Reported Decision : 77 ACSR 616 New South Wales Supreme Court CITATION : Vadori v AAV Plumbing [2010] NSWSC 274 HEARING DATE(S) : 2, 3 and 4 February 2010 JUDGMENT DATE : 13 April 2010 JURISDICTION : Equity Division JUDGMENT OF : Ward J DECISION : 1. Declare that the affairs of the first defendant have been conducted in a manner that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff within the meaning of section 232 of the Corporations Act (Cth) 2001. 2. Order the fourth and fifth defendants to purchase the share of the plaintiff in AAV Plumbing Pty Limited for the sum of $190,800. CATCHWORDS : CORPORATIONS – alleged breach of s 232 Corporations Act – diversion of corporate opportunities – breakdown of business relationship and cessation of trading of company – main business diverted to new company owned by majority of shareholders and directors – oppressive conduct found – majority shareholders ordered to purchase minority shareholder's share in company – principles concerning valuation of shares in oppression suits – consideration of value attributable for goodwill – share valued largely by reference to value of company's claim against directors for breach of statutory and fiduciary duties in diversion of corporate opportunities LEGISLATION CITED : Corporations Act 2001 (Cth) CATEGORY : Principal judgment Addstead Pty Ltd v Liddan Pty Ltd [(1997) 25 ACSR 175 Backoffice Investments v Campbell [2007] NSWSC 161; (2007) 61 ACSR 144 (2007) 25 ACLC 302 Birtchnell v. Equity Trustees, Executors and Agency Co. Ltd. [1929] HCA 24; (1929) 42 CLR 384, Boardman v Phipps [1966] UKHL 2; (1967) 2 AC 46; [1966] 3 All ER 721 Campbell and Another v BackOffice Investments Pty Limited [2009] HCA 25; (2009) 238 CLR 304; (2009) 257 ALR 610; (2009) 73 ACSR 1 Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95 Campbell v Backoffice Investments Pty Ltd [2009] HCA 36; (2009) 259 ALR 402; (2009) 83 ALJR 110 Canadian Aero Service Ltd v O'Malley [1974] SCR 592, 40 DLR (3d) 371 Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 65 ACSR 661; 245 ALR 780 Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178 Colour Control Centre Pty Ltd v Ty [(1996) 39 AILR 4,316 Doyle v Australian Securities and Investments Commission (ASIC) [2005] HCA 78; (2005) 227 CLR 18; (2005) 223 ALR 218; (2005) 56 ACSR 159 Dwyer v Lippiatt; Dwyer v Backpackers R Us, at 355; Drinkwater v Caddyrack Pty Ltd [1997] NSWSC 431 Ehsman v Nutectime Int'l Pty Ltd [2006] NSWSC 887; (2006) 58 ACSR 705 ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1995) 15 ACSR 536 Fexuto Pty Limited v Bosnjak Holdings [2001] NSWCA 97; (2001) 37 ACSR 672; (2001) 19 ACLC 856 Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732; 23 ACLC 1100 Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480; [1964] 1 All ER 630; [1964] 2 WLR 618 Furs v Tomkies (1936) 54 CLR 583 Gemstone Corp of Australia Ltd v Grasso (1994) 13 ACSR 695; 12 ACLC 653 Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534 Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 Industrial Development Consultant Ltd v Cooley [1972] 1 WLR 443 Keech v Sandford (1726) 2 White & Tud LC 706; [1558-1774] All ER Rep 230; (1726) Cas temp King 61; (1726) 2 Eq Cas Abr 741; (1726) 25 ER 223 CASES CITED : Lord Corporation Pty Ltd v Green [(1991) 22 NSWLR 532-4 Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452 Mopeke Pty Ltd v Airport Fine Foods Pty Ltd (2007) 61 ACSR 395; 25 ACLC 254; [2007] NSWSC 153 Mordecai v Mordecai [(1988) 12 NSWLR 58 Natural Extracts Pty Ltd v Stotter [(1997) 24 ACSR 110 Pacifica Shipping Co Ltd v Andersen [1986] 2 NZ LR 328 Peso Silver Mines Ltd (NPL) v Cropper (1966) 58 DLR (2d) 1 Ragless v IPA Holdings Pty Ltd (in liq) [2008] SASC 90; (2008) 65 ACSR 700; 254 LSJS 225 Rankine v Rankine (1995) 124 FLR 340 Re a Company (No 002612 of 1984); Dwyer v Lippiatt; Dwyer v Backpackers R Us.Com Pty Ltd (2004) 50 ACSR 333; [2004] QSC 281 Re a Company (No 002612) (1986) 2 BCC 99,453 Re Baumler (UK) Ltd [2005] 1 BCLC 92; [2004] All ER (D) 139; [2005] BCC 181 (Ch D) Re Bright Pine Mills Pty Limited [1969] VR 1002 Re Hollen Australia Pty Ltd; Holt v Burnside [2009] VSC 95 Re Scottish Co-operative Wholesale Society Limited v Meyer [1959] AC 324; [1958] 3 All ER 66 Regal (Hastings) v Gulliver [1967] 2 AC 134; [1942] 1 All ER 378 Roberts v Walter Developments Pty Limited (1997) 15 ACLC 882 Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549; (1987) 5 ACLC 394 Scottish Co-operative Wholesale Society v Meyer; Webb v Stanfield [1991] 1 Qd R 593; (1990) 2 ACSR 283; 8 ACLC 715 Shelton v NRMA [2004] FCA 1393; (2004) 51 ACSR 278 Short v Crawley (No 30) [2007] NSWSC 1322 Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 Thomas v HW Thomas Ltd [1984] 1 NZLR 686, at 694; (1984) 2 ACLC 610; (1984) 2 NZCLC 99,14 Victoria, Spincode Pty Ltd v Look Software Pty Ltd [(2001) 4 VR 501 Wayde v NSW Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459; (1985) 61 ALR 225, at 234 Webb v Stanfield [1991] 1 Qd R 594 TEXTS CITED : Equity and Commercial Relationships, ed. PD Finn, Law Book Company, 1987 Ford's Principles of Corporations Law (13th Edition), eds RP Austin, IM Ramsay Lisa Vadori (Plaintiff) AAV Plumbing (First Defendant) Andrew Peter Antunovich (Second Defendant) PARTIES : Paul Antunovich (Third Defendant) Kathryn Anne Antunovich (Fourth Defendant) Lisa Antunovich (Fifth Defendant) Peter Vadori (Sixth Defendant) FILE NUMBER(S) : SC 254946 of 2007 M Lawson (Plaintiff) COUNSEL : No appearance (First Defendant) M W Young (Second to Fifth Defendants) In Person (Sixth Defendant) Thomas Mitchell Solicitors (Plaintiff) SOLICITORS : No appearance (First Defendant) Antunes Solicitors (Second to Fifth Defendants) In Person (Sixth Defendant) - 105 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WARD J TUESDAY 13 APRIL 2010 2007/254946 LISA VADORI V AAV PLUMBING PTY LIMITED & ORS JUDGMENT 1 These proceedings arise from the breakdown in the working relationship between Mr Andrew Antunovich, his brother Mr Paul Antunovich, and Mr Peter Vadori (all plumbers by trade), who are the three directors of the first defendant, AAV Plumbing Pty Limited, and the manner in which in late 2006 that company ceased to carry on its plumbing business. 2 Mrs Lisa Vadori, a one third shareholder of AAV and the wife of one of the three directors (Mr Peter Vadori), alleges that the affairs of AAV from around late November 2006 (in relation to the cessation of the plumbing business of the company) have been conducted in a manner contrary to the interests of the members of the company and oppressive to, unfairly prejudicial to or discriminatory against, her interests, in breach of s 232 of the Corporations Act 2001 (Cth). 3 Mrs Vadori is seeking an order under s 233 of the Act that the majority shareholders (the fourth and fifth defendants, Mrs Kathryn Antunovich and Mrs Lisa Antunovich, being the wives of the other two directors) purchase her shareholding for a sum to be set by the court. In the alternative, she seeks an order that the company be wound up under s 233 of the Act. 4 Mrs Vadori also seeks, as an alternative to her oppression suit, leave to commence proceedings against the directors of the company for damages for breach of statutory and fiduciary duties by reason of the same conduct which it is alleged was oppressive. 5 For convenience, I will refer to each of the directors and their wives (other than Lisa Vadori) by their first name (however, to avoid confusion between the two Lisa's, I will refer to the plaintiff as Mrs Vadori). I note that, of the six defendants, AAV did not appear and was not represented at the hearing; Peter appeared in person and was not represented at the hearing. Where I refer collectively to the defendants in these reasons, I am referring to the second to fifth defendants only (those being the shareholders and directors of AAV other than Mrs Vadori and her husband). 6 Broadly speaking, the steps that were taken to divide up the business and assets of AAV in late 2006 are not in dispute (though there is a dispute as to whether there was any agreement at all between the directors in relation to the taking of some of those steps, such as what was to happen with the company's stock in trade). Where there is a more substantive dispute is as to whether any agreement reached between Andrew, Paul and Peter in late 2006 (as to which the basis on which the assets and work in progress of the company were to be divided up between them or the new corporate entities with which the Antunovichs, on the one hand, and the Vadori's, on the other, were by then associated) was one entered into by Peter as agent for his wife or was one in respect of which she is estopped from making the complaints now made as to what has occurred. 7 In particular, the defendants plead (in paragraph 29(c) of their Defence dated 1 May 2008) that, from the time that Mrs Vadori became a shareholder (in June 2005), Peter acted as her agent and that he, with the full knowledge and consent of Mrs Vadori, participated in the direction of the affairs of AAV (including the decision to dissolve the business of the company and to allocate equipment and assets as between the three directors). It is pleaded that, prior to March 2007, Peter (whether on behalf of himself or as agent for Mrs Vadori) did not raise any objection to the resolutions made at a meeting on 21 November 2006 (that AAV would cease to trade and that its assets would be allocated as between the three directors) or the course of action undertaken pursuant to that agreement, until such time as the directors had reasonably undertaken action pursuant to those resolutions and to their detriment relying on those resolutions, as a result of which (ie as a result of Peter's failure to raise an objection to the arrangements at an earlier time) the defendants contend that Mrs Vadori is estopped from seeking the remedies that she now seeks. 8 In the alternative, it is pleaded in paragraph 29(d) of the Defence that AAV was conducted in the form of a quasi-partnership whereby the directors were quasi-partners and had conducted the business of the company on that basis, including acting as agent for their respective spouses (the shareholders). It is alleged that (as directors and quasi-partners) Andrew, Paul and Peter came to an agreement to cease trading and to allocate the assets of the company between them; that the defendants relied on that agreement and reasonably acted to their detriment in so doing and that, as Peter was acting as agent for Mrs Vadori, Mrs Vadori is now estopped from bringing these proceedings on the stated basis that each quasi-partner is entitled to rely on the agreements arrived at between them and reasonably to act on them. 9 As can be seen, each of the pleaded estoppels is predicated on a finding that Peter was acting as agent for his wife in the conduct of the company's business and, more relevantly, in the decision to cause it to cease trading and to divide up its assets (not an estoppel arising from any silence or conduct on the part of Mrs Vadori in her own right). 10 Mrs Vadori's complaint of oppressive conduct and breach of duty by the directors, as pleaded in paragraph 23 of the Statement of Claim by reference to the preceding paragraphs (relevantly including 11-22), relates to the manner in which, on the parting of the ways between the three directors, the business and assets of the company were, in effect, split up between the three directors without reference to Mrs Vadori as one of the three shareholders of the company. 11 Relevantly (in light of the submissions which have been made for the defendants as to the ambit of the oppression pleading), Mrs Vadori's allegation of oppression includes the alleged breach of statutory and fiduciary duties by the directors pleaded in paragraph 18 of the Statement of Claim (as seemingly recognised by the defendants insofar as their Counsel, Mr Young, submitted, when contending that the grant of leave to commence proceedings in the name of the company would not be in its best interests, that it would be difficult to find any cause of action to sustain a derivative suit which would not also amount to oppression). 12 It is alleged that, as from 1 December 2006, the plumbing business of AAV "was essentially transferred" to a new company in which the defendants were directors or shareholders respectively (A & P Plumbing Pty Limited) (para 11), as was the work in progress of AAV (comprised by works which were the subject of then contracts to be completed by AAV, being Montgomery Homes contracts in the value of $148,934.30 and Contour Building and Construction contracts to the value of $98,015, as particularised) (para 12); and a significant proportion of AAV's assets and intellectual property (para 16), and that this took place with no compensation or payment of moneys to AAV (paras 11, 14, 17). As seems to have been a matter of fundamental dispute between the parties, the alleged transfer of business also took place with no accounting for any goodwill in the business of AAV. The difference between the parties as to whether there was any, and if so the value of any, goodwill in the business of AAV as at 1 December 2006, largely explains the difference between the amount which Counsel for Mrs Vadori, Mr Lawson, contends is the appropriate price to be paid for her share in the company (if a compulsory purchase order is granted), that being in the order of $250,000, and the nominal amount which is all that Mr Young submits should be ordered if (which the defendants deny) any oppressive conduct is established to have occurred. 13 Paragraph 15 pleads that all plumbing works associated with the contracts and quotations detailed in paragraph 13 (ie, the existing contracts said to have been 'transferred' to A & P Plumbing) were obtained 'through' the defendants by reason of their position as members and/or directors of AAV. 14 The assets and intellectual property said to have been transferred to A & P Plumbing (for no consideration) are particularised in paragraph 16 as being: AAV's leasehold interest in its business premises; all but one of its employees; its stock and plumbing supplies; and its office equipment and furniture. There is a dispute as to a number of these allegations (including as to whether employees can be regarded as transferable assets) but, in particular, I note that in relation to the stock it is said by the defendants that there was a three way split of the stock in trade agreed, as between Andrew, Paul and Peter, but that Peter has since failed or refused to collect his one-third share of stock, which nevertheless remains available to be collected. (Mrs Vadori disputes that there was any such agreement (or, if there was, that it binds her) and asserted in the witness box that the stock said to be available for collection is not the same stock as that held by AAV in 2006. However, it is not apparent that any steps have been taken to verify whether the stock in question is the same stock and I do not see that I am in a position to make any finding in that respect.) 15 Paragraph 18 pleads that on or about 1 December 2006, the defendants (including the sixth defendant, Peter) commenced using motor vehicles and equipment owned by AAV for business ventures other than that associated with AAV. 16 Paragraph 22 pleads a breach of ss 180, 182, 182 and 183 of the Corporations Act and/or of the directors' fiduciary duties, by reference to the use by Andrew and Paul of their positions as directors to obtain a profit for A & P Plumbing to which AAV is said to be entitled (referring, as I understand it, both to the existing work taken over from AAV and to the future work opportunities arising from the relationship between AAV's existing clients and AAV's respective directors, particularly Andrew). 17 Complaint is also made (paras 19 – 21) as to the payment, out of funds from AAV's bank account, on 20 December 2006 of moneys to the defendants either without the consent of the members and directors (in the case of two payments of just over $4,000 to Andrew and Paul, said by them to be holiday pay) or as dividends without payment (at that time) of a corresponding dividend payment to Mrs Vadori (in the case of the two dividend payments of $3,340 to each of Kathryn and Lisa). 18 During the course of cross-examination of Paul, questions were raised as to the payment of AAV funds to meet other expenses, such as mortgage repayments for real estate not owned by the company but by the partnership and the making of superannuation contributions on behalf of Andrew and Paul (see, for example, at T 94/96). There was also some cross-examination of Paul as to the payment of duty chargeable in respect of a contract for sale of the neighbouring land to the AAV business premises, ultimately acquired by the partnership, from which Mr Lawson suggested that money may have been paid by the company which was not to its benefit (but for the benefit of the partnership between Andrew, Paul and Peter). 19 Objection was taken to this line of questioning on the basis that these were not matters pleaded in the Statement of Claim. The oppressive conduct there pleaded (as summarised above) relates solely to the conduct of the defendants from around late November 2006 in respect of what might be described as the practical winding up of AAV's plumbing business (AAV itself not having been wound up at any stage). 20 Whether or not conduct of this kind might properly form part of claims made for breach of directors' duties, if leave to commence derivative proceedings were to be granted, these were not matters pleaded in relation to the derivative suit for which leave was sought in these proceedings nor were they pleaded as conduct in breach of s 232 of the Corporations Act. 21 Mr Lawson nevertheless submitted that if there were to be a compulsory purchase order (and an adjustment to the price per share as valued by the different valuers who gave evidence in these proceedings) it might be necessary to take into account any sum of money that the company had paid out to a third party's benefit and which might need to be returned to the company. 22 Suffice it to note, at this stage, that when the company's accountant (Mr Jarrod Bramble of Cutcher & Neale) was taken in the witness box to various accounting entries, Mr Bramble said that there was a loan account in place when the business was transferred from the partnership to the company and that this loan account had been left in place as between AAV and the partnership. (He said that this was where the 'ad hoc' lease arrangement in relation to AAVs business premises was in place). Mr Bramble expected that there would be internal accounting entries to record payments made out of company funds for the benefit of the partnership or the directors (T 112) and took me through the general ledger report to confirm that the mortgage repayments for the property owned by the three individual directors in partnership had been accounted for in the partnership accounts as a loan from the company to the partners (by reference to p 464 of the court bundle). Presumably, therefore, any repayment of moneys of this kind would be dealt with in a winding up of the company, if not before. 23 I have proceeded on the basis of the claims as pleaded and therefore have not taken into account, in determining the claims now brought against the defendants, the making of any payments out of company funds towards partnership or personal expenses at an earlier time. In any event, the evidence from Mr Bramble suggests that the criticism made of the defendants in this regard is unwarranted. 24 There is no dispute but that A & P Plumbing in fact took on the task of completing the existing work, which AAV had on its books as at 1 December 2006. Both Andrew and Paul accepted in the witness box that no payment was made by A & P Plumbing to AAV in relation to that work (Paul - T 78.2, T 84.33-42; Andrew T 158) and that there was no attempt to pay to AAV any amount by way of the profit margin that A & P Plumbing had received (or that AAV might have expected to receive) from that work (Paul - T 78.7; T 84.33-42; Andrew – T 158). 25 It is not disputed that AAV's bank account (which was in credit as at November 2006) is currently overdrawn; that the company continues to incur accounting and other fees at a time when it is not trading; and that it has no function other than as a trustee of the existing superannuation and investment funds held for the benefit of the three directors of AAV. 26 AAV's only assets at present (it seemingly being accepted that no goodwill now reposes in the company, whatever may have been the case as at late 2006) appear to be the remaining one-third of the company's stock as at December 2006 (which is said by the defendants still to be held by A & P Plumbing awaiting collection by Peter on behalf of his wife and/or their new company, Vadori Plumbing); any debts represented by the loan balances shown in the company's accounts; and (significantly in my view) the benefit of any chose in action the company may have by way of a claim against one or more of its directors for breach of duty in relation to the matters of which Mrs Vadori complains. 27 Expert evidence was adduced by both sides in the proceedings (from Mr Gregory Lawrence, who was called by Mrs Vadori, and from Mr Robin Humphreys, who was called by the defendants). With the consent of the parties, at the outset of the hearing I directed that the experts confer in order to see if they were able to reach agreement as to the issues relating to the valuation of the business and of Mrs Vadori's share in the company as at the relevant time. They did so and a handwritten joint report dated 3 February 2010 was tendered (Ex 4). The experts have agreed that (based on the factors stated at the commencement of the report) the value of the business of AAV as at 1 December 2006 was $750,000, of which the value of goodwill (assessed on the basis that the business was a going concern and with no threat of employees/directors leaving the company) represented $500,000. 28 In particular, the experts agreed that on the said valuation of the business of the company, the value of each shareholder's interest in the company would be $250,000 (without taking into account any minority interest discount that would be applicable were the share to be offered outside the current shareholders' group) but that if a minority interest discount were to be applicable it would be in the range of 15% - 40%, depending on (unidentified) circumstances. 