed "Offer for purchase of shares". Under a sub-heading "Aim", appeared: "Buy the total holdings in the above from Daniel Nassar, Maria Nassar, Marfern P/L and all Nassar family trusts." 45 This document was given to Mr Nassar by Mr De Oliveira and Mr Grasso at a meeting attended by all three of them on 16 November 2007. There are different accounts of precisely what was said at the meeting. The accounts are consistent to the extent that, at the end of the meeting, it was up to Mr Nassar to make the next move. According to Mr Nassar himself, he queried aspects of valuation and concluded by saying, "Thank you for the offer and I will get back to you". On Mr De Oliveira's account, he said at the end, "Consider it and make a counter-offer if you do not agree; if handled properly this could be resolved quickly and fairly". 46 On 27 November 2007, Mr Nassar prepared a document headed: "Response to letter date [sic] 16th November 2007 Offer to purchase shares as issued by Paul De Oliveira and Rosario Grasso". 47 Mr Nassar did not send or give this document to Mr De Oliveira and Mr Grasso. Rather, it formed the basis for a letter of 29 November 2007 written to them by Mr Nassar's solicitor, Mr Koutzoumis. This was the first involvement of a lawyer. While Mr Koutzoumis's letter traversed a number of matters of detail, the basic proposal was simply that "all assets will need to be sold and proceeds accounted for and divided in accordance with each of the share entitlements", with Mr Nassar's plan for the overall business being "simply dissolve it and distribute one third entitlement to each of you". The letter concluded with a request for certain undertakings and an indication that, if they were not given, an application for urgent injunctive relief might be made. 48 Mr De Oliveira and Mr Grasso then instructed lawyers of their own. Marsdens, solicitors, responded on their behalf to Mr Koutzoumis by letter dated 14 December 2007. Marsdens began by saying, "The relationship between our respective clients has irretrievably broken down". The letter then went on to outline a proposed basis for purchase by Mr De Oliveira and Mr Grasso of the one-third shareholding in each company held by Mr Nassar as his family company. The basis was, in essence, that certain assets be sold, that an accountant value others, that $450,000 be attributed to goodwill and $4 million to the factory property, and that Mr Nassar's interest be bought (albeit on deferred payment terms) for one-third of the total. Mr Nassar regarded the proposal as almost identical with that he had been given on 16 November 2007. That was, in objective terms, an accurate appraisal. 49 The letter from Marsdens dated 14 December 2007 concluded as follows: "Please have your client give consideration to this offer. In the event that this offer is not acceptable to your client, my client would be happy to meet with you and your client at a round table conference in an attempt to resolve the outstanding issues." 50 On 18 December 2007, "DGN Investments Pty Ltd and associated companies", through Marsdens, gave notice to Marfern Pty Ltd of the termination of the contract under which it provided Mr Nassar's services. The letter sent to Mr Koutzoumis alleged failure of Mr Nassar to "present himself to work each day". The termination was expressed to be effective on 31 December 2007. 51 Mr Koutzoumis wrote in reply on 19 December 2007 saying that the "notice therein is refuted, and is disputed both as to substance and form". In the meantime, Mr Nassar and Mrs Nassar had attended for work in the usual way on the morning of 7 January 2008. It appears that they were then unaware of the letter sent by Marsdens to Mr Koutzoumis on 18 December 2008 (a Tuesday). This may be because, according to a Christmas message on his notepaper, Mr Koutzoumis closed his office from 21 December 2007 to 14 January 2008, although Mr Nassar deposes that he spoke to Mr Koutzoumis by phone on 7 January 2008 and was informed only then of Mr Koutzoumis's receipt of the letter from Marsdens; also that Mr Koutzoumis had already sent a reply on 19 December 2007. 52 It is Mr Nassar's evidence that when he and Mrs Nassar attended on 7 January 2008, Mr Grasso spoke to them and said that they should not be there; also that Mr Grasso had spoken to him by telephone on 31 December 2007 saying that his "services are not required", to which Mr Nassar replied, "I'll see you on the 7th at the factory." 53 After speaking with Mr Grasso on 7 January 2008, Mr Nassar collected some personal items from the office. He says that he then spoke to Mr De Oliveira and Mr Grasso together and said, "You guys are doing the wrong thing", to which Mr De Oliveira replied that a letter had been sent and Mr Nassar should speak to his solicitor. 54 On 15 January 2008, Marsdens wrote to Mr Koutzoumis referring to Marsdens' own letter of 14 December 2007 and saying that Mr De Oliveira and Mr Grasso "would be happy to attempt to resolve the outstanding issues with your client at a round table conference", thus repeating the suggestion made at the end of the letter of 14 December 2007. There was no response. Mr Nassar says in his affidavit that he did not think that such a conference "would be beneficial to resolving the dispute". 55 As of 15 January 2008, therefore, no basis for the sale of Mr Nassar's shares in the companies had been negotiated. He was no longer attending for work on a daily basis following the letter of 18 December 2007 terminating the consultancy arrangement with Marfern Pty Ltd. Offers concerning the purchase of his shares had been made on both sides. The last of them was by means of the Marsdens' letter of 14 December which expressly invited participation in a "round table conference" in an "attempt to resolve the outstanding issues" – a proposal by Mr Grasso and Mr De Oliveira that was repeated in virtually the same terms by means of the Marsdens letter of 15 January 2008. Mr Nassar did not respond to either of the invitations to sit down with a view to resolving the issue of an offer to buy his shares. Events of 2008 56 On 8 February 2008, Mr De Oliveira, as a director of IPG, gave notice calling a general meeting of the company to be held on 7 March 2008 for the purpose of considering a resolution to remove Mr Nassar as a director. He gave an identical notice in respect of Group. 57 The events just mentioned gave rise to these proceedings. Mr Nassar's originating process was filed on 22 February 2008. At a hearing before Hammerschlag J on 3 March 2008, Mr Nassar, Mr Grasso and Mr De Oliveira all undertook to consent to an adjournment of the meetings. Thereafter the meetings lapsed. 58 The undertakings given on 3 March 2008 included undertakings by Mr De Oliveira and Mr Grasso not to deal with real property of the companies without prior notice to Mr Nassar and undertakings concerning the making of company contracts otherwise than in the ordinary course of business. There was an undertaking by Mr Nassar that he would not attend the business premises except during normal business hours and after giving 12 hours notice to Mr De Oliveira and Mr Grasso. Mr Nassar did, from time to time after 3 March 2008, attend the business premises in accordance with these arrangements. He acknowledges that he was allowed access to such books and records as he required and was given photocopies of any he wished to take away. He was not, however, given direct access to the computers. 