29 The experts further agreed that if certain assumptions were to be made (namely, assumptions as to the intentions of the directors to leave and to set up business in opposition to the company with some or all of the company's employees and as to the satisfaction of the company's regular clients with the work of the current directors), then this would "completely overwhelm the original valuation". The experts concluded that: "If the results of the assumptions are taken to the worst case scenario, the experts agree that the company would be worth little more than its net asset value of some $250,000. Some residual goodwill may remain depending on the extent to which the circumstances occur [though what that extent might be was not explored]". 30 Mrs Vadori seeks the making of a compulsory purchase order against the remaining two one-third shareholders (Kathryn and Lisa) in the sum of $250,000. (It is said that a purchase of shares by the company by way of a reduction in share capital would have no utility because the company has no money.) Alternatively, a winding up order is sought by way of remedy for the alleged oppressive conduct but in those circumstances Mrs Vadori would seek to postpone the operation of any winding up order until after the outcome of the derivative suit she seeks leave to bring. 31 As I understand it, the claim for leave to commence a derivative suit is pressed only if Mrs Vadori fails in her oppression suit (or, perhaps, if she fails to obtain the relief she seeks by way of a compulsory purchase order in that suit). Issues 32 Both sides handed up, in accordance with the pre-trial directions I had made, a statement of the issues they perceived as arising for determination in these proceedings. Broadly, those issues overlap. Some, such as the questions as to whether goodwill reposed in the company (or in one or more of the individual directors) or as to the transfer of work in progress, which were specifically raised as issues by Mr Lawson, seem to me to be subsumed in one or more of the issues as stated more generally by Mr Young (such as issues 1 and 4) or not to be pressed at all (in that I did not understand Mr Young to be asserting that goodwill reposed in the individual directors; simply that, by reason of the winding up of the business affairs of AAV, there was no goodwill left as at December 2006 to appropriate). 33 In essence, the issues as I see them may be summarised as follows: 1. Whether the circumstances in which the directors of AAV caused it to cease carrying on its plumbing business, and the way in which that business and the company's assets were divided up between the directors in late 2006 without reference to the shareholders, amounted to oppression or conduct otherwise in breach of s 232 of the Corporations Act ? 2. If so, what remedy should be granted pursuant to s 233 of the Act? 3. Alternatively, should leave be granted for Mrs Vadori to commence a derivative suit in the name of AAV against its directors for breach of statutory or fiduciary duties in relation to the conduct alleged to have been contrary to the interests of members and oppressive? 34 The determination of the above issues gives rise, among other things, to the question whether the cessation of AAV's business and the division of its assets was effected pursuant to an agreement or arrangement to which Mrs Vadori was bound (or as to which she is in some way estopped from taking issue) and as to the value of Mrs Vadori's share in the company (and, in particular, whether there subsisted any goodwill in the company as at 1 December 2006 which should be taken into account in valuing Mrs Vadori's share for the purposes of a compulsory purchase order). 35 There are also questions as to the appropriateness at this stage of a winding up order in respect of the company (whose only role since late 2006 has been as trustee of a superannuation fund, and of an investment fund wholly owned by it as trustee of the superannuation fund, for the benefit of the three directors). Summary 36 In summary, for the reasons set out below, I am of the view that the affairs of the company in late 2006 were conducted in a manner contrary to the interests of its members and oppressively to Mrs Vadori, in breach of the directors' statutory and fiduciaries and in breach of s 232 of the Corporations Act, for which breach the appropriate remedy is an order that the remaining shareholders buy Mrs Vadori's share in the company. 37 The evidence of the chartered accountant called as an expert for the defendants, Mr Robin Humphreys, is in effect that (in circumstances where there were no restrictive covenants to restrain the directors/employees from leaving the company and the competing with it) the value to be attributed to the company for goodwill as at 1 December 2006 would be nominal. I did not understand this evidence to imply that the goodwill of the business reposed in any one director (as opposed to the company itself). Rather, I understood it to be a function of the fact that, in the absence of effective non-restraint covenants in place with the three directors, the company was always at risk of one or more of those directors choosing to cease their working relationship with the company, to the detriment of the value of the goodwill in its business, and hence that once that (worst case) situation eventuated, by the end of 2006, any goodwill which might have been built up in the company was no longer worth anything. Mr Lawrence, in agreeing to the propositions set out in the joint experts' report, accepts that this is the appropriate conclusion to be reached in relation to the issue of how any goodwill in the company is to be valued. 38 However, what the experts did not seemingly take into account in valuing the business and assets of the company as at 1 December 2006 was the value of any claim which AAV may have against the directors if the conduct of the directors (in implementing the decisions taken by them in November 2006) was improperly to divert not only the plant and equipment of the company to themselves (thus making it unlikely that the company could as a practical matter complete the work it was contractually bound to do or to take on any other work) but also to divert to A & P Plumbing (for the benefit of the Antunovich family interests) the existing work and customer base of AAV and thus to destroy any residual goodwill there may have been left in AAV. 39 Mrs Vadori accepts that she has had the benefit, through the allocation of equipment and the payment of cash to the new company with which she and her husband are now associated (Vadori Plumbing Pty Limited), of a one-third share of at least some of the assets of the company (and Mr Lawson confirmed that she is not seeking to 'double dip', as had been suggested in submissions by Mr Young). For their part, the defendants seem to have accepted that the division of plant and equipment was roughly equal as between the three directors and their respective new entities (though I recognise that Andrew and Paul believe that the scales are weighted slightly in Peter's favour in that regard). 40 In my view, the amount to be paid for Mrs Vadori's share should take into account not simply a one-third share of the value of the business, as valued by the experts on a nil goodwill basis, but also an amount to compensate for the loss of a one third share of the profit component for the existing AAV work which was taken on by A & P Plumbing in late 2006; an amount to reflect the value of one-third of the company stock remaining on hand as at late 2006 after the allocation of two-thirds of that stock to Andrew and Paul or their new company (A & P Plumbing); and an amount to reflect the value of a share of the company's claim against the directors in relation to the breach of directors' duty. 41 I therefore consider that, in all the circumstances, the fair price for which Mrs Vadori's shareholding in the company should be acquired is $190,800. That represents, broadly speaking, the value of her one-third share of the business as at 1 December 2006 (ie one-third of $250,000 – approximately $83,000) less the value of the plant and equipment/cash received by Vadori Plumbing (which seems to be around $50,000, comprised of $20,000 in the equity in the car/equipment taken by Peter and $30,000 in cash), ie $33,000, plus the value of one-third of the stock as at 2006 ($16,300) and one-third of the profit attributed to the existing work taken over by A & P Plumbing (over $16,400), plus one-third of the value to be attributed to the business wrongfully appropriated by Andrew and Paul (or the profits obtained by A & P Plumbing from that business), for which they would be liable to account on a claim for breach of their duties as directors. 42 I have assessed that last component as equivalent roughly to one-third of the 2006 net profits of AAV (on the assumption that the business was, in effect, taken over completely by A & P Plumbing, with the benefit of all but one of the employees, the use of the business premises and presumably the office infrastructure or set-up at those premises; and the benefit of the existing customer relationships). As the evidence was that the 2006 financial year returned a profit of $375,000, and I see no reason to assume that the profits would have been any less in the 12 months after A & P Plumbing took over AAV's business, I would add to the purchase price the sum of $125,000 as the one-third share of that amount. 43 In those circumstances, as I understand it, the alternative claim is not pressed and the question whether leave should be granted for Mrs Vadori to commence a derivative suit does not arise. Had I been of the view that there was no breach of s 232 of the Corporations Act, or none for which a compulsory purchase order remedy would lie which would compensate for the breach of directors' duties in issue in these proceedings, then I would have found that Mrs Vadori had established an entitlement to an order for leave to commence a derivative suit against Andrew and Paul for breach of their duties as directors arising out of the circumstances in which the business of AAV was improperly diverted from the company to A & P Plumbing and AAV was denuded of the benefit of any residual goodwill in the business. There is no doubt that Andrew and Paul (albeit without appreciating that this was inconsistent with their duties as directors) took, for the benefit of A & P Plumbing, the existing work of AAV and of opportunities for future work, while still directors of AAV and still owing fiduciary and statutory duties to AAV. 44 As to the claim for a winding up order, the evidence was that AAV does not presently serve any function other than as trustee of the AAV Plumbing Superannuation Fund and as trustee of the AAV Plumbing Investment Fund (which is wholly owned by the trustee of the Superannuation Fund, according to the AAV Plumbing Group structure as outlined in Annexure C to Mr Bramble's affidavit of 24 July 2009), and that the difficulties which have hitherto stood in the way of its winding up might now be able to be resolved in the course of a winding up of the company. The defendants do not, as I understand it, oppose such an order, though neither do they press for such an order to be made. 45 It seems to me that given that the timing (and perhaps process) of the winding up may affect the return to members, the question of the winding up of the company is one which should more appropriately be determined by the members after the purchase of Mrs Vadori's share in the company, at which time Mrs Vadori will have no further interest in the company and therefore no interest in the outcome of the winding up. Facts Commencement of partnership 46 As noted earlier, Andrew and Paul are brothers. They have known each other for many years (Peter and Paul having worked for the same plumbing company as apprentices in the late 1980's). In December 1988, they entered into a partnership agreement under which they carried on business for some years. A copy of that partnership agreement was in evidence and both Andrew and Paul were taken, in cross-examination, to certain of its terms – namely, those dealing with termination of the partnership and the provisions for the determination of the goodwill of the partnership in that event. Under their initial business arrangements, it was contemplated (although neither Andrew nor Paul appears to have appreciated this) that goodwill might be built up over the course of the partnership and that the value of that goodwill would be taken into account when and if the partnership came to an end. That partnership agreement remains on foot as at today's date, no steps having ever been taken to determine that agreement and to wind up the partnership between the three men. However, any goodwill in the partnership seems long since to have been assumed, with the consent or acquiescence of the partners, by AAV. 47 Together, as partners, the three men acquired, and still own, two pieces of real estate in Gateshead, Newcastle, being the business premises from which first their partnership business and subsequently the AAV plumbing business had operated (and from which for a period after 2006 the business of A & P Plumbing operated) and, more recently, a commercial property next door to those business premises. Incorporation of AAV 48 Some time after the establishment of the partnership, a decision was made by the partners to carry on the business under a company structure. According to Andrew, this was on the advice of accountants (though not, as I understand it, from Cutcher & Neale who were only instructed to act for AAV from mid 2006). 49 In March 1998, AAV was incorporated for that purpose. AAV was also appointed as corporate trustee for the superannuation trust fund set up for the benefit of the three partners and for the AAV Plumbing Investment Trust which I understand is an investment vehicle wholly owned by the superannuation fund. AAV holds other commercial property in Gateshead and a residential property at Hallidays Point as trustee for the investment trust. I understand that trustees for sale have been appointed for some of the properties held by the partners and/or by AAV, presumably as part of attempts to wind up the overall partnership and superannuation arrangements between Andrew, Paul and Peter. For present purposes, however, the only real property owned by AAV is held by it in its capacity as trustee. 50 The complexity of the partnership/company/superannuation and investment arrangements entered into by or on behalf of the three men can be inferred from the difficulties to which AAV's accountant (Mr Bramble) has deposed in attempting (even before the decision by Andrew and Paul to cease their working relationship with Peter) to regularise the financial affairs of both the partnership and the company. For the purposes of these proceedings it is unnecessary to consider the taxation or superannuation issues which have delayed the winding up of AAV and which were outlined briefly by Mr Bramble in the witness box. In part, I understand them to relate to whether it is possible to roll out certain assets of the superannuation fund into separate funds without financial disadvantage to the beneficiaries of the fund. Mr Bramble's evidence was that the issues had proved time consuming to resolve and that the timing of any winding up could, as a consequence perhaps of the outcome one or more of these issues, impact upon the ultimate returns to AAV's members. 51 Neither Andrew nor Paul demonstrated in the witness box any real understanding of the nature of their partnership arrangements (or the terms of their partnership agreement, neither seeming to have read or understood it before signing it). (Paul said he did not really take much notice of the way the business was, he was a worker, and he just signed a partnership agreement and worked (T 67.11). From Andrew's evidence he, too, did not pay any real attention to the partnership agreement when he entered into in 1998 (T 150).) 52 Nor does it appear that, at least prior to these proceedings, either Andrew or Paul had any real understanding of the consequences of incorporation or the differences in rights and obligations as between directors and shareholders. Certainly, when cross-examined neither professed to have had such an understanding. 53 Paul's response, consistent with his attitude to the partnership responsibilities was that he never got involved in the way the business operated; again, that he was simply a worker; and that he did not take much notice of the paperwork. He said, "I knew I was a director, that was as far as I knew" (T 68.07). 54 Andrew, similarly, seems to have paid no real attention to the constituent documents of the company or as to his obligations as a director (T 150). He was aware that the business that had been previously conducted by the partnership was transferred to AAV, the company, on 1 July 2004. He said he was not aware of the significance of the fact that once his share was transferred to his spouse this meant that he was no longer the owner of the business and in fact his spouse was the owner of the business (T 152.28). He also said that he now knows but did not know at the time in November/December 2006 that, if the business were dismantled, then because the business was an asset of the company the net assets after payments of liabilities would have to be distributed amongst the shareholders not the directors (T 153.2). It was fairly clear from his evidence that he did not have any realisation at the time that the company and the business that it operated belonged to the shareholders and not the directors (T 153.30).) 55 Peter, for his part, accepted that as at November 2006 he was aware that the wives owned the shares but also that the running of the business had been in the hands of the directors "They were the directors, yes" (T 40). He accepted that there were not any shareholder meetings of AAV and that all decisions about AAV were made by the three men, both before and after the transfer of their shares to their wives. He also accepted that there was never any meeting after the transfer of the shares to the wives at which they were asked, as shareholders, what they wanted to do with the company (T 53/54).) 56 It seems to me likely that it is the apparent lack of appreciation of, or regard for, the consequences of incorporation which in due course has led to the complaints now before me, rather than any conscious attempt by the defendants to deprive Mrs Vadori of her entitlements as a shareholder (and no such conscious wrongdoing was asserted). The conduct of at least Andrew and Paul (and Peter, insofar as he seems also to have participated in the decision-making without reference to any of the members of the company, including his wife, as to their wishes) seems to have been to treat the company's business as if it were their own. They appear to have felt at liberty to proceed, without having regard the wishes or interests of the actual members of the company, when determining what was to happen to the company's business after they had decided they could no longer work with Peter, as evidenced by the refusal to permit Mrs Vadori to attend a critical meeting in November 2006 at which the division of the company's assets was to be discussed. I consider that this, together with the diversion (while still directors) of the company's business and assets for their own benefit or the benefit of companies associated with them, amounted to conduct in breach of s 232 of the Act. 57 Following the decision to run their partnership business under a corporate structure, from about 1998, the plumbing business which had formerly been carried on in partnership by Andrew, Paul and Peter was carried on by AAV. There is no suggestion that any compensation was sought or paid for the assumption by AAV of that business. (Nothing turns, however, on the lack of consideration or compensation for the 'transfer' to AAV of the partnership assets or any then goodwill in the partnership.) 58 According to Andrew, there was a 'seamless' transfer to AAV of the plumbing assets of the partnership, which he described as "being plant, equipment, current and forthcoming contracts and goodwill", without any compensation to the partnership (paragraph 14 of his affidavit sworn 22 July 2009) – an interesting statement when, in cross examination, Andrew seemed to have no understanding as to what goodwill was and said that he never considered any goodwill at the time of that transfer (T151.2). Similarly, Paul says he did not understand there to be any goodwill subsisting in the building trade and thought this was something that attached to shops such as a grocery shop down the corner (T 66.45). 59 Relevantly, all parties seem to accept that, for some time prior to 2006, the plumbing business formerly carried on in partnership by Andrew, Paul and Peter was carried on by AAV (for example, see Andrew at T 151.50) and it follows that any goodwill which may have been built up in that plumbing business at least over the years from 1998 either reposed, as at 1 December 2006, in AAV (as asserted on Mrs Vadori's case) or was no longer there to be appropriated, following the break up of the AAV business and most of its assets and workforce (as asserted on the defendants' case). Share transfers to spouses 60 On 1 July 2004, share transfers were executed by each of Andrew, Paul and Peter to transfer their shares in AAV to their respective spouses for consideration of a dollar in each case. The share transfers were registered on 27 June 2005. (The reason for the delay in registration was not made apparent to me.) 61 Although the defendants plead that the shareholding of each of the wives was as agents for their husbands, there is nothing in the documentation before me to record such an arrangement. The most the evidence establishes is that the husbands may have understood that the purpose of transferring their shares to their wives was to take advantage of tax or accounting benefits which might flow from such a structure but they nevertheless continued to operate the business as if the transfers had no other effect. There is nothing in my view to warrant a finding that the shares were held by each of the wives other than in her own right. 62 Having chosen to adopt a corporate structure for their business, whether or not they understood its implications, the defendants seem to me to be stuck with the consequences of that course. As directors, Andrew, Paul and Peter owed clear (and well recognised to be onerous) statutory and fiduciary obligations to the company, including to act in the best interests of the company and its shareholders as a whole. 63 In the witness box, Mrs Vadori agreed that the one share she holds in AAV was transferred to her as part of an arrangement that her husband had with Andrew and Paul that all shares were to be transferred to the respective wives (T 12.10). She accepted that she never involved herself to a significant extent in the management of AAV (T 12.30) and that, in effect, she did nothing with her share other than simply hold it, it being her husband who was intimately involved with the AAV business up until November 2006. Mrs Vadori's understanding was that AAV was being run by the three men (T 12.36-50). 