59 A meeting of the directors of Group took place on 29 September 2008. It was convened at the request of Mr Grasso and Mr De Oliveira. All three directors attended. The meeting was called to discuss the relationship with Associated Valaire under the licence agreement that was the only asset of Group. Mr Valaire had apparently expressed concerns that Group was not doing enough to exploit the technology. Mr Nassar was aware of the purpose of the meeting in advance, since he spoke direct with Mr Valaire before the meeting. 60 The meeting was civil or, at least, no unpleasantness manifested itself. The minutes are in evidence. They show that the need for further expenditure on the Valaire technology was discussed Mr Grasso and Mr De Oliveira were willing for the necessary funds to come from IPG, as in the past. Group had no financial resources of its own. There was also discussion of the possibility that the shareholders might make further investments in Group to provide capital. Mr Nassar expressed himself opposed to both these courses. There was, according to the minutes, discussion of matters not strictly within the province of Group, such as certain staff movements within IPG and responses to questions that had apparently been raised by Mr Nassar by email. 61 Mr Nassar visited the business premises on about 15 December 2008. Mrs De Oliveira was there. In a capacity he describes in an affidavit as "an accounts payable clerk", she asked him to countersign a number of cheques so that company debts could be paid. He declined to sign. He says in his affidavit that he did so because of the pendency of these proceedings. A different explanation was given by Mr Nassar in cross-examination: "I refused to do that because I didn't know what the cheques were for. I had not been involved in the day-to-day running of the business. I couldn't clarify anything in the business. I was handed a stash of cheques and asked - the exact words were: "My husband has asked you to sign these cheques, will you sign them?" I said: "No, I don't know what they're about. I will speak to my solicitor". At that time I had been picking up accounts all the way through, and I said in open forum, in the middle of the drafting room, in front of Mr Peter Richardson, Mr Woodridge and Olando, this company I believed is trading insolvent, and I will not be signing that. I went outside and I rang Esplins. That is exactly what happened." 62 Mr Nassar accepted in cross-examination that he did not look at the cheques or make any effort to discover what they were for; also that he said to Mrs De Oliveira, "This company is insolvent; I will not be signing them". 63 Mr Nassar was obviously speaking of IPG. I say this because of his affidavit evidence about what he discovered from documents he obtained from the office on a visit he made on or about 16 December 2008 – a visit separate, it seems, from that during which he was asked by Mrs De Oliveira to sign cheques. In the course of the visit, he obtained copies of documents showing that IPG was trading at a "significant loss", with negative net assets, while DGN had very substantial assets. According to the sequence of events in Mr Nassar's affidavit, this discovery occurred after the episode in which he declined to sign cheques and said, "This company is insolvent". But it may be that the visits happened in the opposite order or that there was a single visit during which Mr Nassar saw the financial documents and was later asked to sign the cheques. 64 At all events, Mr Nassar, knowing that Mr Grasso was unable to act and that two signatures were required, refused to take action necessary to cause IPG to make payments. There is nothing to suggest that the cheques were not for payment of bona fide debts of IPG. Events of 2009 65 After Mr Grasso became incapacitated on 27 November 2008 and Mr Nassar had showed his unwillingness to sign cheques, there were difficulties in due administration of the affairs of the companies. It was this that led the plaintiffs to press their interlocutory application for the appointment of a provisional liquidator. Mr Hill was appointed by order made on 2 February 2009. As I have said, the application was consented to by Mr De Oliveira and not opposed by Mr Grasso. 66 Mr Hill gave evidence of the results of his discussions with Mr Nassar and Mr De Oliveira and his examination of the books and records of IPG following his appointment. He established that IPG had not taken or sought any new contracts after a point in late 2008. There was work in progress of about $282,000 but the cost to complete was estimated at about $154,000. Mr Hill was not prepared to continue to trade IPG. 67 On 10 February 2009, there occurred, at Mr Hill's instigation, a meeting attended by him, members of his staff, Mr Nassar, Mrs Nassar and their solicitor, Mr De Oliveira, Mrs De Oliveira and their solicitor and Mr Grasso's son. The future of the IPG business was discussed. Mr Hill decided, after this consultation to attempt to sell the business as a going concern. He discussed with those present the way in which he proposed to proceed. 68 After the sale had been advertised and Mr Hill had made direct contact with a number of organisations involved in pre-cast panel businesses, a number of outside parties expressed interest. Some were given information packages and shown over the plant and premises. 69 A bid or auction process was then undertaken. The participants were Mr De Oliveira, Mr Nassar and two outside parties. Several rounds of bidding occurred, with bids being lodged in writing in sealed envelopes. On the fourth round, one of the outside parties withdrew. On the fifth round, Mr Nassar withdrew. The higher of the remaining bids was that of the other outside party but that party imposed conditions that Mr Hill found unacceptable. That party then withdrew and Mr De Oliveira became the successful bidder. 70 Having satisfied himself that the bid by Mr De Oliveira was a fair bid, Mr Hill completed a sale of the assets of the IPG business (excluding trade debtors) to a new company in which Mr De Oliveira had an interest. He first obtained certain orders of the court to enable him to do so. The price was $365,000. 71 On 18 March 2009, a secured creditor of DGN appointed a receiver of property at Camden owned by DGN. Mr Hill, the provisional liquidator, deposed that, according to the books of both companies, DGN is a creditor of IPG in the sum of $923,849 – a sum greater than the aggregate of the trade receivables of IPG and the proceeds of the sale of the IPG business. Mr Hill's opinion is that IPG is insolvent. 72 Mr Hill further reports that the patent of the Valaire technology in respect of which Group held a licence from Associated Valaire has expired. In any event, Associated Valaire took steps to terminate the licence. The substratum of Group has therefore dissipated. The parties' relationship 73 In addressing the question whether, as Mr Nassar alleges, there was a partnership among Mr Grasso, Mr De Oliveira and himself, I begin with observations made by McColl JA in Brooker v Friend & Brooker Pty Ltd [2006] NSWCA 385, a case in which a similar allegation was made regarding the relationship of persons who became shareholders in a company. Her Honour said at [142] and [143]: "A partnership is the relationship which exists between persons carrying on a business in common with a view of profit: s 1(1), Partnership Act 1892. Here while the parties joined forces as shareholders in the company, any profit was to be derived through their equal shareholding and, presumably, by the payment of dividends. It is difficult to conclude from a review of the evidence that there was a manifestation of mutual assent sufficient to prove a partnership agreement pursuant to which the parties undertook to assume personal, and equal, responsibility for some debts, particularly borrowings from family and friends. In particular insofar as personal borrowings were concerned, the appellant did not establish the essential elements of an express contract of partnership, in the sense to which McHugh JA referred in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd . While the parties clearly agreed that each should personally borrow amounts to contribute to the company's coffers, they do not appear to have agreed on the terms, such as servicing and interest, upon which those borrowings should be undertaken, nor in particular, does the evidence demonstrate either turned his mind to how those borrowings would be dealt with in the event they could not be repaid by the company." 74 In the present case, the three parties had no relevant relationship before they joined together as co-directors and co-shareholders. As individuals, they never carried on any business in common; nor did their family companies. And their obvious intention was to obtain, so far as was possible, the benefit of limited liability that comes from being a shareholder in a company – an intention that was, to some extent, thwarted by the practical need for personal guarantees to be given to some creditors. In that way and to that extent, there was personal exposure to the debts of the businesses. But this was a matter of necessity that they did not seek. 75 The plaintiff has not proved the existence of what McColl JA called "the essential elements of an express partnership", born of a decision to carry on business in common, with each individual able to bind and be bound by either of the others and unlimited personal liability for the business debts. 76 It may, however, be said that the three venturers were parties to a "quasi-partnership" in the sense referred to by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360. That, of course, was a case in which winding up was sought on the just and equitable ground. Lord Wilberforce said at 379: "… a limited company is more than a mere legal entity, with a personality in law of its own: … there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure…The 'just and equitable' provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way. It would be impossible, and wholly undesirable, to define the circumstances in which these considerations may arise. Certainly the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down in the articles. The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence—this element will often be found where a pre-existing partnership has been converted into a limited company…. It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the force of the words themselves. To refer, as so many of the cases do, to 'quasi-partnerships' or 'in substance partnerships' may be convenient but may also be confusing. It may be convenient because it is the law of partnership which has developed the conceptions of probity, good faith and mutual confidence, and the remedies where these are absent, which become relevant once such factors as I have mentioned are found to exist: the words 'just and equitable' sum these up in the law of partnership itself. And in many, but not necessarily all, cases there has been a pre-existing partnership the obligations of which it is reasonable to suppose continue to underlie the new company structure. But the expressions may be confusing if they obscure, or deny, the fact that the parties (possibly former partners) are now co-members in a company, who have accepted, in law, new obligations. A company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it is through the just and equitable clause that obligations, common to partnership relations, may come in." 77 In MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 at [71], Spigelman CJ preferred to avoid "the often misleading terminology of quasi partnership" and referred to "a majority controlled business requiring mutual co-operation and a level of trust". 78 That, in my view, is a fair reflection of the situation in this case, with "majority controlled" understood as encompassing the ability of any two of the three to direct a course not favoured by the third. The parties were not partners. Nor were they merely co-shareholders brought together by the circumstance of having happened to buy shares in the same company on the stock exchange. They had elected to associate together through and by means of shareholdings in and directorships of three companies in circumstances where they looked to the companies alone for their financial rewards. And those rewards were to be the consultancy fees paid to the family companies for providing the services of the individuals (akin, in concept, to salaries) and, no doubt, dividends as a normal incident of shareholding (I have referred to the dividends actually paid in July 2007). The parties had not subscribed to any contract among themselves, apart from the contracts inherent in the companies' constitutions. But they were in a situation which, of its very nature and because of the informality that attended the day-to-day relationships, warranted mutual co-operation and a level of trust. 79 The submission that the three individuals were partners in the Partnership Act sense cannot be accepted. But I do accept that their relationship entailed mutual co-operation and a level of trust and that they came to be associated together in a form of "quasi partnership". The express terms 80 The constitution of each of IPG and DGN contains particular provisions with respect to the disposal and transfer of shares. Subject to articles 27 and 30 about to be mentioned, shares are, in each case, freely transferable by a member. 