64 However, the fact that Mrs Vadori (and, for that matter, the Antunovich wives) may have left the business decisions to her husband and his co-directors is not, in my view, to the point. The management of any company is in the hands of its directors, subject to whatever limited control may properly be exerted by members in general meeting. I do not think that an inference can be drawn, simply from the fact that from 2004, when she acquired her share, Mrs Vadori apparently left the business decisions to her husband and (apart from her role as bookkeeper for the company up until at least August 2006) did not take part in the management of the company, that Mr Vadori was acting at the relevant times as her agent. (Nor do I think the evidence establishes a quasi-partnership of the kind pleaded under which it should be inferred that Mr Vadori was acting as agent for his wife.) 65 Rather, it seems to me that Andrew and Paul, and perhaps Peter as well, simply assumed (incorrectly) that the incorporation of AAV had changed nothing for practical purposes about the way they had previously run their plumbing business and, until the events in 2006, none of their wives took issue with the conduct by their husbands of the business (without thereby giving up the right to assert their entitlements as shareholders when matters came to a head between their husbands in late 2006). Events of 2006 66 In the 2006 financial year, AAV had an annual turnover of over $1.64 million and had generated profits over $375,000 (p 772 of the court bundle). AAV's sole customers, as at late 2006, were two building construction companies - Montgomery Homes and Contour Building and Construction Pty Limited. 67 It appears that over the years there was some tension between Paul and Peter, the cause of which (though adverted to in some of the affidavits) seems to me to be irrelevant to any issue in the proceedings. What is relevant is that at some point during 2006 the question whether the three men could continue to work together became a topic for consideration by one or more of them. 68 Each of Peter and Andrew, in about June/July 2006, apparently independently gave consideration as to whether the working relationship between the three could continue. Peter says he asked Paul to make an offer to buy him out around this time; and Paul accepts that Peter had done so on a number of occasions over the years. 69 Meanwhile, in mid 2006, and it would seem before the suggestion of a split was seriously discussed between the three directors, Mr Bramble received instructions from Peter to give advice in relation to the accounting and taxation requirements of the AAV Group (by which Mr Bramble refers to AAV, the unit investment trust, the superannuation fund, the partnership and the respective individuals, both husbands and wives). He considered that various steps needed to be taken to 'regularise' the affairs of the entities within the group and, towards the end of July 2006, he prepared a memorandum to the directors outlining those matters. He deposed that at this time no mention had been made to him as to the directors going their own ways. 70 On 22 August 2006, there was a meeting between Andrew, Paul and Peter, which Mr Bramble also attended, at AAV's business premises. Mr Bramble's recollection is that this was "to discuss the possible split of AAV". Peter says that it was "to discuss whether the company and partnership issues could be resolved", by which I understand him to accept that the possibility of a parting of the ways was at least under consideration by the three directors at that stage. 71 On 31 August 2006, Mrs Vadori resigned as bookkeeper of the company (although she remained at work training the replacement bookkeeper until the end of October 2006). Mrs Vadori says that she resigned at her husband's request because Paul had taken issue with her working for the company (as Paul accepts he had). The fact that she did so, but continued on with the company to train an incoming bookkeeper for the company, suggests that at that stage she understood that the company would be continuing in business. 72 According to Peter, there was no further discussion in relation to a parting of the ways until 30 October 2006, when he had a conversation with Andrew in which Andrew informed him that he and Paul had decided to go out on their own. Andrew agrees that such a discussion took place. Peter not only seems to have understood this to have been presented as a fait accompli but also to have accepted (which does not necessarily follow) that he had no choice but to accept that the company would have to cease to carry on business. 73 Peter's position as at this stage was that he regarded a one third split of everything (including the employees) as a fair division. At T 61, in re-examination, Peter said: I walked into the office that day [30 October 2006] and Andrew Antunovich said to me, "I have decided with my brother that we are going to go out on our own." And that was it. And then we started discussing what would happen to the split, and my first reaction was I had to guard my own third of the business which meant one third of the employees, one third of everything, including goodwill and work in progress. … (my emphasis) 74 It was not, of course, Peter's (or for that matter, Andrew and Paul's) business to be split up in this way. 75 Mrs Vadori says that the first she became aware that the three men were likely to split up was on 30 October 2006, when Andrew and Paul told her husband that 'it was finished' (T 14.03). Mrs Vadori said: Peter came home on Monday and said that [Andrew] had come in, Andrew had come in and told him that - him and Paul had had a meeting on the weekend, decided that they didn't want to work with Peter any more. And they wanted to go off on their own. And Peter had no option other than like doing the same basically because AAV was finished. (T 34.36)) 76 At this stage, it would seem that Mrs Vadori had had no opportunity to obtain any advice as to her own position as shareholder and I do not see her silence or failure to object at this point as indicating any acceptance of the proposition that her husband and his co-directors could determine the fate of the company as they chose. 77 Where the respective accounts of the three men relevantly differ, at this point, seems to be as to how their split was announced to the employees of the company and, in particular, as to what occurred on 1 November 2006 when it was determined between them which of the employees would join Peter and which would join Andrew/Paul. Nothing ultimately seems to me to turn on this, other than that Peter said (and I accept) that he was very upset at the events which had transpired on 1 November 2006. In the witness box, Peter spoke with some emotion as to this being a bad period in his life. His wife similarly appeared upset and concerned for her husband at what had occurred. Peter says he felt extremely ill and had to see a doctor. 78 The only relevance, if at all, of Peter's reaction to the events at this stage or his state of health at this stage would seem to be as to the justification put forward by Andrew/Paul for the two payments made to them but not to Peter on 20 December 2006 – as I understand it, they say these were payments for holiday leave due to them, Peter having taken his holiday leave in effect when he did not return to work after 1 November 2006. Peter, who does not deny that he did not return to work after that date, says the payments he received for the period from 1 November 2006 were for sick leave. If Peter is correct, then he may have a claim for accrued holiday leave against AAV but even so it does not seem to me that there is a basis on which I should infer that the payment of claimed holiday leave to Andrew/Paul (without the consent of Peter or his wife) amounted to oppression. Hence, I remain of the view that this issue (and the two $4,000 odd payments on 20 December 2006) is of marginal relevance, if at all, to the issues before me. 2 November 2006 meeting 79 A meeting took place on 2 November 2006 at AAV's business premises between Andrew, Paul and Peter, at which meeting Mr Bramble again attended. Mr Bramble gave little detail in his affidavit as to what had transpired at this meeting but said that Peter had said words to the effect "We can no longer work together and the business will have to be split up" and that, as a result of the (unspecified) conduct of the parties at the meeting, he came to the conclusion that the situation between them 'had reached untenable terms'. (Peter did not refer to this meeting in his affidavit, nor did Andrew.) 80 Paul referred in his affidavit to a meeting around this time, at which he says that the accountant (presumably, Mr Bramble) told them they would need to get new entities organised. Relevantly, Paul also says that Mrs Vadori was present at the meeting with a tape recorder and that Mr Bramble suggested that she wait in the car, on the basis that she was "not part of this and there's no need to be using a tape recorder anyway". Mrs Vadori denied having attended a meeting with a tape recorder (though, given the dispute as to what was said at the subsequent 21 November meeting, a tape recorder might well have been a good idea.) The relevance of Paul's account of this meeting is that it supports Mrs Vadori's evidence in the witness box (T 14.03; T 19.18; T 34.27) that she had attempted to attend a meeting with her husband and had not been permitted to do so (although she attributed this to Andrew having excluded her, not to any suggestion to that effect by Mr Bramble). It also seems to indicate a view (whether put by, or simply adopted by, Andrew and Paul) that the respective wives had no say in the winding up of the company's business. 81 At T 34.27, Mrs Vadori said: There was a meeting arranged at the premises of the business with the accountant Jarrod Bramble, and I was going with Peter to that meeting to know what was going on and also to support him. Jarrod Bramble turned up at the office, and we went in, and Andrew said that I wasn't to be there. The meeting wasn't going ahead if I was there. So then I had to leave for the meeting to continue and sit in the car and wait till it was over. I wasn't given the chance to sit in or anything. I had to wait in the car. (T 34.17-24) 82 Andrew, for his part, accepted in cross-examination that he had not allowed Mrs Vadori to come to a meeting held prior to the meeting on 21 November 2006 about the break up of the plumbing business. In this regard, therefore, I would accept Mrs Vadori's recollection of the circumstances in which she was not allowed to attend the meeting as more reliable than that of Paul. 83 Mrs Vadori said that she understood the purpose of the 2 November meeting to be to let Mr Bramble know that Andrew and Paul had decided AAV was not operating any more and to discuss what their options were. It is significant in my view that Mrs Vadori did not simply wish to attend to support her husband. She said that she wanted to know what was going on with the company. As a shareholder in a company whose directors (or a majority of whose directors) had made a decision to cease trading, without reference to the shareholders, that seems to me to be not an unreasonable stance for Mrs Vadori to have taken. It also seems to me that, following the stance taken by Andrew not to permit Mrs Vadori to attend that meeting, no criticism can be made of her failing to press to be allowed to attend the subsequent 21 November 2006 meeting or any other meeting at which the directors were discussing the split of their working arrangements but this does not mean that she held her husband out as authorised to bind her to any particular outcome from those discussions. 2-8 November 2006 84 Following the 2 November 2006 meeting, Mr Bramble apparently took on the role of seeking to facilitate a resolution of the way in which there was to be a split up of AAV's assets and business (and there is no reason to think that he was trying to be anything other than even-handed and neutral in this regard). 85 On about 6 November 2006, Mr Bramble wrote to each of the directors (the letters being addressed to the directors only, not to the directors and their spouses), although from the attachment to those letters it is clear that Mr Bramble contemplated that they would be put before the respective spouses in some form. The letters were in identical terms in all relevant respects. 86 The letters stated that "We have been asked [by the other directors and the addressee of the letter] to assist in the negotiation of the split up of the groups assets and business" and went on to note that "As you and your wife effectively own 1/3rd of all of the assets and the business the negotiation amount and structure is of importance to you." Mr Bramble identified certain concerns regarding the negotiations, including that Cutcher & Neale "will be perceived not to be independent"; advised that valuations had been obtained of the real property holdings and plant and equipment; and noted that "In the short term we have arranged for different Partners of Cutcher & Neale to assist with your affairs" (my emphasis). In the case of Mr and Mrs Vadori, a Mr David Carpenter was identified as the partner to "assist" with their affairs. For the Antunovichs, Mr Ian Neale was the identified partner to assist them. 87 Mr Bramble's letter also noted that "Due to the complexities of the negotiation we advise you should consider getting independent advice regarding the final split of the assets and business prior to any legal documentation being executed" and asked that the recipient acknowledge both the letter "and also your instructions whether to continue to represent you notwithstanding the concerns outlined in this letter". The attachment to this letter, for execution by both husband and wife in each case, contained a pro forma acknowledgement of receipt of the letter and the statement "Furthermore, we would like you to proceed with negotiations as planned for Thursday 16 November 2006". (My emphasis is noted as italicised in each of the quotes above.) 88 Of significance, it seems to me, is that the letter clearly envisaged that if the negotiations, which the author of the letter was contemplating would take place (and in which a separate partner would "assist" each couple or combined couple's affairs), produced an outcome it would be one which was to be the subject of legal documentation (in respect of which the author advised that consideration as to the obtaining of independent advice should be given). 89 Although they did not recall so doing, it seems that both Mrs Vadori and her husband duly signed and returned the 6 November letter (Ex 3), as did the defendants. 90 Given that Mr Bramble said that he believed his introduction of Mr Carpenter took place at the meeting itself, it seems unlikely that Mrs Vadori had met him prior to the 21 November meeting and she cannot have met him at that meeting as she was not present. 91 Whatever Mrs Vadori might be thought to have done by confirming instructions for Cutcher & Neale to proceed with negotiations on the basis outlined in that 6 November pro forma letter, in my view she was clearly not authorising anyone from Cutcher & Neale to execute any legal documentation on her behalf, nor does the letter suggest that Mr Carpenter (or Mr Bramble) was authorised to commit her to any other kind of binding agreement. At best, this letter might be taken as authorisation for Mr Carpenter to attend the meeting on Mrs Vadori's behalf, to convey to the meeting any statements she authorised him to make (and perhaps those statements which, though without instructions, he considered it in her interests to make, such as those he may have made in the debate over goodwill) and to participate in attempting to negotiate an agreement in principle as to any matters arising in discussion at that meeting but to do so subject to her instructions, which it would be necessary for her to confirm, with the result that any "agreement" affecting her would be one which she would have the ability later to approve, or not, as the case may be. 92 Given that I see nothing in this letter which authorises Mr Carpenter to commit Mrs Vadori to any binding agreement and that each director received a similar letter (and presumably each couple signed a similar letter confirming instructions to proceed with the negotiations), I cannot see that Mr Carpenter attended the meeting cloaked with any actual or ostensible authority to do more than what the letter contemplated – namely to "assist" with the couple's affairs (which, as indicated above, I would take to mean to the ordinary reader that he would listen to what was said, convey his own opinion on relevant issues (such as goodwill), convey Mrs Vadori's position (if any) on relevant issues, and take back to Mrs Vadori any proposal which might have emerged at the meeting for her instructions and assent, if any, such that any final agreement would later be formally documented and signed, after any independent advice as necessary). 93 The need for representatives of parties, when involved in negotiations on their behalf, to be expressly cloaked with actual authority if they are to bind those parties to any concluded agreement which might be reached during the negotiations is something which I would have thought is well recognised amongst those professionally involved in negotiations of this kind. It is something of which I would have expected the partners of Cutcher & Neale attending at that meeting to have been conscious (particularly given the care which Mr Bramble had taken to ensure that he drew to the attention of the directors, at least, to the potential for conflicts of interest to arise and to arrange for 'separate' assistance from partners who had not previously, apparently, been involved in the affairs of AAV). It seems to me significant in this regard that Mr Bramble does not depose to any statement having been made at the meeting asserting authority by anyone to bind the (absent) shareholders, nor was there any signed document purporting to record any agreement (in principle or otherwise) prepared at the conclusion of the meeting. Mr Bramble's evidence, in the witness box, made it clear that he did not understand this meeting as one in which a binding agreement was to be struck – and from this I would infer that he did not see it as necessary to clarify with those attending the meeting that they had authority to bind those persons whose interests were to be affected by what was being discussed but who had not been invited to attend the meeting. Therefore, there is nothing to suggest that there was, or that those participating in the meeting were put on notice of, any authority on the part of Peter to bind Mrs Vadori to decisions taken at that meeting or that Mrs Vadori by her conduct held him out as having any such authority. 94 On 8 November 2006, Vadori Plumbing was incorporated. On 11 November 2006, A & P Plumbing was incorporated. Both steps are consistent with Mr Bramble's advice at the 2 November meeting that the directors should organise new entities. Again, however, this does not lead me to draw any inference as to Mrs Vadori having agreed to steps to be taken to bring the business of AAV to a close. 21 November 2006 meeting 95 The critical meeting for present purposes took place on 21 November 2006 at Cutcher & Neale's offices. (This was the meeting convened by Mr Bramble and foreshadowed in Mr Bramble's letters to each of the directors.) Mrs Vadori did not attend that meeting. The defendants assert in their pleadings that Peter (not Mr Carpenter) represented Mrs Vadori at this meeting as her agent. As noted above, there is no evidence that Mrs Vadori appointed her husband to attend the meeting as her representative or that he was held out by her as having authority to bind her to any agreement at that meeting. 96 Peter accepted that what was happening in November 2006 was that he, Andrew and Paul were trying to agree on the best way to finish up the business of AAV and a fair way of distributing the assets three ways (T 45.42-46). He accepted that he had understood that at the meeting on 21 November 2006 that he was looking to obtain his wife's share of the assets of AAV (T 40.38) and that Mr Carpenter was the accountant supposed to be looking after both his interest and his wife's interest. Peter agreed that this was an important meeting and, consistent with this also being the understanding of his wife, he said that his wife had wanted to be at the meeting. I do not think that any inference can be drawn from Peter's failure to insist upon her attendance. It is not suggested that he said anything at the meeting to hold himself out as Mrs Vadori's agent and Peter's understanding therefore seems to me to be irrelevant on this issue. Nor do I think that Mrs Vadori is estopped from asserting her rights by reason of any failure by Peter to raise an objection to her exclusion from the discussions. 97 Mrs Vadori accepted that she knew that her husband was attending the meeting. She thought that what was to be discussed at the meeting was the future of the business but says she did not discuss with Mr Vadori before he went to the meeting what might happen nor did he tell her what he would be doing at the meeting (T 18). Mrs Vadori said "It's not that I didn't want to [go to the 21 November meeting] I don't think I would have been welcome there because I wasn't allowed at the other meeting" (T 19.18) (by which I understand her to be referring to the 2 November meeting). Mrs Vadori's understanding was that shareholders were not invited to that meeting. She was adamant that she had tried to attend a meeting prior to this meeting concerning the split up of the assets of the business "but I was thrown out by Andrew. So I didn't have a choice to go to any other meeting" (T 23.03). 98 Mrs Vadori was asked whether she had left it to her husband and Mr Carpenter to work out which of the assets of AAV would go to Vadori Plumbing. Her response was, "Well, I wasn't there". When pressed, her response was "Yeah, well, I would have liked to have been there but I wasn't given the opportunity to be there not by my – not by Peter. Andrew and Paul wouldn't let me at any meetings" (T 27.29). Mrs Vadori did not recall any conversations with Mr Carpenter authorising him to act on her behalf at that meeting (which is consistent with Mr Bramble's evidence that he only introduced his partners to the directors for the first time at that meeting). 99 While Mrs Vadori seems to have understood that (in circumstances where she had not been allowed to attend the meeting by Andrew and Paul) her interests were going to be 'looked after' by her husband and/or her husband and Mr Carpenter at that meeting (T 27.45), that does not seem to me to be sufficient to give rise to a finding that she authorised either of them to commit her to any particular agreement which might have been reached at that meeting. Rather, it is consistent with an understanding that they would convey back to her any proposals which might be made at the meeting so that she could discuss those with her husband and/or obtain advice before binding herself to any particular agreement. 100 Different accounts are given of the 21 November meeting – though none from Mr Neale or Mr Carpenter. Mr Bramble's account is set out in his affidavit. His recollection of the meeting is also recorded in a letter dated 3 April 2007 which he sent to each of the directors. (He explained the delay between the meeting and this letter by reference to the fact that there was a lot happening in relation to negotiations in respect of the unit trust and superannuation fund at that time.) 101 At T 101, Mr Bramble said that the meeting was an "initial discussion" to facilitate whether anything could be resolved amicably and that the purpose was for the parties to go and appoint independent people if they chose (T 107.37); that it was his understanding that the meeting was meant as a chance for the directors and shareholders (although the latter were not invited to the meeting so any such chance was not likely to have been a particularly meaningful one for them) to have an initial negotiation to see whether they could come to terms amicably or alternatively to seek independent advice (T 107.46). By way, seemingly, of an example of this he said that if, at the time, the directors were able to agree on the goodwill, then an independent person could have been utilised to finalise that negotiation. 102 Mr Bramble's understanding is therefore consistent with no formal authority having been sought from or given by Mrs Vadori to commit her to any decision at the meeting. Nor did Mr Bramble, in hindsight, regard whatever was agreed on 21 November 2006 as having given rise to a legally binding agreement, which suggests that nothing was said at the meeting to indicate that the parties were intending immediately to be bound by the arrangements then being discussed. Mr Bramble accepted that no agreement was documented following that 21 November 2006 which might be regarded as falling within the description contained in his 6 November letter (T 110). 103 While the conduct of the three directors after that meeting is consistent with there having been at least an agreement in principle between them as to the various matters itemised by Mr Bramble, with the possible exception of the treatment of stock (although the conduct of Andrew and Paul is consistent with Mr Bramble's recollection on this aspect of the meeting as well), what could not be said was that there was any semblance of a final agreement at that meeting as between the three directors as to how all the issues in relation to the splitting up of the business were to be resolved, let alone any agreement between the shareholders on those matters. Mr Bramble's recollection of 21 November 2006 meeting 104 In Mr Bramble's affidavit, he recounts the discussion which took place at the meeting, which he says opened with him stating (what it seems he understood the purpose of the meeting to be) that "We need to negotiate the values of all the plant, equipment, jointly owned assets and the value of the goodwill". 105 Mr Bramble said that during the meeting valuations were tabled for plant and equipment and it was discussed between the people present as to who would like to take that piece of equipment for that value. In relation to two items, a Hino FD Ranger and a Hino Ranger, the valuation attributed to the vehicles was altered (at Peter's instigation and with Andrew/Paul's agreement) from that which had been obtained from Slattery's Auctions. (To the best of Mr Bramble's recollection, Peter said that he believed that the first (Hino FD) was worth $40,000 not $45,000 and that Andrew and Paul had agreed to a change in that regard.) Mr Bramble says he suggested that each work car be retained by the person currently using it and he records Andrew as having said that the stock should be split into thirds, with Peter agreeing to both propositions. He suggested a cash drawing split one-third/two-thirds between the two new entities (Vadori Plumbing and A & P Plumbing) to which he says there was also assent. 106 Mr Bramble recalled that there was a brief discussion about how the existing work was to be split (but gave no detail other than to recall that each director's jobs would go with that director). As to new work, he says that Andrew said that they were speaking to the two main clients (Contour Building and Montgomery Homes) to see if they would split future work between the respective entities (ie Vadori Plumbing and A & P Plumbing). He recalls that there was a discussion as to what was to happen about the employees and the value of the warranty work (estimated at $25,000). He recalls that there was an inconclusive discussion as to the real estate within the group and a discussion about goodwill. 107 As to the goodwill, Mr Bramble said in his affidavit that he did not recall the content of the discussion but did recall that no agreement had been reached on any matter concerning goodwill. His recollection was that during the meeting there was a lot of discussion about plant and equipment valuations and real estate, in which each of the directors were most vocal, but that when it came to goodwill it was Mr Neale and Mr Carpenter who had had most of the discussion. 108 Mr Bramble's letter of 3 April 2007 is consistent with his recollection of the discussion, though not surprisingly is more detailed in some respects. Although written some four and a half months after the meeting, there seems no reason to regard the letter as other than Mr Bramble's genuine recollection as at that time (ie some time after the meeting itself and therefore not as fresh in his mind, perhaps, as if he had written the letter immediately) as to what had been decided in the meeting as between the three directors. Peter's recollection of the 21 November meeting 109 Though at one stage in his evidence Peter said that the meeting was 'just a discussion' (T 38.43), he does seem to have accepted that there was an agreement of some kind at the meeting between the three men at least as to the taking of items of equipment (but not as to stock). Peter said, I thought there was going to be a split of the company, so we were all to take one third" (T 39.50). He accepted that since AAV was not going to trade anymore it was appropriate that its assets should be divided up between the interested parties. He says that he thought that whoever took over the AAV work would take over the warranty work (T 56.35). 110 Peter said: Well, the only thing that we really didn't agree on in that meeting was the value of the goodwill, and their accountant said there was no value, there was no goodwill at all. And they had all right to take everything that they did. And with that, the meeting was closed. That was the last thing I think that was discussed at that meeting was the goodwill. though he accepted that at the meeting the accountant representing or "looking after" the interests of Andrew/Paul and their wives had said there was no goodwill (T 49.50). Andrew/Paul's recollection of the 21 November meeting 111 Andrew recalled very little about the meeting. He said that there was some discussion about what would happen to the stock in trade (T 155); he did not recall a discussion at that meeting as to any value that should be attached or ascribed to the goodwill of the business (T 156.5); he said he did not recall any discussion about the work in progress or what was to happen to that (T 156.12). (It is difficult not to draw the conclusion that he either has a bad memory for events of this kind (which casts doubt on the recollections set out in his affidavit) or that in the witness box (where his automatic response tended to be that he could not recall matters) he was not seriously attempting to turn his mind back to the events of 2006. 112 Paul agreed that at the meeting of 21 November 2006, there was no discussion of how the goodwill of the business would be accounted for upon the dissolution of the enterprise (T 74.27) and that there was no discussion about what sum would have to be paid to Mrs Vadori to compensate her if A & P Plumbing took over all of the AAV contracts (T 74.37). 113 As to the warranty work, Paul's recollection of the 21 November meeting was that Peter was the one who put the estimate of $25,000 on the warranty work (for the completed AAV jobs) and that Paul had agreed that he and Andrew would do it for $25,000. There is no evidence as to what that warranty work in fact comprised or any final agreement reached with AAV in that regard. 114 Paul agreed that the meeting on 21 November 2006 had proceeded on the basis that the directors were to divide up between themselves, if it was possible, the stock in trade, so that they could take it away and use it in their new business enterprises (T 89.06-11). Stock 115 The issue as to stock has loomed large during the hearing. Peter was adamant that there was no stock mentioned at the meeting on 21 November, only a division of the equipment (T 44.14) but then seemed to accept that there had been a discussion as to stock at some stage: I can't remember the stock being requested. I was under the understanding it was going to be split a third equally. But I think that was prior to the meeting. I am not sure if it was discussed at that meeting or just prior to it. 116 Mr Bramble's letter suggested (and his recollection of events was) that there was an agreement that stock would be split three ways. This accords with each of Paul's and Andrew's recollections of the meeting as set out in their affidavits. Andrew recalls that it was Peter who said the stock should be split three ways, which would accord with Peter's earlier stated assertion that everything should be split three ways. It does not seem that there was any separate valuation of the stock to hand at that meeting, nor that any of the directors went through a similar exercise as that carried out in relation to the equipment in order to allocate particular items of stock to each. 117 If it were necessary to determine whether an agreement had been reached for the division of stock at this meeting (and ultimately I do not think it is) I would have placed reliance on Mr Bramble's recollection of events. He was at the meeting in a professional capacity and seems to have had no reason to favour the interests of either faction. A one-third split of the stock would accord with Peter's earlier adamant position that everything should be split three ways and Peter does recall that there was a discussion to that effect at some time. In cross-examination he seemed ultimately to accept (at T 59) that there was a conversation on 21 November 2006 that the stock should be divided three ways (and that he, Andrew and Paul had each said something to the effect that they agreed to that and there had been a discussion as to splitting of the work), although my observation was that he did not seem particularly sure about this. 118 It seems to me unlikely that the topic of stock would not have been raised at all and that, if this had been an issue of contention between the three directors, then Mr Bramble would have had a clearer recollection of the discussion of this issue. Therefore the fact that he has no recollection of a dispute in this regard suggest to me that his version of the meeting in this regard (corroborated by his April letter, which was written before these proceedings were commenced) is the more reliable. 119 Even now there is no suggestion that there is anything inappropriate with a three way division of stock, although it was suggested to Paul in cross-examination that it might have been possible at the time to arrange for a sale of the stock around November/December 2006 and split the proceeds so as to produce cash available for distribution within the company (as opposed, for example, to effecting a physical allocation of the stock as between the directors). (As to whether it would have been possible at that stage to sell the stock, Paul, in re-examination indicated that there would probably be a difficulty or a disadvantage in so doing because of the lack of a ready market for it (T 97).) 120 As to the then value of the stock, Paul was taken to pages 227 to 243 of the court bundle, which he agreed was a record of the stock in trade AAV had in its possession in about December 2006 and agreed that it was his understanding as at late November/early December that AAV had stock in trade of approximately $49,000 in value (T 88.49). (A one-third share of that stock would therefore have been approximately $16,300.) 121 Peter accepts that he was told, at some time after the meeting, that there was a third of the stock ready to be picked up by him. He says that he did not pick it up in part because he had nowhere to store it, but in part because he did not want to do so. In relation to the stock, Mrs Vadori accepted that the reason initially that stock was not taken was that she and her husband did not have a warehouse in which to put it but then, in answer to the proposition that Andrew and Paul had said that there was stock on AAV's premises that belonged to her or her husband or to Vadori Plumbing and that it should be removed, Mrs Vadori's response was "That's not our stock" (ie, as I understand it, she does not accept that this is the original stock from 2006). Without some form of stocktake as at the time (compared with a stocktake as at today's date) it is difficult to see how this is to be tested. 122 The reason that I think that it is not material whether there was an agreement reached as to the stock at the meeting on 21 November 2006 is that I do not consider that Mrs Vadori is bound by (or estopped from denying) any agreement reached at that meeting. Therefore, any agreement which may have been reached between the directors as to what was to be done with the stock does not affect her position. (That said, when considering any relief for oppressive conduct, I think it may be relevant to take into account that one-third of the stock as at 1 December 2006 has apparently, for some time, been made available for collection by the Vadori interests and it would seem that for various reasons Mrs Vadori and her husband simply do not wish to collect that stock in kind.) Conduct following 21 November meeting 123 Mrs Vadori says that, after the 21 November meeting, her husband told her that there had been discussions (as to how to split up the plant and equipment) but she denied that he had told her that any agreement had been made at that meeting (T 19.30). (She also denied that there was any agreement to split the stock.) 124 Mrs Vadori accepted that when she found out what had happened at the 21 November meeting, she did not raise any objection to it, but says that she was not happy (though there, as I understand it, referring to the fact that she and her husband did not want a split up of the business in the first place rather than dissatisfaction as to the particular outcome of the November meeting). 125 Nevertheless, the evidence does not suggest that Mrs Vadori understood that any final agreement as such had been reached at that meeting in relation to a split up of the assets or the business of the company other, perhaps, than that she seems to have understood that the plant and equipment was to be divided up three ways (and she makes no complaint about that, as I understand the pleadings, except insofar as the plant and equipment might be understood to include office furniture as particularised in paragraph 16 of the pleading). 126 It is accepted that a sum of $90,000 in cash was distributed between the two new corporate entities and that each of the three directors took their work cars (and where those items were encumbered the person taking that item assumed the relevant obligation to make finance repayments) and plant and equipment as listed at the meeting. 127 Peter admits that he took away from the meeting a Toyota Land Cruiser, which was an asset owned by the partnership, not by AAV, as per the schedule of assets for the partnership (p 88 court bundle). The work car which he took, as part of the division of assets, which was owned by AAV was the Hino FD Ranger. Peter has apparently serviced the financing of the debt over that vehicle since that date. Peter also took an excavator. At T 130, Mr Bramble confirmed that there was no debt payable on the Toyota Land Cruiser (the partnership asset) as at 1 December 2006; that the debt payable on the Hino FD Ranger was $28,915.02, and that a Kobelco 2004 excavator taken by Peter was an asset of the company with a debt of $24,839.36. Andrew and Paul similarly took with them work cars and some of the plant and equipment which had been used in the business. The equity in the items taken by Peter from the company was thus only in the order of $20,000 (given the refinancing amounts owing on them and assumed by him) – the partnership asset is irrelevant to the assessment of the diversion of company assets. Work flow 128 Peter accepts that he and Andrew together visited a representative from Montgomery Homes and that they had sought agreement that the future Montgomery Homes' work would be split equally amongst the three men. Evidence was given by Mr Darren Kidd and Mr Jamie Montgomery from Montgomery Homes as to the approaches made to them in relation to this. They chose to continue the working relationship with Andrew. Mr Montgomery made it clear that he wished to sub-contract with only one plumbing contractor. (Peter said that he knew from the start that he would not get the Montgomery Homes Central Coast work, as had been suggested as a possibility, because he knew Montgomery only wanted the one plumber (T 55). Nevertheless there does not seem to be any suggestion that Andrew did not in good faith make that approach.) 129 As to Contour Building and Construction Pty Limited, which was placed into receivership or voluntary administration in 2009, evidence was given by Mr Trevor Tuckwell, a director of the company, and Mr John Prince, its then construction manager. The former gave evidence that Paul had asked him to give Peter some work to quote on and that he had done so to no avail; that he had offered Peter some work which he had been unable to do and various other jobs which he had undertaken. Mr Prince gave similar evidence. 130 Peter accepted that he had not approached Contour Building at first after the split. He gave a number of reasons for not pursuing such an opportunity – the first, being an apparent concern as to the confidentiality of his new business structures; then a possible concern as to its viability; and then because he said he had no staff to do the work (apparently blaming this on the fact that of the nine tradesmen then employed by AAV only one, not three, had chosen to join him). He said: I was given the option to quote Contour work. They were given the option to take their work. I had to tender every job with that. I was under the belief that they would have access to my quotes and therefore have access to my structure of my business. So I thought there was a conflict there, one of the reasons. Another reason was maybe they were on the rocks. I didn't really believe that, but I thought maybe they could have been. But the main reason I couldn't go there, I had no staff (T 46.33) 131 Some time later, a few Contour Building work jobs were given to Peter, but it seems that there were of a one-off kind. 132 Of the nine tradesmen who were employed by AAV in December 2006, all but one joined A & P Plumbing. The remaining one, Mr Nathan Rolla, who no longer works for Peter, swore an affidavit in which he deposed to the circumstances in which the split was announced and employees were asked to indicate who wanted to go with Peter. This evidence was broadly consistent with Andrew's version of events although Nathan only refers to a question being put as to who wanted to go with Peter, whereas Andrew says that he also asked who wanted to go with Paul and him. Peter attributes the incident to Paul, which is consistent with neither Andrew's nor Nathan's version of events. Peter said that he and Andrew had tried to split the staff equally but that Paul did not and he appears to have suggested that Paul had influenced that attempt. He said that he was not able to obtain other staff, although he had ended up hiring one person as a sub-contractor. Whatever the circumstances in relation to the ultimate destination of the company's employees, it does not seem to me that they can be treated as 'assets' of the business, as such. It surely would not have been open to AAV, for example, to have directed the employees to take up employment with one or other of the new corporate entities. By the same token, the assumption of the obligation to meet existing employee entitlements for those employees who chose to join the new entities seems to have been a matter for the new employers and, in effect, part of the consideration for acquiring their services. 133 It is not disputed that for some time after December 2006 the business premises of AAV were occupied by A & P Plumbing and that (inconsistently with the advice Mr Bramble says he gave) no rent was paid for those premises to AAV for some time (although it is said that the back rent has now been paid). (Peter in turn accepted that he has continued to keep the mobile phone number which he was using for AAV when he was in the business of Vadori Plumbing (T 45), though it is difficult to see the relevance of this to any issue in the proceedings other than to show that Peter (and through him Vadori Plumbing) may have had the opportunity to receive contacts for work from AAV clients via that telephone number.) 