81 Article 27 requires a member proposing to transfer any shares to give notice in writing to the company. The notice may, but need not, state the price per share that the member is willing to accept. If no price is stated or the directors consider the stated price to be less than the fair value per share, the directors must obtain a determination of the fair value per share from an independent accountant. Having done so, the directors must inform the prospective transferor of the fair value so determined, whereupon he or she may withdraw the transfer notice. If it is not withdrawn, the directors must offer the shares in question to the other members (in proportion to their shareholdings) at the lower of the price per share specified in the transfer notice and the fair value as determined in the way I have mentioned. If any other member accepts the offer, the prospective transferor must sell to the member accordingly. If any of the relevant shares then remain unsold, the prospective transferor is free to sell those shares to any person he or she chooses, provided that the sale is made within the following six months and at a price not less than the lower of the price stated in the transfer notice and the fair value determined by the accountant. 82 Under article 30, the directors may decline to register any transfer of shares without giving any reason; but that, of course, is a power the nature and scope of which are as described by Chitty J in the following passage in his judgment in Re Bell Bros Ltd (1891) 65 LT 245 expressly approved by Griffith CJ in Manning River Co-operative Dairy Co Ltd v Shoesmith [1915] HCA 32; (1915) 19 CLR 714 at 717-718: "The discretionary power is of a fiduciary nature, and must be exercised in good faith; that is, legitimately for the purpose for which it is conferred. It must not be exercised corruptly, or fraudulently, or arbitrarily, or capriciously or wantonly. It may not be exercised for a collateral purpose. In exercising it, the directors must act in good faith in the interests of the company and with due regard to the shareholder's right to transfer his shares." 83 Article 30 thus does not create a power in the directors that can be used simply for the purpose of denying to any shareholder his essential right to transfer his or her shares as he or she wishes. It creates only a power of a safeguarding kind, with the interests of the company as the sole object of the safeguard. Sections 232 and 233 84 Mr Nassar advances his case predominantly by reference to ss 232 and 233 of the Corporations Act. To the extent that he seeks an order that Mr Grasso and Mr De Oliveira purchase his shares in the companies, he relies exclusively on those sections. 85 The statutory jurisdiction created by ss 232 and 233 (based on concepts of oppression, unfair prejudice, unfair discrimination and inconsistency with the interests of the members as a whole) provides a means by which the court can look beyond legal rights and do what is just and equitable in the particular circumstances. In Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 (at CLR 471), Brennan J said that this provision "broadens the grounds of intervention", adding that "the legislature intends to provide a greater measure of curial protection to members of a company, especially if they be in a minority, than the protection afforded under earlier Companies Acts". In Thomas v H.W. Thomas Ltd [1984] 1 NZLR 686 (at 693) Richardson J said that the several distinct concepts referred to in the analogous New Zealand section are not to be considered "separately in watertight compartments" but "overlap", so that "each helps to explain the other". Read together, Richardson J said, the several concepts: "… reflect the underlying concern of the subsection that the conduct of the company which is unjustly detrimental to any member of the company whatever form it takes and whether it adversely affects all members alike or discriminates against some only is a legitimate foundation for a complaint under s 209. The statutory concern is directed to instances or courses of conduct amounting to an unjust detriment to the interests of a member or members of the company. It follows that it is not necessary for a complainant to point to any actual irregularity or to an invasion of his legal rights or to a lack of probity or want of good faith towards him on the part of those in control of the company." 86 The jurisdiction was described by Spigelman CJ in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 in these terms: "The statutory formulation has been extended over the years to confer on the court a wide-ranging remedial jurisdiction. The addition of the words 'unfairly prejudicial to' and 'unfairly discriminate against', to the original statutory reference to 'oppressive', indicates an intention that the jurisdiction should not be confined by technical distinctions: see eg Re Saul D Harrison & Sons plc [1995] 1 BCLC 14 at 17-20; Re a Company (No 00709 of 1992); O'Neill v Phillips [1999] 2 All ER 961; [1999] 1 WLR 1092 at 1098-1101." 87 The co-existence of the several elements in the statutory formulation based on oppression, unfair prejudice and unfair discrimination occurs "with each helping to explain the other": Thomas v H.W. Thomas Ltd (above). The same message comes through from the judgment of Young J in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 where it was said that the provisions are looked at as a composite whole, with the individual elements seen as "merely different aspects of the essential criterion, namely commercial unfairness": see also Dosike Pty Ltd v Johnson (1996) 16 WAR 241. 88 One aspect of the statutory jurisdiction is the effectuation of parties' underlying intentions when these are not consistent with strict legal rights. I quote from H A J Ford, R P Austin and I Ramsay, "Principles of Corporations Law" at para 11.450: "We have seen that equitable considerations underpin the oppression remedy. A party may have a legal right which the Court refuses to allow the party to exercise on the basis that this would be unfair. It may be unfair because exercise of the legal right may breach an understanding between the parties. An example is a company formed by a majority and minority shareholder on the basis that both shareholders will participate in management of the company and each be directors. The majority shareholder has a legal right to remove the minority shareholder as a director. However, where this breaches the understanding of the shareholders that both will be involved in the management and be directors, the Court can restrain the exercise of the legal right by the majority shareholder on the basis that its exercise would be oppressive." 89 That passage was the subject of the following comment by Hasluck J in Remrose Pty Ltd v Allsilver Holdings Pty Ltd [2005] WASC 251; (2005) 225 ALR 588 at 600: "The learned author notes that the term 'legitimate expectation' has been used to describe an understanding or expectation of the kind just mentioned although Lord Hoffman in O'Neil v Phillips , above, indicated that use of the term may not be appropriate. More recently, in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97, Priestley JA described it as a convenient shorthand term, so long as Lord Hoffman's caveat about its proper significance is kept in mind, namely that it is a consequence not a cause of equitable restraint upon legal rights. His Honour indicated that it is a useful label for describing the result of the way in which equitable considerations operate." 