134 Nor is it disputed that A & P Plumbing completed the works which had been on AAV's 'job board' as at the end of 2006 and has not accounted to AAV for any profits made thereon, nor paid anything to AAV to take over those jobs. Mr Young submitted, in effect, that A & P Plumbing had done AAV a favour by taking over the existing work as AAV was not in a position to complete it. (That inability, it must be said, seems to be due primarily to the decision by Andrew and Paul not to continue to provide their services to the company. Having put the company in a position where it was unlikely to be able to complete existing work, the submission that they should then be applauded for completing the company's work tasks at a profit to their new company does not sit comfortably with me.) 135 As to the work items shown on a 'job board' at AAV's business premises as at 1 December 2006, Mrs Vadori says that from that she prepared the itemisation of the value of jobs outstanding as at 1 December 2006 (Exhibit LV 5). She says that she reached those values by going through the job board, indicating what invoices were paid in relation to jobs, and going through the MYOB disc to work out what was outstanding as at 1 December 2006. Mrs Vadori accepted that this represented money for work that had not yet been done, and had not been invoiced for, as at 1 December 2006. She said she had referred to the original quotes for the jobs in completing that list. The manner in which the estimated job values had been prepared was criticised but seemed broadly to be accepted by at least Paul. 136 Paul initially accepted that at pages 244 and 245 of Exhibit LV 5 there was a copy of a job board up in the premises of A & P Plumbing detailing the work that it was undertaking in or about December 2006 and detailing work that had been ordered by Contour Building and Montgomery Homes from AAV Plumbing (T 80.30-38). He later corrected this to say that it was a copy of what was on the AAV job board (T 83) and was in Peter's handwriting. This would not necessarily be surprising, since the A & P Plumbing business was operating at that stage from the AAV premises and hence it might well have been the case that the job board continued as it was, based on information posted prior to the split up of the business. What does not seem to be disputed is that the then existing jobs were completed by A & P Plumbing and that no account was made of the profits obtained for that work. 137 However, Paul did say that not all of the works described on the job board relating to Contour Building were works the completion of which had been undertaken by A & P Plumbing. The only job he identified in that regard was one in Windsor Street, Merewether, that being one which he said had been finished well before A & P Plumbing started (T 82.11-17). At T 84.28, Paul agreed that, with the exception of the last Contour Building job listed on page 247 of the court bundle (Windsor Street, Merewether) which he considered had been finished, the list of jobs on that page was work that had been requested of AAV by Contour Building and was completed by A & P Plumbing (T 84.28); that when A & P Plumbing took over the work it did not pay any money to AAV for the right to take over those particular jobs and nor did it pay any payment in respect of the whole or any part of the profit A & P Plumbing had made with respect to those jobs (T 84.33-42). 138 There was some confusion as to whether or not there were existing contracts, as such, in relation to the particular jobs. It seems that at least for Montgomery Homes, there was an annual contract or arrangement at the outset of the year (seemingly by way of a retainer) in relation to jobs for that year and purchase orders were then issued (and accepted) as and when particular jobs arose; but that in relation to Contour Building, jobs were performed on a "do and charge" basis, with a quote being issued and the work carried out on acceptance of the quote. 139 Paul was taken in cross-examination to a sample of purchase orders and tax invoices from which it appeared, and he accepted, that Montgomery Homes' practice was to issue a purchase order asking AAV to do some work and that the job would be carried out or completed by A & P Plumbing which then invoiced Montgomery Homes (T 76). 140 Andrew agreed that the work that A & P Plumbing did in relation to the jobs it took over was work it did with a view to making profit on the job (T 157.31). While he did not accept that the profit margin AAV sought to make on the work was in the order of 35% (and said that Paul, not he, was the one that was heavily involved in the pricing or quoting of jobs), his best estimate was that the profit figure was 20%. While it seemed to me that that was a figure given by him "off the top of his head" (T 158.27), there was no attempt to correct that evidence, which suggests to me that 20% was not an overestimate of the amount of profit AAV might have expected to make from the work in question. Andrew similarly agreed that there was no attempt for A & P Plumbing to return to AAV the whole or any portion of the profit margin that it had made on the work completed for Montgomery Homes and/or Contour Building since 1 December 2006. 141 Mr Young suggested that the evidence in relation to the work in progress was unreliable. However, other than in relation to the Windsor Street work, no issue was taken as to the identification of the work taken on by A & P Plumbing and there seemed a logical explanation for the sums attributable to that work. 142 Mr Young further submitted that the value of the outstanding work cannot be accepted as the value to AAV and that Andrew's evidence as to a profit margin of 20% was unreliable. However, as noted above, there was no attempt to correct Andrew's evidence as to the profit margin, from which I am inclined to think that the 20% figure was not excessive. 143 It is also said that there was an amount of $25,000 owing by AAV for warranty work that A & P Plumbing carried out for AAV. However, it is not clear to me that this was something actually paid out by or invoiced to AAV. 144 Mr Young submits that the arrangements made in late 2006 were the most anyone could have done to provide for the orderly cessation of AAV's business and to provide a fair distribution of its assets. However, the fact remains that at the time this division of the business of AAV took place, the company remained in existence and both Andrew and Paul remained as directors. By their decisions (not the decision to leave but the decision as to how to go about the separation of their working arrangements with Peter), they made it difficult, if not indeed practically impossible, for the company to continue in business. Subsequent events 145 As to the events since December 2006, there was an issue about a payment in December 2006 in relation to a tax bill that Peter says he refused to sign as he refused to sign cheques to pay for the tax of Andrew or Paul. He said that this was the only instance in which he refused to sign a cheque (T 56). There was some suggestion that tax refunds payable to Andrew or Paul had been offset by the tax office against moneys payable by AAV and that the cheque in question might have been in reimbursement of this. In any event, it does not seem that this takes matters any further if, as I consider is the case, there was oppressive conduct warranting relief as at December 2006. 146 Andrew accepted that since 1 December 2006 AAV had continued to have tax returns prepared for it at a cost to the company, that there were accounting fees incurred and BAS statements to be prepared, and that the company was overdrawn on its accounts (T 160). 147 On 20 December 2006 the payments (said to be for holiday pay) were made to each of Andrew and Paul, to which I have earlier referred; and dividends paid to each of Kathryn and Lisa. At T 128.26, Mr Bramble said that he had not advised Andrew and Paul in relation to the payment of the sums of about $4,000 each made to them on 20 December 2006 nor (unsurprisingly) did he advise them to pay dividends to their wives but not to Mrs Vadori (T 128.45), contrary to the suggestion by Paul (at T 90) that he had done so. Subsequently, in 2008, a corresponding dividend payment was made to Mrs Vadori (without any interest for the period from 2006 and presumably, as Mr Lawson submits, with the benefit of legal advice following the commencement of these proceedings). 148 Mr Bramble said that in his opinion there was no reason why, as a trading entity, AAV needed to continue to exist, although there would seem to be complications as to how to 'roll out' the members from the AAV superannuation fund. He accepted that winding up AAV might solve a lot of the accounting issues but said there were other problems that would need to be considered (T 127). 149 As to the disadvantages of winding up AAV at this stage, in re-examination Mr Bramble said that if it were wound up in the one tax year the dividend could be quite significant and have adverse tax consequences on all the shareholders whereas if it were to managed over particularly over one or two years in order to pay dividends over a longer term that would be advantageous to all (T 131.12). He said that there were loan account issues, the obvious shareholder dispute and unpaid tax - "If the court determines that those loan accounts had to be repaid, then that would have the company with sufficient funding to pay its unpaid income tax bills which then, if the court orders the company to pay the dividends to the existing shareholders, potentially over two financial years rather than one, for instance, then the windup could be done quite simply". He said there was a significant amount of loan accounts and loan accounts on behalf of the partnership and the individual directors (T 132/133). Issues 1 Oppression 150 Mrs Vadori's case is that, during the course of the dissolution of the business, the directors of AAV managed the affairs of AAV in a manner that was contrary to the interest of the members and, in particular, in a manner that was discriminatory of her, as a minority shareholder, and/or that in a way that is unfair or oppressive. 151 Mr Lawson submits that Mrs Vadori was not bound by anything that occurred at the meeting of 21 November 2006 because she was not present, either in person or by an agent duly authorised by her; and because nothing that was done at the meeting purported to bind her as a shareholder of AAV. He says that at no time during the relevant meetings in late 2006 was either her husband or Mr Carpenter acting as Mrs Vadori's agent, but that even if either had been acting as such an agent he was not authorised by Mrs Vadori to enter into any binding agreement on her. 152 Mr Lawson submits, and I accept, that the letter of 6 November 2006 signed by Mrs Vadori did not appoint Mr Carpenter as her agent; rather it did no more than accept the proposition that he would assist her in the negotiations with a view to any resolution at the meeting being the subject of a formally executed legal document. 153 It is further said by Mr Lawson that all that was determined (whether in principle or otherwise) at the meeting of 21 November 2006 by the directors was that the plant and equipment (some of which was owned by AAV and some by the partnership) should be distributed between the directors for their further business ventures. (I would add that it seems to me that the evidence sustains a finding that there was also a resolution reached between the directors that the stock (valued at about $49,000) would be divided up equally between each of the directors.) 154 What was not done was to reach any overall agreement (whether in principle or otherwise) as to how the whole of the affairs of the company were to be wound up. There was certainly no agreement as to the treatment of any goodwill in the company's business (or indeed as to whether there was any such goodwill), nor is there any such agreement now. There seem to have been any agreement in principle or otherwise as to the existing or future work of the company beyond a decision that the two main or only clients of the company would be approached as to an equal split; though there may have been a discussion about existing jobs going with the directors who were working on them; and a discussion about warranty work being undertaken by A & P Plumbing with an estimate put on the cost of that at $25,000. 155 Mr Lawson relies on Re Leas Hotel Co [1902] 1 Ch 332 for the proposition that the goodwill of the business (such as it may have been) was owned by the company, not by any of its directors, and maintains that AAV is in a position to claim damages for any conversion of that asset or restrain others from utilizing it, referring to Cook v Deeks [1916] 1 AC 554 and ss 182 and 183 of the Corporations Act (Cth). 156 Mr Lawson submits that the most significant "oppressive conduct" is that A & P Plumbing was "gifted" the business of AAV (including all work in progress and its goodwill). In that regard, Mr Lawson submits that A & P Plumbing continued with the works and received the profits in relation to all existing contracts (or work jobs) of AAV as at 1 December 2006; that it did not account to AAV for the profits received from such works; that the goodwill that belonged to AAV was transferred to it or otherwise destroyed by AAV's directors (and it is submitted that a corresponding goodwill was created in A & P Plumbing in circumstances where AAV could otherwise have taken action to preserve its own goodwill); that A & P Plumbing did not have to undergo the usual start-up period having the benefit of the existing business, most of AAV's employees and use of the business premises of AAV (for which it did not pay rent for at least eighteen months until after the commencement of proceedings), and retained the stock owned by AAV. 157 The further oppressive conduct is said to be the making of dividend payments on 20 December to two of the shareholders (but not Mrs Vadori) and alleged inappropriate payment of wages to Andrew of $4,012.00 and Paul of $4,128.00 on 20 December 2006, despite AAV not trading by that time. 158 Conduct by majority members of a company, or by its directors, taking a benefit at the expense of the company may constitute oppression (Fexuto Pty Limited v Bosnjak Holdings [2001] NSWCA 97; (2001) 37 ACSR 672; (2001) 19 ACLC 856). 159 Mr Lawson points out that, within the classes of cases in which oppressive conduct has been found, are not only cases where there is an improper diversion of business away from the company (referring to the authorities cited at para 11.460 of Ford's Principles of Corporations Law (13th Edition), eds RP Austin, IM Ramsay, namely, Re Scottish Co-operative Wholesale Society Limited v Meyer [1959] AC 324; [1958] 3 All ER 66; Re Bright Pine Mills Pty Limited [1969] VR 1002; Webb v Stanfield [1991] 1 Qd R 594; Re a Company (No 002612) (1986) 2 BCC 99,453) but also cases where the company fails to prosecute an action (here being the asserted claim for breach of duty against the directors) (conduct which Ford notes may be oppressive based on the objective fairness test of whether a reasonable commercial bystander would have done so – para 11.460). 160 A failure to pay dividends may be oppressive (Roberts v Walter Developments Pty Limited (1997) 15 ACLC 882); and one would think this was particularly so where the payment is to some but all of the shareholders. (It is noted that although there was a payment made to Mrs Vadori in the amount of the earlier dividend, this was made in 2008, after the commencement of the litigation and no interest was paid on the sum as from the date on which the corresponding dividends had been paid to Kathryn and Lisa.) 161 More fundamental, it seems to me, is the fact that the conduct of the directors in arranging for the practical winding up and dispersal of the company's business and assets took place without reference to (and, in Mrs Vadori's case, with the express exclusion of input from) the shareholders. The directors, having determined between themselves that they would cease working together (and in Peter's case this seems to have been put to him as something of a fait accompli) took it upon themselves to decide how the assets and business of the company should be disposed of and, as seems in effect to have been conceded by the thrust of the defendants' submissions on both this and the valuation issue, to have destroyed any goodwill which might then have subsisted in the business (or at least failed to turn their minds to the question whether any value could in fact be derived therefrom for the benefit of the shareholders of the company). 162 The motivation or bona fides of the company or its officers does not preclude the availability of the remedy (Campbell and Another v BackOffice Investments Pty Limited [2009] HCA 25; (2009) 238 CLR 304; (2009) 257 ALR 610, at 654; (2009) 73 ACSR 1), it not being to the point that the directors may not have intended to deal inappropriately with the assets of the company. 163 In Shelton v NRMA [2004] FCA 1393; (2004) 51 ACSR 278 Tamberlin J stated: [23] It is not practicable to delineate the numerous ways in which oppressive conduct may be established. The Court will generally look at the overall course of conduct and consider whether it is so unfair that reasonable directors would not consider it fair. If directors exercise a power so as to impose a disability or burden on a member that is unfair according to ordinary standards of reasonableness and fair dealing, then such conduct may be described as oppressive. The question is one of fact and degree for the Court to determine, having regard to the view the directors have formed themselves, and allowing for any special skill or knowledge possessed by the directors. The test of unfairness is objective: see Wayde v NSW Rugby League Ltd (1985) 180 CLR 459 at 472 (" Wayde ") per Brennan J; Morgan v 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573. The Court should not take a narrow approach to cases of oppression. It is necessary for the Court to come to a conclusion that there has been conduct unfairly prejudicial to or unfairly discriminatory or oppressive to a member before it makes an order to this effect: see John J Starr (Real Estate) Pty Ltd v Andrew (Australasia) Pty Ltd (1991) 6 ACSR 63, and the authorities there collected at 65–67. (my emphasis) 164 Whether the company's conduct was contrary to the interests of the members as a whole or oppressive is based on the objective facts (Wayde v NSW Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459; (1985) 61 ALR 225, at 234), although in Doyle v Australian Securities and Investments Commission (ASIC) [2005] HCA 78; (2005) 227 CLR 18; (2005) 223 ALR 218; (2005) 56 ACSR 159, it was said that even though subjective intention or purpose is not a necessary ingredient in determining improper use of position, the presence of such an intention or purpose may be relevant in assessing impropriety (at [41]). 165 Fairness under s 232 must not be assessed in a vacuum (Thomas v HW Thomas Ltd [1984] 1 NZLR 686, at 694; (1984) 2 ACLC 610; (1984) 2 NZCLC 99,148). 166 Emphasis is placed by Mr Young on the fact that the oppressive conduct, as pleaded, is that which occurred from about 30 November 2006, not the earlier conduct of the directors in deciding to leave, and making arrangements to leave, the company and to take some of the employees with them. 167 Mr Young submits that as at 1 December 2006 (or, for that matter, 30 November 2006), from when the oppressive conduct is pleaded as having occurred, AAV was no longer operating as a plumbing business because of the events which had happened prior thereto (as to which he says no claim of oppression is made). It is submitted that, prior to 1 December 2006, not only had all the directors decided that they were going to leave AAV and set up their own businesses, but all of the employees had also decided they were going to leave the company. Steps were in train by then for the winding down or cessation in practical terms of the AAV business (both Peter on the one hand and Andrew/Paul on the other hand having set up new corporate entities in the first two weeks of December). It seems to be suggested for the defendants that all that happened after the end of November was that the parties put in place the arrangements which had been discussed (and agreed between the three men to more or less an extent) in mid-November 2006. 168 Mr Young submits, therefore, that by 1 December 2006 AAV was a company no longer engaged in plumbing operations and no longer intending to engage in plumbing operations; its sole remaining function was as trustee of the superannuation/investment vehicles. 169 It is said that, by 1 December 2006, AAV had the services neither of its chief plumbers nor of any of its employees and at best had some loose arrangements for ongoing work with Montgomery Homes and Contour Building. (I interpose to note that this submission would be inconsistent with the payment of holiday leave for the month of December to Andrew/Paul unless this was a payment out of entitlements accrued due at that stage but paid after they ceased to be employed by AAV.) Further, it seems somewhat of a generalisation to describe the arrangements with the company's customers as "loose arrangements", since the evidence is that there were in place a number of existing purchase orders and accepted quotations for work jobs for those clients (and there is no suggestion that those clients would not have been in a position to rely upon those 'arrangements' in order to require the work to be completed or to claim damages for breach of contract, if it was not). Indeed, it is at the same time submitted for the defendants that, had an administrator or liquidator been appointed to AAV at that stage, then the administrator or liquidator winding up the company would have regarded those arrangements as a liability of the company for which provision of some kind would have needed to be made. 170 Mr Young appeared to concede that there would have been a powerful argument that there had been oppressive conduct if the oppression claim had been pleaded by reference to the actions of Andrew and Paul in deciding "to go off and set up shop elsewhere and take over the work of the company", at a time when they were still directors of, and employed by, the company. However, he submits that the oppressive conduct upon which the case is based has not been pleaded in that fashion; rather that the oppressive conduct as pleaded is that Andrew and Paul (or their company A & P Plumbing) took over the work of AAV, something which occurred only after 1 December 2006 and which Mr Young says was inevitable once AAV had ceased its business and divided up its employees. 171 Such an argument, on its face, seems to require acceptance of the proposition that it is not oppressive or contrary to the interests of members to put in effect decisions taken by directors at an earlier time which might themselves have been oppressive if, by reason of those earlier decisions, the business of the company has already been destroyed. It seems to me that this could only have force if the initial agreement of the directors (in effect, to shut up shop) was one to which shareholders had agreed or in which they had acquiesced. This is because, whether or not the directors had been acting in the best interests of the company at the time when they decided to act in accordance with their own interests and 'ditch' the company (to use a colloquial term which I think encapsulates fairly the flavour of what occurred), as at 1 December when that decision was implemented in a concrete way, they remained directors of the company and it was not up to them to decide that they should take (or, as the case may be, retain) the benefit of the company's business and assets for themselves without reference to the interests of the shareholders or to implement any such decision of their own accord. 