90 In similar vein, the Court of Appeal of Western Australia (Steytler P, McLure and Buss JJA), in Smolarek v Liwszyc [2006] WASCA 50; (2006) 32 WAR 101, noted, at p.122, that, notwithstanding the criticism of the expression by Lord Hoffman in O'Neill v Phillips [1999] 1 WLR 1092, "legitimate expectation" has been used in this context to describe "an understanding or expectation of a member which, because of equitable considerations, can make it unfair for a party to exercise legal rights". Lord Hoffmann said that the real question is as to the "correlative right" that may be sourced in the relationship between company members making it unfair, on equitable principles, for a majority to exercise a power available to them to the prejudice of another member. 91 In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (above), Priestley JA said at [420]: "But I think that one useful cross-check in a case like this is to ask whether the exercise of the power in question would be contrary to what the parties, by words or conduct, have actually agreed. Would it conflict with the promises which they appear to have exchanged? In Blisset v Daniel the limits were found in the 'general meaning' of the partnership articles themselves. In a quasi-partnership company, they will usually be found in the understandings between the members at the time they entered into association. But there may be later promises, by words or conduct, which it would be unfair to allow a member to ignore. Nor is it necessary that such promises should be independently enforceable as a matter of contract. A promise may be binding as a matter of justice and equity although for one reason or another (for example, because in favour of a third party) it would not be enforceable in law." An expectation of participation in management 92 Among what Priestley JA termed "the promises which they appear to have exchanged" that were "binding as a matter of justice and equity" will often be a promise that each member will be permitted to participate in the day-to day management of the company. Thus, in O'Neill v Phillips (above), Lord Hoffmann (at 1102) referred to "the standard case in which shareholders have entered into association upon the understanding that each of them who has ventured his capital will also participate in the management of the company". In such a case, his Lordship said, "it will usually be considered unjust, inequitable or unfair for a majority to use their voting power to exclude a member from participation in the management without giving him the opportunity to remove his capital on reasonable terms". 93 Lord Hoffmann also observed (at 1104): "It is not fair to the excluded member, who will usually have lost his employment, to keep his assets locked in the company." 94 Lord Hoffmann referred (at 1102) to characteristics "commonly giving rise to equitable restraints upon the exercise of powers under the articles". These are: "(1) an association formed or continued on the basis of a personal relationship involving mutual confidence, (2) an understanding that all, or some, of the shareholders shall participate in the conduct of the business and (3) restrictions on the transfer of shares, so that a member cannot take out his stake and go elsewhere." 95 The characteristics thus mentioned are those identified by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd as indicating a need for intervention by way of winding up on the just and equitable ground. It was accepted in both O'Neill v Phillips and Fexuto v Bosnjak that the same considerations may be at play in cases such as the present where there is resort to the statutory jurisdiction concerning what is compendiously referred to as "oppression" but which extends also to unfair prejudice and unfair discrimination. 96 It is important to bear in mind that the parties' understandings and "promises" productive of equitable qualifications upon legal rights are not immutable. They may change with time and with circumstances. This was recognised by Spigelman CJ in Fexuto v Bosnjak at [90]: "There will be circumstances in which the emergence of irreconcilable differences will cause the court to conclude that an understanding or expectation as to participation in management should be taken to have ceased, in a manner not entitling the person excluded from such participation to relief under the statutory provisions. That would be so where the court decides that it is the person excluded who is responsible for the breakdown in the relationship. This appears to have been the case in Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (2000) 34 ACSR 469; see also Belgiorno-Zegna v Exben Pty Ltd (2000) 35 ACSR 305 esp at [142], [151]." 97 The Chief Justice also made the point that the jurisdiction to order winding up on the just and equitable grounds may become exercisable in circumstances that do not amount to oppression, unfair prejudice or unfair discrimination. His Honour said at [89]: "It may be accepted that the existence of irreconcilable differences among persons involved in what is, in effect, a partnership, will destroy the personal relationship involving mutual confidence, that lies at the heart of the partnership analogy. This analogy has been applied both to applications for winding up on the just and equitable ground and also to oppression suits. (Although the differences in form are not immaterial: see Re a Company (No 002567 of 1982) [1983] 2 All ER 854; [1983] 1 WLR 927 at 935–6 per Vinelott J.) Irreconcilable differences may establish a basis for winding up, they do not of themselves constitute oppression or unfair prejudice: see McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603 at 604. Nevertheless, the destruction of the personal relationship establishes a basis for granting relief in the usual case, not for concluding that the partnership analogy has ceased to be pertinent. (As to partnership law: see Atwood v Maude (1868) LR 3 Ch App 369 at 373; Knight v Bell (1887) 13 VLR 878 at 885–6.)" 98 This is, in my view, an important point for the present case. There can be no doubt that there are irreconcilable differences between the shareholders and that there has been an irretrievable breakdown of the relationship that once existed. Indeed, it was readily accepted by both counsel for Mr De Oliveira and counsel for Mr Grasso that this is a classic case for the making of a winding up order on the ground that irretrievable breakdown of the relationship between the members makes winding up just and equitable. But it by no means follows that relief under ss 232 and 233 – whether by way of winding up or otherwise – is warranted. The basic submissions in this case 99 Mr Pike submitted that this is a case in which each of the three participants who came together in 2000 in a relationship of "quasi partnership" had an entitlement to participate in day-to-day management. He further submitted that Mr Nassar was excluded from day to day management in circumstances where he was not given an opportunity to remove his capital on reasonable terms. That, it was said, was inconsistent with the expectation that involvement in management would continue or an opportunity to withdraw would be given. 100 Assuming the existence of the postulated entitlement, two propositions thus require examination: first, whether Mr Nassar was, in the relevant sense, excluded from day-to-day management; and second and if so, he was excluded without an opportunity to remove his capital on reasonable terms. It is convenient to consider these matters in reverse order. A fair offer? 101 Lord Hoffmann said in O'Neill v Phillips (at 1107) that "it will almost always be unfair for the minority shareholder to be excluded without an offer to buy his shares or make some other fair arrangement" [emphasis added]. This pre-supposes that "some other fair arrangement" does not already exist. It was submitted on behalf of Mr De Oliveira and Mr Grasso that, in the case of each of IPG and DGN, article 27 created a fair and reasonable means of exit for Mr Nassar that was there, as it were, for the taking whenever he wished to have it. 102 The response by counsel for Mr Nassar was that article 27 fails to measure up to the five criteria of fairness indicated by Lord Hoffmann in obiter dicta at pages 1107-1108. The criteria envisage that the offer will be at "a value representing an equivalent proportion of the total issued share capital, that is, without a discount for its being a minority holding". Article 27 does not work in that way. The process for which it provides produces a value of the shares to be sold and if, as here, they represent a minority interest, there will inevitably be a discount accordingly. There is the added point that article 27 does not produce a buyer ready, willing and able to buy at the price fixed by the valuation process. It produces only freedom on the part of the selling member to sell at that price if the other members choose not to buy and the selling member can find an outsider willing to do so. Here, as in Saykan v Elhan [2006] VSCA 230, the availability of a mechanism for valuation in the constitution does not counter the need for a fair arrangement. 103 It therefore becomes necessary to consider the proposal that Mr Grasso and Mr De Oliveira communicated through Marsdens' letter of 14 December 2007. The first thing to note is that the letter did not convey an offer in the classic contractual sense. It was not framed in such a way that Mr Nassar, simply by saying "I accept", could bring a contract into existence. But it cannot be a requirement, in circumstance of the kind under discussion, that the members under a duty to make a fair arrangement must act in the classic contractual sense. The emphasis must be on the creation of a fair exit mechanism that is, in the end, agreed after necessary negotiation and discussion. 104 The proposal conveyed by Marsdens' letter of 14 December 2007 is criticised because it takes account of the IPG goodwill and the factory owned by DGN (but used by IPG) at fixed amounts, rather than providing for them to be valued by an independent valuer; also that the Associated Valaire licence held by Group is not mentioned at all. It may readily be accepted that, in these respects, the proposal does not measure up to Lord Hoffmann's five criteria. 105 But to hold that Mr Grasso and Mr De Oliveira thereby failed to take a step that it was essential for them to take to avoid falling into conduct that was oppressive, unfairly prejudicial or unfairly discriminatory represents an altogether too simple and mechanistic approach. In order to avoid such a charge, the members upon whom lies the expectation of facilitating exit on fair terms are not required to come up immediately with a detailed offer constructed in isolation from discussion and negotiation that conforms in every respect to Lord Hoffmann's criteria of fairness. They are not, as it were, given a single arrow with which they must hit the bullseye. 106 In the present case, a process of negotiation as to Mr Nassar's exit terms had begun. He had become a participant in the process by means of Mr Koutzoumis's letter of 29 November 2007. That was a response to the informal document he had been given by Mr Grasso and Mr De Oliveira on 16 November 2007. They, in turn, responded through Marsdens' letter of 14 December 2007. It is said against them that they did no more by that letter than repeat the proposal they had made in the first place. There is substance in that criticism. But it is important to note that the letter expressly addressed the possibility that the proposal might not be acceptable to Mr Nassar and invited discussion at a "round table conference"; also that the separate and subsequent letter from Marsdens dated 15 January 2008 again suggested a "round table conference". Mr Nassar chose not to take up either of these invitations. 107 The situation between late November 2007 and January 2008 was one in which both sides had made proposals for the purchase of Mr Nassar's shares by Mr Grasso and Mr De Oliveira. A negotiation had begun and was pursued. Mr Grasso and Mr De Oliveira, by the 15 January 2008 letter, showed a willingness to continue the negotiation with a view to reaching a consensual resolution. Given the correspondence that had passed to that point, continuation of the attempt to find an agreed basis for the purchase of Mr Nassar's shares would have been the main item for discussion at the round table conference that Mr Grasso and Mr De Oliveira proposed. It was Mr Nassar who declined to join in that attempt. 108 Mr Grasso and Mr De Oliveira showed a willingness to seek in good faith an agreed basis for buying out Mr Nassar. Had their proposals for a round table conference been accepted by Mr Nassar, the reservations he had about their 14 December 2007 proposal might have been resolved. They might have accepted or proposed changes to deal with problems he had with that proposal. Some agreed middle ground might have been found. But the course chosen by Mr Nassar was to make no response to the "round table conference" invitations of 14 December 2007 and 15 January 2008, to initiate these proceedings on 22 February 2008 and to articulate the specific concerns about deficiencies in the 14 December 2007 proposal from Mr Grasso and Mr De Oliveira only through counsel's submissions at trial. 109 By the end of 2007 or beginning of 2008, the entitlement of Mr Nassar was, in the words of Hodgson J in Belgiorno-Zegna v Exben Pty Ltd [2000] NSWSC 884; (2000) 35 ACSR 305 at [139], an entitlement "to expect a reasonable approach to a negotiated exit". Mr Grasso and Mr De Oliveira showed themselves willing to take such a reasonable approach. 110 Mr Nassar was not denied a reasonable opportunity to negotiate reasonable terms of withdrawal. He chose not to continue to negotiate in the face of invitations by Mr Grasso and Mr De Oliveira to do so. Exclusion from day-to-day management? 111 I return now to the question whether Mr Nassar was, in the relevant sense, excluded from day-to-day management in breach of an understanding that he would participate in that management. 