172 The argument so put for the defendants in effect would permit a party to benefit from his or her own wrongful conduct if, having diverted or otherwise destroyed the business of the company, it was said there could be no oppression in continuing to benefit from that situation (though still remaining directors) for the very reason that the company no longer had that business. (It is as unpalatable a result as permitting a person to benefit from that person's own breach of contract.) 173 If, as seems clearly to have been the case, the position in November 2006 was that the directors simply could not work together anymore (whether in partnership or in the company), and had therefore decided to part ways, then surely what should have happened, consistent with their obligations as directors, would have been that the steps taken to cease their involvement with the company would be ones which took into account their obligations as directors and the interests of the shareholders. 174 The options available to Andrew and Paul at that time, for example, would have included their resignation as directors (and as employees, in the latter case complying with any relevant notice requirements) of AAV, at which stage consideration would presumably have been given by Peter, as the remaining director, and/or by the shareholders (including Kathryn and Lisa) as to whether an arrangement could be made for the company to continue to operate in the interests of the shareholders, or as to what value could be derived for the benefit of the shareholders by a transfer of part or all of the business, assets or goodwill of the company. Another option open to Andrew and Paul would have been to consider whether it might have been in the interests of shareholders to wind up the company at that stage and put this to a meeting of the members. Had the matter been raised with shareholders, it is possible that they would have explored the possibility of a sale (whether to a third party or to one or other members) of their interest in the company in order to maintain within the company whatever residual benefit there may have been in its assets and any goodwill in the business. 175 On the evidence before me, I accept that there would have been nothing to stop any one or more of Andrew, Paul and Peter from resigning from the company and then pursuing their trade in a different company or in a different working arrangement, provided this did not involve a breach by them of any obligation of confidence. Similarly, in Cook v Deeks the court considered what would have happened had the directors (instead of taking the benefit of the contracts in the way that they had done), decided to make it clear what they were proposing to do and either move to wind up the company or to consider a resolution that they would not continue in the business of the company. There, however, the directors (not having done so) were liable to account for the profits made from the business opportunity entered into in breach of their duties as directors. 176 By taking it upon themselves to determine what was to happen to the business assets of the company, without apparent regard to the shareholders' position (and, in the case of Mrs Vadori, having actively excluded her from direct participation in discussion as to what was to happen) it seems to me that there was a clear breach of s 232 of the Act. Even if that was not expressly pleaded (though I think it was in fact subsumed within paragraph 18), it follows that the implementation by the directors of the decisions taken by them on 21 November 2006 (whether or not that agreement included items such as the division of stock) must also amount to a breach of s 232. Therefore, the fact that the earlier conduct may not have been expressly pleaded as oppressive conduct does not seem to preclude a finding that, by acting in accordance with (or to implement) the earlier decision, there was oppressive conduct. 177 A & P Plumbing, at Andrew and Paul's behest, took over the existing work jobs of AAV and the benefit of part of its assets and the use of its business premises, thereby depriving AAV of the ability to seek to put in place any arrangements by which it might have been able to obtain a benefit from that business even if that might have been only for a limited period. 178 Mr Lawson submits that the relevant oppressive conduct is the transfer of the assets of the company to a new entity for no consideration at all. I agree. 179 Mr Young, in effect, submits that in the circumstances (the goodwill having already been lost by the departure of the workmen and assets), there was no opportunity lost by the company. However, what seems to me to have been lost is the opportunity for the company to consider its position viz a viz the outgoing directors and to seek to preserve some value from the existing work and/or from any remaining client contacts. Had Andrew and Paul been properly advised as to their obligations as directors of the company as at 1 December 2006 it seems inconceivable to me that they would have been advised that they could regard themselves as at liberty to divide up the assets of the company and to proceed to take over the existing business of the company, without having reference to the shareholders and without putting in place an appropriate arrangement for that to happen. 180 It seems to me likely that, had Andrew and Paul been informed of the fiduciary and statutory duties to which directors are subject before they took the steps they did, then they would have given consideration as to how they could have proceeded without breaching those duties and a number of possibilities would have been explored. One is that they would have continued in the company to complete the existing contracts and then given notice of their intention to leave, at which time the remaining director and the existing shareholders would have had the opportunity to consider whether to continue in business or to put in place arrangements for the company to be would up or for the shareholders to reach agreement on the division of the company's assets. 181 Mr Young submits that what occurred was an attempt to divide up the assets fairly between the three couples. It may well be that, but for the dispute over whether there was any subsisting goodwill in the company, the manner in which the company's business was divided up would have met with no objection from Mrs Vadori. However, in the absence of an overall arrangement for the division of all of the assets and business (including any goodwill) of the company, it seems to me that it was not open to two of the directors (or three of the directors, including Peter) to agree as between themselves to appropriate assets of the company as they did (while all the time remaining as directors of the company to which they owed very onerous duties as such). 182 I accept that the evidence suggests that, without effective non-compete covenants being put in place, the likelihood is that it would have been difficult to sell the business of the company and I do not accept that it should be inferred that any outgoing director not already bound by such a covenant would readily have been prepared to give (nor would he have been obliged to give) such a covenant. Hence, the value of the company's goodwill was clearly at risk and the opportunity of which the company has been deprived is not likely to have been great. Nonetheless, it was not for the directors, without reference to the shareholders, to deprive the company of that opportunity. 183 Mr Young emphasised that as at 1 December 2006 AAV was a superannuation company, not a plumbing company, because it had determined all of its plumbing businesses on 1 December 2006 and that the oppressive conduct pleaded was not the agreement of the directors in November 2006 to go their separate ways with the business, assets and employees of the company as divided between them. I have difficulty with that proposition, as outlined above, since the directors remained directors as at 1 December 2006 and any implementation of the decisions made after the November 2006 meeting seems squarely to fall within the oppressive conduct as pleaded. 184 Setting up a business or diverting business from the company to companies in which the 'oppressor' has an interest, but the applicant does not, has been recognised as conduct capable of constituting oppression: Scottish Co-operative Wholesale Society v Meyer; Webb v Stanfield [1991] 1 Qd R 593; (1990) 2 ACSR 283; 8 ACLC 715; Re a Company (No 002612 of 1984); Dwyer v Lippiatt; Dwyer v Backpackers R Us.Com Pty Ltd (2004) 50 ACSR 333, at 355; [2004] QSC 281; Re Baumler (UK) Ltd [2005] 1 BCLC 92; [2004] All ER (D) 139; [2005] BCC 181 (Ch D); Re Bright Pine Mills; Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549, at 556; (1987) 5 ACLC 394; Re Hollen Australia Pty Ltd; Holt v Burnside [2009] VSC 95, at [69]. 185 In Re Bright Pine Mills, the Full Court of the Supreme Court of Victoria found that certain shareholders had engaged in oppressive conduct by using the licences and facilities of the company to set up businesses in which the applicant had no interest. It was found that oppression may be established where the controlling directors have pursued a course of conduct designed by them to advance their own interests or the interests of others of their choice to the detriment of the company or to the detriment of minority shareholders. The court said (at 1013): This article [referring to an article permitting directors to contract for a profit with the company] does not in any way affect the principle that a director of a company is obliged at all times to act in the company's affairs in what he conceives to be the best interest of the company and its shareholders and to refrain from making decisions about the company's affairs without regard to its interests, but in order to divert, what might otherwise be a profitable enterprise to another concern, particularly to one in which he himself has a proprietary interest, the real purpose of his action being to prevent a minority shareholder participating in that profit. 186 In Sanford v Sanford Courier Service Pty Ltd, some of the directors of a courier company in Sydney established a courier business in Melbourne to which business otherwise open to the company was diverted, to its loss, to the company conducting the Melbourne business. Waddell J said in respect of the diverted business (at 556): … the undertaking by Axthorn [the company carrying on the Melbourne business] of these activities instead of by SCS [the company carrying on the Sydney business] is consistent with an inference that it was done for the purpose of enabling the second defendants, as the shareholders of Axthorn, to have the profits of the business to the exclusion of the plaintiff. If it was, it should be concluded that conduct coming within s 320 is occurring and has taken place: Scottish Co-operative Wholesale Society Ltd v Myer . 187 The defendants were there found to have engaged in oppressive conduct, having given the business to Axthorn "so that the benefit of any profits would be gained by the … defendants rather than the plaintiff" (at 557). 188 Reliance was placed, not surprisingly, by Mr Lawson on Cook v Deeks, a case almost on all fours with the present. There, the plaintiff and three defendants were directors and shareholders of a railway construction company. After a falling out between the defendants and the plaintiff, the three defendants began covertly diverting construction contracts to a new company founded by the three defendants. The three defendants (and their new company) were awarded the contracts due to their position as directors of the original company, specifically, the railway construction contracts which were awarded on the basis of the previous good work done by the original company. Later, the three defendants caused the company to pass resolutions approving the sale of part of the plant of the company to the new company formed by the three defendants, and a declaration was made that the company had no interest in the new contracts procured by the defendants and that the directors were authorized to defend this action, which had in the meantime been instituted. 189 The two issues on appeal to the House of Lords were (i) whether, apart altogether from the subsequent resolutions, the company would have been at liberty to claim from the three defendants the benefit of the contract which they had obtained; and (ii) whether in such event the majority of the shareholders of the company constituted by the three defendants could ratify and approve of what was done and thereby release all claims against the directors. 190 The House of Lords (at 562-563), on appeal, agreed with the first instance findings that: The sole and only object on the part of the defendants was to get rid of a business associate whom they deemed, and I think rightly deemed, unsatisfactory from a business standpoint. In other words, they intentionally concealed all circumstances relating to their negotiations until a point had been reached when the whole arrangement had been concluded in their own favour and there was no longer any real chance that there could be any interference with their plans. This means that while entrusted with the conduct of the affairs of the company they deliberately designed to exclude, and used their influence and position to exclude, the company whose interest it was their first duty to protect. 191 The House of Lords found that the three directors had breached their duties to the company by diverting the business opportunities of the company away for their own personal benefit, stating (at 563): … men who assume the complete control of a company's business must remember that they are not at liberty to sacrifice the interests which they are bound to protect, and, while ostensibly acting for the company, divert in their own favour business which should properly belong to the company they represent. … Their Lordships think that, in the circumstances, the defendants T. R. Hinds and G. S. and G. M. Deeks were guilty of a distinct breach of duty in the course they took to secure the contract, and that they cannot retain the benefit of such contract for themselves, but must be regarded as holding it on behalf of the company. 192 As to the issue of the effect of the purported ratification, it was found that, in circumstances where the contract was entered in breach of directors duties and belonged in equity to the company, and that any purported ratification by the majority was ineffective as this would be a fraud on the minority, stating (at 564); If, as their Lordships find on the facts, the contract in question was entered into under such circumstances that the directors could not retain the benefit of it for themselves, then it belonged in equity to the company and ought to have been dealt with as an asset of the company. Even supposing it be not ultra vires of a company to make a present to its directors, it appears quite certain that directors holding a majority of votes would not be permitted to make a present to themselves. This would be to allow a majority to oppress the minority … In the same way, if directors have acquired for themselves property or rights which they must be regarded as holding on behalf of the company, a resolution that the rights of the company should be disregarded in the matter would amount to forfeiting the interest and property of the minority of shareholders in favour of the majority, and that by the votes of those who are interested in securing the property for themselves. Such use of voting power has never been sanctioned by the Courts, and, indeed, was expressly disapproved in the case of Menier v. Hooper's Telegraph Works . 193 As to the remedy, the defendants were ordered to account (at 565) to the defendant company for the profits, which they had made out of the transaction and the case was referred back to the High Court Division of the Supreme Court of Ontario for the purpose of taking such account. 194 The House of Lords noted (at 559), that the defendants could have undertaken business separately from the plaintiff, without breach of directors' duties, if they had terminated their business relationship and ensuing duties and obligations first, by placing the company into voluntary liquidation. 195 The conduct of the directors in the present case seems to me to have contravened not only their statutory duties but each of the two fundamental and distinct rules binding fiduciaries, as recognised in Chan v Zacharia [1984] HCA 36, at [24]; (1984) 154 CLR 178), both of which are of strict application, namely the duty not to profit by reason of one's position as a fiduciary and the duty not to place oneself in a position of potential conflict (at [24]): 24. … The variations between more precise formulations of the principle governing the liability to account are largely the result of the fact that what is conveniently regarded as the one "fundamental rule" embodies two themes. The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the "use of fiduciary position" doctrine is but an illustration or part of a wider "conflict of interest and duty" doctrine (see, e.g., Phipps v. Boardman, at p l23; N.Z. Netherlands Society v. Kuys, at p 1229), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. (my emphasis). 196 As recognised in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64, at [27]; (1984) 156 CLR 41), these principles have been described as "inflexible" (Birtchnell v. Equity Trustees, Executors and Agency Co. Ltd. [1929] HCA 24; (1929) 42 CLR 384, at 408) and "fundamental" (Boardman v Phipps [1966] UKHL 2; (1967) 2 AC 46; [1966] 3 All ER 721, at 756). 197 To the extent that Peso Silver Mines Ltd (NPL) v Cropper (1966) 58 DLR (2d) 1 seems to apply a less strict rule than that applied in Keech v Sandford (1726) 2 White & Tud LC 706; [1558-1774] All ER Rep 230; (1726) Cas temp King 61; (1726) 2 Eq Cas Abr 741; (1726) 25 ER 223 and Boardman v Phipps (the court in Peso Mines distinguishing the former cases on the basis that the company in Peso Mines no longer wanted to pursue the opportunity at the time the director took it), this suggests a lack of appreciation as to the independent operation of the two rules (the no profit rule and no conflict rule) (although the finding there was that the opportunity had not come to the defendant in his capacity as a fiduciary but in his personal capacity, so that no profit could be made by reason of his fiduciary position). 198 The fact that the company in Peso Mines no longer wanted to pursue an opportunity or had not wanted to pursue it in the first place, goes only to the application of the no conflict rule, not to the application of the rule that the fiduciary should not profit by reason of or as a result of his or her position. Once it is accepted that these are two distinct and independently operating duties, then it should not matter whether the beneficiary wishes to pursue, or is capable of pursuing, the opportunity or making use of the information; the question is whether in that event there is nevertheless a conflict between the interest of the fiduciary and the beneficiary. Where a fiduciary makes a profit by reason of or as a result of his or her fiduciary position, the fiduciary should be liable to account for this profit, regardless of whether there is a concurrent breach of the duty to avoid a conflict. 199 That these duties can breached independently, explains what is perceived to be the "strictness" or "inflexibility" of the application of the no profit rule in situations where a breach is found irrespective of the beneficiary's ability to pursue the opportunity (Keech v Sandford; Regal (Hastings) v Gulliver [1967] 2 AC 134; [1942] 1 All ER 378; Boardmand v Phipps) or the absence of any damage caused to the company (in Keech v Sandford; Regal Hastings and Boardman v Phipps no damage was caused as the beneficiaries could not pursue the opportunities and in Boardman v Phipps, the fiduciaries' actions actually made the beneficiaries a profit), or of the good faith or bona fide intentions of the fiduciary (in Boardman v Phipps and Regal Hastings, it was found that the fiduciaries were acting bona fide in what they thought was the best interests for the company). 200 In applying the no conflict and no profit rules, it therefore appears that: It does not matter whether the fiduciary acted bona fide and in what the fiduciary thought was the best interests of the beneficiary/ies ( Boardman v Phipps; Regal Hastings ); It does not matter whether no loss is caused ( Keech v Sandford ) or that a profit was actually made for the beneficiary ( Boardman v Phipps; Regal Hastings; and more recently Gemstone Corp of Australia Ltd v Grasso (1994) 13 ACSR 695; 12 ACLC 653 where Olsson and Prior JJ held that it was no defence that the company had not suffered a loss or that any profit made was of the kind which the company could not have obtained (ie voting rights), at 702, 709). It does not matter whether the profit is made in circumstances where there is no conflict of interest ( Keech v Sandford; Regal Hastings; Boardmand v Phipps ) (and if there is a breach of the no conflict rule, but no profits are made, then equitable compensation would instead be an appropriate remedy if there has been loss caused); and Furs v Tomkies (1936) 54 CLR 583 ; Canadian Aero Service Ltd v O'Malley [1974] SCR 592, 40 DLR (3d) 371 ; Industrial Development Consultant Ltd v Cooley [1972] 1 WLR 443 ; Pacifica Shipping Co Ltd v Andersen [1986] 2 NZ LR 328 and Cook v Deeks are cases where the facts gave rise to breaches of the no profit rule and the no conflict rule (in Furs v Tomkies the managing director negotiated for the sale of part of the company and in so doing was paid commission by the purchaser; in each of Canadian Aero Service v O'Malley; Industrial Developments v Cooley and Pacifica Shipping v Andersen the directors came into confidential information which put them in a competitive position pursue certain opportunities, they resigned from their company to use the information to compete with their old company to pursue such opportunities; in Cook v Deeks three of four directors diverted a contract that was to go their company away for their own personal interests). 