112 It may be accepted that there was an expectation of such participation by Mr Nassar when the parties came together in 2000 and that it continued thereafter to the later part of 2007; and that this was so despite Mr Nassar's own wishes, expressed in 2005, to be able to go his own way. The expectation that arose at inception was an incident of the parties' quasi-partnership. 113 But a fundamental and irreversible change in the nature and substance of the parties' relationship occurred abruptly on 9 November 2007. On that day, two of the three participants resorted to fisticuffs in the workplace. The situation was serious enough for the police to be called and to attend. Mr Nassar and Mr De Oliveira themselves recognised immediately that they could no longer work together. On the very day of the incident, Mr De Oliveira asked Mr Nassar when he would be leaving. Mr Nassar said that he would leave when he was paid out. It was thus acknowledged immediately that a parting of the ways was inevitable, that it would take the form of Mr Nassar's withdrawal and that the only thing remaining to be done was to come to an arrangement about a pay-out. 114 In the days that followed, Mr Nassar attended for work but was not as active as he had been. He directed some clients to Mr De Oliveira. He was in a transitional state and, on 16 November 2007 – a week after the physical altercation – received a separation proposal from Mr Grasso and Mr De Oliveira and acknowledged receipt of it with words indicating that he would speak to them further about the terms of his withdrawal. 115 The pre-existing relationship – which may already have been under stress – came to an abrupt end on or soon after 9 November 2007. Mr Nassar and Mr De Oliveira acknowledged immediately that the relationship was at an end and that the termination would result in Mr Nassar's leaving with a pay-out. This was not a product of exclusion of anyone by anyone. It was merely acceptance of a reality arising from fundamentally changed circumstances (in the form of inability to work together) not attributable to the fault of any individual. At that point, the pre-existing expectations about participation in day-to-day management were overtaken by mutual acceptance of the reality that Mr Nassar would no longer participate. 116 It is relevant to quote at some length from Mr Nassar's cross-examination by Mr McInerney: "Q. Mr Nassar, following 9 November 2007, there was a change in your relationship with Mr De Oliveira; that's correct, isn't it? A. Yes, that's correct. Q. And before 9 November 2007, you and Mr De Oliveira had a friendly relationship; is that correct? A. We had a working relationship. It was civil, yes. Q. Following the fight on 9 November 2007, is it fair to say that you and Mr De Oliveira ceased to have a working relationship? A. We didn't cease to have a working relationship, we held grudges for two or three weeks, yes. Q. And-- A. The working relationship, I might add, continued and there was interaction between us. Q. But you went from a position whereby you could talk to each other on a friendly basis before 9 November 2007, and following the fight on 9 November 2007 you ceased to have that type of relationship? A. Yes, we did. Q. Within a short period of time of 9 November 2007, your relationship with Mr Grasso changed as well, didn't it? A. Yes, it did. Q. Similarly, with Mr Grasso, before 9 November 2007, you had a working relationship where you're on reasonably friendly terms; correct? A. I would say more than a working relationship with Mr Grasso. Q. And within a short period of time of this fight on 9 November 2007, your relationship with Mr Grasso had changed fundamentally, hadn't it? A. Yes, it did. Q. And, in effect, you and Mr Grasso, within a short period of 9 November 2007, had in effect ceased to communicate effectively, hadn't you? A. We still communicated, but it wasn't on the same basis as we used to, no. Q. And so by 16 November 2007, which was the meeting all three of you attended-- A. Yes. Q. --the state of affairs was that your relationship had fundamentally deteriorated with Mr De Oliveira; correct? A. Correct. Q. And your relationship with Mr Grasso had fundamentally deteriorated by 16 November 2007 as well? A. Had - with Mr Grasso it was strained. It hadn't deteriorated, as you put it. No, we were still talking. He was still talking to my wife and he was still talking to myself. He was actually trying to broker a peace between Paul and myself. Q. Also, either on 9 November 2007 or within a very short period of time, and certainly before 16 November 2007, you had formed the view that you could no longer continue working with Mr De Oliveira and Mr Grasso; correct? A. At that time, yes, I would say. Q. You understood the views held by, firstly, Mr De Oliveira either on 9 November 2007, or within a short period of time thereafter and certainly before 16 November 2007, that he held the view that he could no longer continue working with you? A. I believe he made that - he made that view after the 9th, yes. Q. But before 16 November 2007? A. Yes, I would say so. The actions of calling the bank manager would attest to what was going on in the background. Q. Mr Grasso's position, equally, was that either on 9 November 2007 or before 16 November 2007 you understood that he no longer felt he could continue working with you; correct? A. No, that's not correct. I don't hold that view, no. I think he was pressured by his personal circumstances, but it's a matter for another-- Q. Is it fair to say that by 16 November 2007, you wanted out of the relationship you had had with Mr De Oliveira and Mr Grasso? A. Yes, it's fair to say that. Q. And is it fair to say that the only impediment to you getting out of your relationship with each of them was reaching an agreement as to, from your perspective, a fair price of your shares in each of the companies, IP Group and DGN? A. That was the only impediment, yes." 117 There was, on and shortly after 9 November 2007, a change in the individuals' relationship of the very kind referred to by Spigelman CJ at paragraph [90] of Fexuto v Bosnjak (see paragraph [96] above). The Chief Justice there observed that an understanding or expectation as to participation in management may come to an end by reason of the emergence of irreconcilable differences. That is precisely what happened on and soon after 9 November 2007. 118 A phase of seeking to negotiate Mr Nassar's exit terms followed. A new relationship prevailed. It was a relationship of negotiators seeking a basis for formal separation. The relationship was already of that quality when the Marsdens letter of 18 December 2007 terminated the consultancy arrangement with Marfern Pty Ltd. 119 There was, in short, no exclusion of the kind that might warrant a finding of oppression, unfair prejudice or unfair discrimination for the purposes of ss 232 and 233. There was the emergence of irreconcilable differences making it impossible for the parties to the quasi-partnership to continue in that relationship. Remedies 120 The conclusions I have stated mean that Mr Nassar's case based on ss 232 and 233 does not succeed. I nevertheless make some observations about the form of relief that might have been appropriate had he been successful in making out that case. 121 The principal relief to which Mr Nassar would have laid claim in that event is an order requiring Mr Grasso and Mr De Oliveira to purchase Mr Nassar's shares in the three companies. 