201 In Canadian Aero Service v O'Malley, Laskin J said at (25): An examination of the case law in this Court and in the Courts of other like jurisdictions on the fiduciary duties of directors and senior officers shows the pervasiveness of a strict ethic in this area of the law. In my opinion, this ethic disqualifies a director or senior officer from usurping for himself or diverting to another person or company with whom or with which he is associated a maturing business opportunity which his company is actively pursuing; he is also precluded from so acting even after his resignation where the resignation may fairly be said to have been prompted or influenced by a wish to acquire for himself the opportunity sought by the company , or where it was his position with the company rather than a fresh initiative that led him to the opportunity which he later acquired. [My emphasis] 202 Laskin J went on to state (at 48); …. The general standards of loyalty, good faith and avoidance of a conflict of duty and self-interest to which the conduct of a director or senior officer must conform, must be tested in each case by many factors which it would be reckless to attempt to enumerate exhaustively. Among them are the factor of position or office held, the nature of the corporate opportunity, its ripeness, its specificness and the director's or managerial officer's relation to it, the amount of knowledge possessed, the circumstances in which it was obtained and whether it was special or, indeed, even private, the factor of time in the continuation of fiduciary duty where the alleged breach occurs after termination of the relationship with the company, and the circumstances under which the relationship was terminated, that is whether by retirement or resignation or discharge. [my emphasis] 203 Canadian Aero Service v O'Malley is an oft-cited authority: for example, Green & Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 (Full Court) at 19 per Kennedy J]; Pacifica Shipping v Andersen (Davison CJ), at 334, 337-8; Mordecai v Mordecai [(1988) 12 NSWLR 58 at 65]; Lord Corporation Pty Ltd v Green [(1991) 22 NSWLR 532-4]; Colour Control Centre Pty Ltd v Ty [(1996) 39 AILR 4,316 (Santow J) at 4,319]; Natural Extracts Pty Ltd v Stotter [(1997) 24 ACSR 110 (Hill J)].; Addstead Pty Ltd v Liddan Pty Ltd [(1997) 25 ACSR 175 (FC of SA) at 195 per Perry J]; and in Victoria, Spincode Pty Ltd v Look Software Pty Ltd [(2001) 4 VR 501 (C.A.) at 522-3 per Brooking JA. (See also the discussion by RP Austin, "Fiduciary Accountability for Business Opportunities" in Equity and Commercial Relationships, ed. PD Finn, Law Book Company, 1987.) 204 Here, although it might be said that there were no 'maturing' business opportunities as from the time the directors decided to cease operating the business together, there was clearly thought to be a business opportunity of some kind inherent in the relationship between the directors and the two clients of the company (hence the approach made to each of Montgomery Homes and Contour Building, successful on the part of Andrew and Paul, for work after the split). 205 Whether or not in this case the directors were aware of their duties to AAV or whether or not they thought they had done the right thing by AAV (and in some cases whether or not AAV was in a position itself to pursue the particular business opportunities as at 1 December 2006) is not to the point. As directors, Andrew Paul and Peter were bound by onerous duties and the failure to comply with those duties means that AAV has a basis on which to hold them to account for profits made by them in breach of duty, even if AAV itself suffered no damage. Is Mrs Vadori bound by or estopped from denying the November 2006 agreement? 206 Mr Young submits that Mrs Vadori always left things to her husband in the AAV business in general (which seems to have been the case); that she knew what was going on (as to which there is less certainty, since she was precluded from attending the relevant meeting at which it is said the relevant agreement or arrangement was struck); that she knew there were negotiations happening (which is the case); that she knew the key things had been said after the meeting (which by and large appears to be the case); that she sent a letter to Mr Bramble that would encourage him to believe that she approved of Mr Carpenter assisting her and her husband (that whatever Mr Bramble thought seems to me to be irrelevant and in any event what he cannot in my opinion reasonably have thought was that Mr Carpenter was being appointed as Mrs Vadori's agent at the relevant meeting); and that she knew after what had happened that money was received by Vadori Plumbing, of which she was the sole shareholder and secretary, and had allowed Vadori Plumbing to use that money and use the plant and equipment in the business (which would at most estop her from raising a dispute as to those aspects of the dissolution of the business but not from denying that there was any overall agreement for the final dissolution of the business). 207 Mr Young does not suggest that there was a final agreement in relation to goodwill or as to the existing or ongoing work of the company but does suggest that Mrs Vadori was party to an agreement to cease trading with AAV; for two successor entities to be set up; and that at least the stock, plant and equipment and a sum of $90,000 were to be split between them with warranty work to be dealt with in a particular way and employees' entitlements to be dealt with in a particular way. Mr Young says that even though it is not Mrs Vadori's pleaded case to complain about most of those decisions, in any event she agreed to them and she cannot now say that the taking (or acting upon them) amounted to oppressive conduct. 208 It is submitted by Mr Lawson that Mr Carpenter cannot be said to have attended the meeting and represented Mrs Vadori as her agent, simply on the basis that Mr Bramble that had suggested that he might represent her interests and that Mrs Vadori had done nothing (except accede to an offer of assistance by him) in response. I agree. 209 In any event what is pleaded is that Mrs Vadori is bound by the arrangements because her husband was acting as her agent and he had failed to raise any objection to what was proposed. I do not accept that, simply because Mrs Vadori in the past had left business decisions to her husband (or that she knew he was attending this meeting and understood that he would be looking out for her interests), she thereby authorised or held him out as her agent for the purpose of making binding agreements in relation to the dissolution of the business. There is no evidence of any ratification of any agreement or conduct of her husband, other than an acceptance of the division of some of the assets (of which she does not now seek any further benefit). 210 Diplock LJ in Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480, at 503; [1964] 1 All ER 630; [1964] 2 WLR 618, in an oft-quoted passage, outlined what is necessary to give rise to a situation of ostensible authority, namely a representation made by the principal which is intended to be and in fact acted upon by the third party that the agent has authority to enter into a contract on behalf of the principal of a kind within the scope of the agent's apparent authority. This is not such a case, in my opinion. Mrs Vadori seems to have intended no more than that her husband and/or Mr Carpenter find out what the intentions of Andrew and Paul were and discuss ways to resolve the position which had arisen by reason of their decision no longer to work with her husband. Nor does there seem to have been any understanding by Andrew and Paul that it might have been necessary to reach an agreement which included Mrs Vadori as a shareholder in order to dispose of the business of the company. 211 Mr Young does not seem to rely on any allegation of ostensible authority. Rather, he submits that Mrs Vadori, by learning what was said at the relevant meeting, by not saying anything (through her husband, if the case remains as pleaded in this respect) to contradict it, and by then accepting the benefits into her new company, has ratified what was decided. The difficulty with this seems to me to be that what was decided, at the highest, was only a partial solution to the winding up of the business and assets of the company. There is no evidence that Mrs Vadori ever accepted the position in relation to the division of stock, nor that she accepted (at least in the absence of some account being given for the transfer of the existing work or to represent the goodwill she claims reposed in the company) any proposal for the overall disposition of the business of AAV. Like her husband, Mrs Vadori seems to have been faced with a fait accompli (and with no means other than proceedings of this kind) to assert her rights as a shareholder given the actions taken by the directors to divide up the business of the company. 212 Insofar as Kathryn and Lisa are concerned, they were not privy to the decisions made at the meetings in November 2006. They appear to have accepted the benefits, through A & P Plumbing, of the business transferred from AAV (and would seemingly, on the reasoning put forward by Mr Young, be said to have ratified their respective husbands' conduct and if so it might be said that they have participated in the conduct which is in breach of s 232 of the Corporations Act). Whether or not there has been a ratification of their husbands' conduct by Kathryn and Lisa, they have with their husbands denied the allegations made by Mrs Vadori as to the oppressive conduct and breach of directors' duties. Any suggestion that the company might otherwise have commenced proceedings to protect the rights of the shareholders could not be sustained (unless the decision to do so was delegated to Mrs Vadori). Just as, in Cook v Deeks, it was said that it was oppressive conduct for the majority shareholders to purport to ratify breaches of directors' duties, here the denial by the majority shareholders of Mrs Vadori's rights would seem to me to operate as oppressive conduct towards her. Conclusion 213 For the reasons set out above, I find that there was a breach of s 232 of the Corporations Act by reason of the exclusion of Mrs Vadori in the determination of the manner in which the business and affairs of AAV were to be dealt with in view of the decision by Andrew and Paul to bring to an end the working relationship they had with Peter. 2 Relief 214 When the court is valuing the oppressed shareholder's interest in the determination of the relief to be awarded for oppression, the aim is to put the applicant in the position as if there had been no oppression, as stated by Young J (as his Honour then was) in ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1995) 15 ACSR 536, at 540: However in cases dealing with the price at which an oppressor is to purchase the oppressed's shares in a company the word ``fair'' has been given significance. For instance in Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 at 369, Lord Denning said that one of the most useful orders that could be made is to ``order the oppressor to buy their shares at a fair price: and a fair price would be, I think, the value which the shares would have had at the date of the petition, if there had been no oppression''. The concept of ``fair price'' in this sense has been followed subsequently; see for instance Re Associated Tool Industries Ltd (1963) 5 FLR 55 at 70; Re Golden Bread Pty Ltd [1977] Qd R 44 at 55; Coombs v Dynasty Pty Ltd (1994) 14 ACSR 60 at 102 and cases cited by von Doussa J in that case at para 25.5. The flavour of the judgments in the company oppression cases is that in looking to the fair value one must look at all the circumstances of the case and seek to put the oppressed in the same position as nearly as can be as if there had been no oppression, erring, if there is to be any erring, on the side of the oppressed. 215 The general principle, when determining relief for oppression, was said in Scottish Co-operative Wholesale Society v Meyer, at 86, per Lord Keith to be to determine: what would have been the value of the shares at the commencement of the proceedings had it not been for the effect of the oppressive conduct of which complaint was made. This is clearly not a matter on which a calculation can be made with mathematical accuracy or by the application of strict accounting principles… 216 In that case, Lord Denning, at 89, said: One of the most useful orders mentioned in the section—which will enable the court to do justice to the injured shareholders—is to order the oppressor to buy their shares at a fair price; and a fair price would be, I think, the value which the shares would have had at the date of the petition, if there had been no oppression. 217 That the aim is to fashion relief which removes the adverse effects of the oppression has also been recognised in Shelton v NRMA, at [26], cited by Bergin J (as her Honour then was) in Backoffice Investments v Campbell [2007] NSWSC 161; (2007) 61 ACSR 144 (2007) 25 ACLC 302, at [93], and reaffirmed in Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95, at [195], [332], which was not questioned in the High Court's decision in this matter, Campbell v Backoffice Investments Pty Ltd [2009] HCA 36, at [178]; (2009) 259 ALR 402; (2009) 83 ALJR 110. 218 The remedy chosen should be the least intrusive: Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452, at 475; Fexuto v Bosnjak Holdings Pty Ltd, Young J (as his Honour then was), at 742. 219 As far as the (perhaps more common) basis of awarding relief on the valuation of the shares is concerned, in Rankine v Rankine (1995) 124 FLR 340, Thomas J (as he then was), with whom Macrossan CJ and McPherson JA agreed, said at 345–346: In granting a remedy in favour of an oppressed shareholder under CL s 260(2)(e) or 260(2)(f) by ordering the compulsory purchase of the applicant's shares at a stated price, the court is in effect awarding compensation for the respondents' breach of duty. The nature of the duty is both subtle and complex, and not capable of exhaustive definition, but the most useful expressions of it are collected in McPherson, The Law of Company Liquidation , 3rd ed, Donovan, pp 143–44. One such expression describes it as a duty of probity and fair dealing (Meyer, above, 364, per Lord Keith). The compensatory nature of the remedy is recognised by Lord Denning in Meyer at 369, in Re a Company No 002612 of 1984 (1986) 2 BCC 99 at 495 and in Coombs v Dynasty , above, at ACLC 918. The ultimate finding of the price that should be paid cannot be made until the nature and effect of the oppression has been identified and its effect quantified or allowed for. By contrast a valuation of shares on the basis of the value of the company as a going concern, or by reference to its underlying assets, as has been directed in this case, is a conventional valuation exercise without adjustments for the oppression factors. 220 In Roberts v Walter Developments, at 906–7, where a discount was applied to the value of the shares of the oppressed minority shareholder, the court nevertheless noted that generally it will be inappropriate to apply a discount to the value of the shares of a minority shareholder which are to be purchased as a result of oppression of the shareholder. This was also observed in Mopeke Pty Ltd v Airport Fine Foods Pty Ltd (2007) 61 ACSR 395; 25 ACLC 254; [2007] NSWSC 153, at [96] where no discount was applied. 221 As to the time for valuing the respective shares, in Short v Crawley (No 30) [2007] NSWSC 1322, White J stated: [1237] The overriding requirement is that the valuation, and the time at which the valuation is to be carried out, be fair. Fairness depends on the facts of the particular case ( Re London School of Electronics Ltd [1986] Ch 211 at 224; Dynasty Pty Ltd v Coombs (1995) 59 FCR 122 at 144; Profinance Trust SA v Gladstone [2002] 1 WLR 1024 at 1034). The valuation must exclude the depreciating effect on the value of the applicant's shares brought about by the oppressive conduct (Scottish Co-operative Wholesale Ltd v Meyer [1959] AC 324 at 364 and 369). [1238] In Profinance Trust SA v Gladstone , the Court of Appeal, having reviewed the English authorities, ventured the following propositions (at 1041–1042 [60]–[61]): … The starting point should in our view be the general proposition stated by Nourse J in In re London School of Electronics Ltd [1986] Ch 211,224: 'Prima facie an interest in a going concern ought to be valued at the date on which it is ordered to be purchased.' That is, as Nourse J said, subject to the overriding requirement that the valuation should be fair on the facts of the particular case. The general trend of authority over the last 15 years appears to us to support that as the starting point, while recognising that there are many cases in which fairness (to one side or the other) requires the court to take another date. It would be wrong to try to enumerate all those cases but some of them can be illustrated by the authorities already referred to. (i) Where a company has been deprived of its business, an early valuation date (and compensating adjustments) may be required in fairness to the claimant: see Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324. (ii) Where a company has been reconstructed or its business has changed significantly, so that it has a new economic identity, an early valuation date may be required in fairness to one or both parties: see In re OC (Transport) Services Ltd [1984] BCLC 251, and to a lesser degree In re London School of Electronics Ltd [1986] Ch 211. But an improper alteration in the issued share capital, unaccompanied by any change in the business, will not necessarily have that outcome: see In re DR Chemicals Ltd (1988) 5 BCC 39. (iii) Where a minority shareholder has a petition on foot and there is a general fall in the market, the court may in fairness to the claimant have the shares valued at an early date, especially if it strongly disapproves of the majority shareholder's prejudicial conduct: see In re Cumana Ltd [1986] BCLC 430. (iv) But a claimant is not entitled to what the deputy judge called a one-way bet, and the court will not direct an early valuation date simply to give the claimant the most advantageous exit from the company, especially where severe prejudice has not been made out: see In re Elgindata Ltd [1991] BCLC 959. (v) All these points may be heavily influenced by the parties' conduct in making and accepting or rejecting offers either before or during the course of the proceedings: see In re A Company (No 00709 of 1992) [1999] 1 WLR 1092. … [1240] Lord Denning spoke to like effect. Counsel also relied upon the observations of Vinelott J in Re a Company [1983] 2 All ER 854 and submitted that authority in Australia showed that the prima facie starting point of valuation is that the valuation be undertaken as at the date proceedings are commenced (citing Dynasty Pty Ltd v Coombs at 143–144; Re Bodaibo Pty Ltd (1992) 6 ACSR 509 at 513; Bagot Well Pastoral Company Pty Ltd ; Shannon v Reid (1992) 9 ACSR 129; Shirim Pty Ltd v Fesena Pty Ltd [2002] NSWSC 10 at [14]; and United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514 at 520–521). [1241] I do not agree that there is such a prima facie principle. [1242] In Re a Company (1986) 2 BCC 99,453, Vinelott J said (at 99,492–99,493) that he: … would at least incline to the view that the date of the petition is the correct starting point, the valuation of course being adjusted to take account of unfair conduct which has depreciated the value of the shares (as in Meyer), and that a departure from this date must be justified on the ground of some special circumstance. The date of the petition is the date on which the petitioner elects to treat the unfair conduct of the majority as in effect destroying the basis on which he agreed to continue to be a shareholder, and to look to his shares for his proper reward from participation in a joint undertaking. [1243] That was a case in which the value of the shares declined between the institution of proceedings and the hearing of the petition. It is in that context that Vinelott J continued: If he succeeds in his petition and establishes that the breakdown in the relationship justifies an order for the compulsory purchase of his shares he has established that the respondents, if they had acted fairly, would have agreed, following the breakdown in their relationship, that his shares should be purchased at fair value. [In that event] it would not have been open to [the petitioner] to have resiled from that bargain if the shares subsequently fell in value, and he should be in no better position as a result of having contested the petition. By contrast, if the respondents to a petition contest the petition and continue in effect to employ the value of the petitioner's investment in the company, justice may require that they account to him for any enhanced value of the company's business at the date of valuation, unless it can be said that the increase in value is solely attributable to their efforts. That question does not arise for decision and I express no opinion on it. [1244] The date chosen for the valuation of the company was affirmed on appeal ( Re a Company (1986) 2 BCC 99,495; also cited as Re Cumana Ltd [1986] BCLC 430). In Re Cumana , the Court of Appeal emphasised that the choice of the valuation date was very much a matter for the judge's discretion (at 436, 445). [1245] As noted above, in Profinance Trust SA v Gladstone , the English Court of Appeal took as the general starting point the date of the order rather than the date proceedings were commenced . In Re London School of Electronics Ltd, Nourse J did not apply what he took to be the general rule that valuation should be carried out as at the date of the order, where the value of the shares had increased due entirely to the efforts of the respondent directors in a way which was unlikely if the petitioner had remained with the company. On the other hand, in Profinance Trust SA v Gladstone , the Court of Appeal warned against assuming that capital invested by the petitioning creditor had no real connection with healthy profits earned after the commencement of the proceedings and contrasted the facts in that case with " ; a rearrangement of its structure and business (typically by an increase in issued capital and the injection of a new business) which means that the company is (in the eyes of a businessman or an investor) no longer what it was before." (at [56] 1040). [1246] I do not consider that the authorities cited establish that the date of commencement of proceedings is, prima facie, the date at which valuation is to be effected, although in Shirim Pty Ltd v Fesena Pty Ltd , Davies AJ said that valuations " usually" occur as at the date of commencement of proceedings. However, there are many cases where that is not the case (eg In the Matter of Rankine Bros Pty Ltd (3 April 1998, de Jersey CJ unreported; BC9801022) where the shares had declined in value after the commencement of proceedings, and Dynasty Pty Ltd v Coombs where the Full Court of the Federal Court approved of the statement of Nourse J in Re London School of Electronics Ltd [1985] 3 WLR 474 at 484 that if there were such a thing as a general rule it should be the date of the order rather than the date of presentation of the petition or the occurrence of the acts of oppression (at 144)). I do not accept that there is a "usual starting point" being the date of the filing of the originating process. The question is, simply, what is the fair time to adopt as the time for valuation of the plaintiffs' shares? 