122 In John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'Asia) Pty Ltd (1991) 6 ACSR 63, Young J had before him several possible orders in an oppression case. At pages 75 and 76, he referred to the possibility that neither party "will really have sufficient funds to buy out the other, so that if an order for buy out … is made it may be frustrated". That must be a concern here. Mr De Oliveira is associated with the new company that bought the IPG business for $365,000. Mr Grasso is incapacitated. There is nothing before the court to show that either of them (or both together) could, as a matter of financial capability, purchase Mr Nassar's shares in any of the companies. 123 The same is true in relation to the conceptually similar outcome of purchase of Mr Nassar's shares by the companies themselves. It cannot be seen that any of the companies has the capacity to acquire Mr Nassar's shares by way of share buy-back or reduction of capital. According to Mr Hill, IPG is insolvent, one of the real estate assets of DGN is in the hands of a receiver and Group's substratum has disappeared. 124 Compulsory purchase of Mr Nassar's shares by his co-shareholders or by the companies themselves is thus not something that can be seen to be viable in such a way that the court, when ordering that action, would have any expectation that the order was otherwise than futile. 125 The fact that the companies are in provisional liquidation would present another obstacle to the making of an order that Mr Grasso and Mr De Oliveira purchase Mr Nassar's shares. The aim of any order made pursuant to s 233 must be to put an end to the oppression. This was made clear by all three members of the Court of Appeal in Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 at [121] per Giles JA, at [172]-[173] per Basten JA and at [354]-[363] per Young CJ in Eq at [354]-[363]. In the case of IPG, that result has already been achieved by the appointment of the provisional liquidator and the sale of the business. The circumstances are very similar to those described by Giles JA at [137]: "In my opinion, the buy-out order was not an appropriate order. The provisional liquidation may have in part been a mutually-recognised necessity when the relationship between Mr Campbell and Mr Weeks thoroughly broke down. But the inability of the company to function as a jointly-owned and managed entity was plainly enough due to more than the particular conduct found to have been oppressive, and a breakdown in relationship in a 50/50 entity is not the same as oppression. The provisional liquidation was also in part, so far as Mr Weeks was concerned, with a view to recovery of his investment. The company did not continue with the provisional liquidator holding the status quo until the court came to consider what relief, if any, should be granted. The sale of its business and assets was consensual. In the absence of evidence to establish that it was forced on the parties, their agreement made a buy-out order unnecessary in order to bring the oppression to an end." 126 On Giles JA's approach, it would not have been a proper exercise of the s 233 discretion to order a buy-out of Mr Nassar's shares under s 233(1)(d); and, on the approach taken by Young CJ in Eq in Campbell v Backoffice Investments, the advent of the provisional liquidator would have made a buy-out order impermissible as a matter of jurisdiction. 127 The position is the same in relation to Group. That company no longer has any assets or business. 128 In the case of DGN, somewhat different considerations apply. It is true that a provisional liquidator is in office but the company does not appear to be insolvent or devoid of substance. Nor have any of the assets been sold. Apart from the debt owed by IPG, the assets are all real estate assets which are held for sale or for the sake of the rents they produce. There is no ongoing business beyond holding properties and receiving rents. An oppressed shareholder's interest would be suitably vindicated by a winding up that saw all the assets sold on arm's length terms, the debts paid and the surplus distributed among the contributories. 129 Had a case for relief under ss 232 and 233 been made out by Mr Nassar, an order that Mr Grasso and Mr De Oliveira buy his shares would not have been an appropriate order in relation to any of the three companies. What should be done? 130 Mr Nassar's failure to show conduct that is oppressive, unfairly prejudicial or unfairly discriminatory means that there is no occasion for the making of any order under s 233. 131 As I have said, however, Mr Nassar's non-preferred alternative of a winding up order is based also on various paragraphs of s 461(1), including s 461(1)(k) which allows the court to make a winding up order where it is of the opinion that it is just and equitable that the company be wound up. 132 As I have also said, it was readily accepted by both counsel for Mr De Oliveira and counsel for Mr Grasso that this is a classic case for the making of a winding up order on the ground that irretrievable breakdown of the relationship between the members makes winding up just and equitable. It is, on the evidence, perfectly clear that this is the case, so that the result should be as recently described by Dodds-Streeton JA in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86; (2008) 66 ACSR 325 at [119]: "Winding up is the characteristic remedy in circumstances where a working relationship predicated on mutual co-operation, trust and confidence has broken down. Equity would not ordinarily order the continuation of such an association where it would be a futility, would require continuing supervision or would be tantamount to specific enforcement of a contract of personal services." Disposition 133 The orders of the court are as follows: 1. Order pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) that Innovative Precasters Group Pty Ltd ACN 094 416 163 be wound up. 2. Order that Grahame Peter Hill of 581 Princes Highway, Rockdale be appointed liquidator of Innovative Precasters Group Pty Ltd. 3. Order pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) that DGN Investments Pty Ltd ACN 095 057 104 be wound up. 4. Order that Grahame Peter Hill of 581 Princes Highway, Rockdale be appointed liquidator of DGN Investments Pty Ltd. 5. Order pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) that IP Group Pty Ltd ACN 123 849 874 be wound up. 6. Order that Grahame Peter Hill of 581 Princes Highway, Rockdale be appointed liquidator of IP Group Pty Ltd. 7. Order that the question of costs be reserved for argument at a time to be fixed. 8. Order that the originating process be otherwise dismissed. ********** 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. 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