222 There is some support for the approach of valuing an applicant's shares in a company which has lost business opportunities due to breaches by the directors (where this conduct also constitutes the oppression) by treating the new company, which took the business opportunity, as if it were a wholly-owned subsidiary of the subject company (Re Bright Pine Mills, at 1013 – 1014; Dwyer v Lippiatt; Dwyer v Backpackers R Us, at 355; Drinkwater v Caddyrack Pty Ltd [1997] NSWSC 431). 223 In Re Bright Pine Mills, at 1013 – 1014, the Court of Appeal in Victoria said: We think that the order appealed from was right in so far as it ordered the appellants to purchase the petitioner's shares in the company. The order appealed from may have to be varied by directing the Master to inquire into and ascertain the value of those shares at the date of the presentation of the petition on a basis somewhat different from that stated in the order. When judgment was reserved, counsel were informed of this possibility and we said that if the appeal were dismissed we would hear argument on the question as to the form of order which should be made. It may be that the Master should, in ascertaining the value of the petitioner's shares in the company, treat (with some allowance as to capital) the Pine Processing Co. as though it were a wholly owned subsidiary of the Bright Pine Mills Pty. Ltd. and it may be contended or it may be agreed that in some way Monterey's assets or profits should be taken into account or be had regard to in ascertaining the value of the petitioner's shares in the company. However, we will hear argument on this matter. 224 This approach was approved and suggested as an appropriate basis of valuation in Dwyer v Lippiatt; Dwyer v Backpackers R Us, by White J, when suggesting how counsel should agree to the valuation of the share, there stating (at 355) [83] Backpackers is still operating, although in a small way. Its operation is largely run by Mr Thomas from his office in Melbourne. The directors are able to work together amicably. It meets its debts to its outside creditors. There is no reason to wind it up. There has been an offer to purchase Mrs Dwyer's shares in Backpackers since the initiation of the winding-up proceedings. The shares were then valued at $1 by Mr Morrissey. It is doubtful if Mrs Dwyer has paid for her 18 $1 shares. It is now accepted that there is no value in Spot Communications Pty Ltd or Pineapple Communications Pty Ltd. Any additional value to the share price of Backpackers will depend upon the valuation of the shares in Avoncore taking all proper regard for the skill of Mr Kirk and outstanding claims for remuneration. It will be appropriate to defer making a formal order as to how the shares should be valued. In Re Bright Pine Mills the Full Court of the Supreme Court of Victoria approached the valuation of a petitioner's shares in a company which had lost business opportunities due to breaches by the directors by treating the new company, which took the business opportunity, as if it were a wholly-owned subsidiary of the subject company. That may be a useful way to proceed here. 225 This approach has also been approved by Young J, as his Honour then was, in Drinkwater v Caddyrack Pty Ltd: In the instant case, the matter is really academic. Either there is a fiduciary duty owed by the Kyrwoods to the Drinkwaters, or else it is one which is owed to Caddyrack Pty Ltd. Although Caddyrack Pty Ltd is not a plaintiff in the present proceedings, if an order is made under s 260 that there be a buyout, then the court can order that in valuing the shares for the purposes of a buyout, the expert valuer can proceed on the basis that certain transactions are to be ignored or that Caddyrack International Pty Ltd is to be regarded as a wholly owned subsidiary of Caddyrack Pty Ltd. It is quite clear that this sort of order is within the scope of the section; see Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 and Re Bright Pine Mills Ltd [1969] VR 1002 226 There is therefore room for a different approach to be taken in relation to the valuation of shares where that would produce a fairer outcome on the facts of the particular case. 227 Similarly, in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd, the Court of Appeal determined that in that case the appropriate remedy for oppression which was constituted by breaches of fiduciary duty was an account of profits (and that the appropriate date for valuation of the account of profits was the date legal proceedings were commenced). 228 The principal remedy that Mrs Vadori seeks is an order that Kathryn and Lisa purchase her share in AAV for a sum to be set by this Court and that judgment be entered against the defendants for that amount. The date at which the share is to be valued for the purposes of such a purchase order is put by Mr Lawson at 1 December 2006, that being the date from which the oppressive conduct is pleaded. It is said that the purchase of Mrs Vadori's share will give to Kathryn and Lisa the absolute right to control the company and to determine when, if ever, it is placed into liquidation, the frequency and value of any dividends and all such matters which shareholders are in a position to control. 229 Mr Lawson submits that there should be no discount to the price payable for the share notwithstanding that it is a minority interest. (The expert evidence was that ordinarily a 15%-40% discount would be payable where a third party is acquiring a minority share in a company such as this.) In the circumstances where I propose to order a buy-out by the majority shareholders at a price referable to the value of the company not including any component for goodwill but including a component referable to the value of the company's claim against the directors for breach of fiduciary and other duties (akin to an account of profits), the question of a discount referable to the minority nature of the holding does not in my view arise. 230 In determining the value of the shareholding as at 1 December 2006 much emphasis was placed on the value, if any, to be attributed to goodwill. I have outlined above the thrust of the expert evidence adduced from two chartered accountants, Mr Humphreys and Mr Lawrence, in this regard. They agreed that the business of the company had a value at 1 December 2006 of $750,000, of which $500,000 was represented by goodwill (assuming either the existence of non-compete covenants or no intention by the directors to leave and set up in competition with the company, neither of which was the case). 231 Mr Lawson says that Andrew, Paul and Peter had been working together in their plumbing business for nearly 20 years and therefore it was not to point to say that there was a risk that one of the partners might leave and thereby affect the goodwill. It is submitted by Mr Lawson that, but for the oppressive conduct, they would have remained in business together (and Mr Lawson pointed to the fact that they still remain both as directors of AAV and partners under their partnership agreement). With respect, I consider that the evidence does not establish any real likelihood that, but for the oppressive conduct (that being pleaded in effect as the implementation of the decision to wind down the business), the three directors would have remained working together in the company. The decision to split up seems to have been firmly reached back in November 2006 (and was under consideration apparently from an earlier time). 232 Mr Lawson nevertheless submits that the sum which should be ordered for the compulsory purchase of Mrs Vadori's share is $250,000 (being one third of the value of AAV, including the goodwill assessed on the basis of a continuing company in which the three directors were working). He submits that this is the value of the share but for the oppressive conduct. (In arriving at this figure it is Mr Lawson's submission that the value that the Vadori interests took from AAV in December 2006 (being one company vehicle and one excavator, with the debts attaching to the same) is balanced by the fact that A & P Plumbing could be required to account to AAV for, at least, the profit that it received from the contracts that formerly belonged to AAV, that is the sum of $16,463.27.) 233 It is submitted that the amount sought is reasonable in that it does not take into account the profits obtained by the defendants through A & P Plumbing which were derived from being directors of AAV, those being profits obtained by A & P Plumbing in relation to works performed pursuant to contracts with Montgomery Homes and Contour Building. 234 Mr Lawson noted that Andrew and Paul had conceded under cross- examination that A & P Plumbing assumed contracts that belonged to AAV after 1 December 2006 and that the value of those contracts is $246,949.30 (as set out on pp 246 and 247 of the court bundle). On the basis that AAV maintained a 20% profit margin on all jobs (which seemed to me to be little more than an ''off the cuff' assessment by Andrew) those jobs would have represented a profit of $49,389.86 for AAV. For Mrs Vadori, it is said that the purchase price for the shares should thus be adjusted upwards by a sum representing one third of those profits, ie $16,463.27. 235 Mr Humphreys valued the business on various different scenarios depending on whether the directors of the employees were allowed to leave the company. Mr Humphreys said that, without restrictive covenants (and there was no suggestion that anyone was bound by any restrictive covenant), then the goodwill would be worthless because there would be no goodwill without the directors of the business. Mr Humphreys said in his initial report that if there were covenants against the directors then the value for goodwill before a decision by the directors to leave was $300,000 though in the joint report the figure for goodwill seems to have been agreed at a higher amount ($500,000) but again only on the basis that there would have been in place either non-compete covenants or no threat by the directors to leave and set up in opposition to the company. 236 Mr Lawrence accepted that on the worst case scenario the company would be worth little more than its net asset value of $250,000 (on the basis that the goodwill would be worth nothing or next to nothing), saying that: "so in other words if a decision was made to sell the business to external parties and those external parties knew that the directors and employees were all going to leave the business, leave the company, that would have a marked effect on what that incoming purchaser would be prepared to pay" (T 137.22). He considered that if the goodwill were deemed to be more personal and related to the business then he would wish to tie the particular individual into the business for a longer period to enable the goodwill to pay. 237 At T 139 he said: The good will associated with the existing company is always dependant on how much profit it is going to make in the next twelve months so it is based on the probability over the next twelve months which is what the basis is for our calculation. We try to estimate the future profit and determine the value from that. If all of that work had left the existing entity, then its future earning would be nil and following on from that any subsequent calculation associated with that would produce a value of nil if there was not going to be any future income of the existing organisation. If that income is now in some other entity, then its value will be determined based on its profitability in the next twelve months. … If the second entity is run identically to the first entity, therefore assuming the probability of profitability of the second entity projected is the same as predicted in the original entity the case would be same; this would be as if the goodwill is simply transferred. 238 I do not consider that one can assume that any particular covenants would have been proffered by the directors had they been asked to do so in order to effect a sale of the business. I accept that the evidence of Mr Bramble was that when a business is sold it is typically at that time that one is concerned with restrictive covenants but it does not seem to me that I can assume what might have happened in circumstances where one of the shareholders or directors sought a purchaser for the business after the other directors had given notice of intention to leave the company and wished to set up in competition with it. In other words, there is nothing to say that a non-compete covenant could have been procured from Andrew and Paul had they simply resigned as directors/employees and left Peter as the sole director of the company to continue with the company and whatever goodwill remained in it. It is therefore difficult to see how, in quantifying the amount of any compulsory purchase order, I should assume something contrary to the situation which seems to have been the case at the time. 239 Even before the oppressive conduct, this was a company susceptible to the risk of just the kind of event that occurred, namely that one or more of the directors who were important factors in the subsistence of goodwill might leave the company (without any oppressive conduct necessarily occurring). 240 Mr Young submits that any compulsory purchase order, having regard to the evidence of the experts as to goodwill, could only be on a purely nominal valuation amount. (It was conceded that there would be some sense in a buyout insofar as the company is continuing on in existence and that a winding up order should not be made because it is appropriate for the company to be wound up in an orderly fashion.) 241 The difficulty, in my view, in valuing Mrs Vadori's share as at 1 December 2006 as Mr Lawson contends I should do, ie as including any component for goodwill, lies is determining that there was any goodwill that could otherwise have been realised but for the oppressive conduct (ie if there had been a decision at that stage by Andrew, Paul and Peter to part ways in a manner consistent with their obligations as directors). 242 Therefore, I accept Mr Young's submission that, in valuing Mrs Vadori's share as at 1 December 2006, no amount should be allowed for goodwill. 243 However, I consider that this conclusion does not produce the result that the buy-out figure is nominal, as account needs to be taken for any value attributable to a claim which the company could have pursued against Andrew and Paul for breach of directors' duties. In this regard, I accept Mr Lawson's submission that the value attributable to goodwill is not the appropriate basis on which to value Mrs Vadori's share in this case. It is submitted by Mr Lawson that if Andrew and Paul had simply resigned as directors and set up a competing business for themselves there would have been a right in the company at the behest of Mrs Vadori to restrain them from competing against the company on the basis of the decision in Cook v Deeks and on the basis of ss 182 and 183 of the Corporations Act. Whether or not that is the case, it must surely have been the case that while Andrew and Paul remained directors (as they do even today) the company could have restrained them acting in competition with it and from diverting business and profits from it. 244 Mr Lawson's submission is that it is improper for directors of a company to assume, to a new entity that they may choose to incorporate, all of the work belonging to the first company particularly when they remain as directors of the first company. I agree. 245 I set out in my conclusion below the manner in which I consider that the purchase price should be assessed. As will be seen, I consider that it should not reflect any component for goodwill but should include an account for the value of the business diverted to A & P Plumbing. As I understand it the value jointly attributed to Mrs Vadori's share (and the value of the company) by Mr Lawrence and Mr Humphreys included neither the value of the work that belonged to AAV as at December 2006 and which was completed by A & P Plumbing nor the profits made from the business diverted to A & P Plumbing for which a claim could have been made by the company. 246 As to the alternative order sought by Mrs Vadori by way of relief for the oppressive conduct, namely an order that AAV be wound up, Mr Lawson submits that AAV is doing nothing but losing money, that it is a burden to the directors and the shareholders, and that the problems that it has can be resolved by a winding up or in the process of it being wound up. It is said that there is no utility in keeping AAV alive and that an order should be made under s 233 that AAV be wound up. 247 As to this, Mr Young says his clients have never opposed winding up and acknowledged that it seemed a sensible course for its affairs to be wound up and for its entitlements to be paid. However, in earlier submissions it was put to me for the defendants that an orderly winding up would be preferable to a court-ordered winding up. Ultimately, the defendants' position was that I was not urged one way or the other whether or not to wind up the company. 248 Given my view as to the compulsory purchase order, I do not think that it is appropriate or necessary that there be a winding up order. That should be left in the hands of the members. 3 Derivative action 249 Finally, Mrs Vadori seeks leave as an alternative to her oppression suit to bring a derivative action on behalf of AAV and to seek a return to AAV of all of the profits utilised by A & P Plumbing and indeed Vadori Plumbing so that those assets can be brought back into the company and the company wound up in a manner in which it ought to have been some time ago. 250 Mr Young says that if there has not been any oppressive conduct then the only purpose of the derivative action is to say that technically the money should have been paid to the shareholders rather than to the companies they own; and that this would be an exercise in futility since the shareholder company got the benefit in question and got the increase in value of their various corporate interests of the same money if there had been a winding up other than in relation to the benefit of the work. 251 Mr Young submitted that the court should lean heavily against a derivative action remedy and that even if there was some oppressive conduct by reason of which work in progress was taken by A & P Plumbing, which had caused Mrs Vadori to miss out on moneys which she would otherwise have had, then that should be dealt with by way of a compulsory purchase order. He noted that there would be expected to be considerable fees if there were to be any further litigation and that this would be to no one's benefit as the relevant stakeholders have already received the value of the plant and equipment (and the distribution of cash) from the company. 252 Part 2f.1A of the Corporations Act allows the court to permit a member or officer to bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (s 236(1)). There is no issue that Mrs Vadori, as a member of the company is entitled to seek leave to bring a derivative suit (s 236). 253 Mrs Vadori relies upon the statutory duties owed by the directors to the company to exercise their powers with a reasonable degree of care (s 180) and in good faith in the best interests of the Company for proper purposes (s 181), and not improperly to use their position to gain an advantage for themselves or detriment to the company (s l82). She also asserts breach of the fiduciary duties considered above. 254 What s 237(2) requires is that there be a serious question to be tried. A party seeking leave to bring a derivative suit does not need to prove any element of the derivative suit in order to satisfy s 237(2). 255 The criteria to be considered upon an application for leave to commence a derivative suit are: the probability that the company will not itself bring the proceedings, or properly take responsibility for them; whether the applicant is acting in good faith; whether it is in the best interests of the company that the applicant be granted leave; whether there is a serious question to be tried by the court (if the applicant is applying for leave to bring proceedings rather than intervene in any proceedings to which the company is a party); and either that at least 14 days before making the application to the court, the applicant gave written notice to the company of the intention to apply to the court for leave and of the reasons for applying; or that it is appropriate for the court to grant leave even though notice was not given to the company: s 237(2). 256 Each of these five criteria must be satisfied (Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534, at 541; 20 ACLC 1502). If all five criteria are satisfied, then the court is bound to grant the application (Fiduciary Ltd v Morningstar Research Pty Ltd [2005] NSWSC 442; (2005) 53 ACSR 732 at 735; 23 ACLC 1100). Turning to the respective criteria, I note briefly as follows. 257 Inaction by the company - The court must be satisfied that it is probable that the company will not itself bring the proceedings, or properly take responsibility for the proceedings. In circumstances where two of the three directors and the two remaining shareholders have denied any wrongdoing or oppressive conduct, it seems likely that AAV will not commence any proceedings against any of the directors in relation to the matters of which Mrs Vadori complains. 258 Applicant's good faith – The court will have regard at least to the following matters: (i) whether the applicant honestly believes that a good cause of action exists and has a reasonable prospect of success; and (ii) whether the applicant is seeking to bring the derivative action for a collateral purpose which amounts to an abuse of process (Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313, at 320). However, the inquiry concerning the applicant's good faith is not limited to these two matters (Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 65 ACSR 661; 245 ALR 780). 259 In Swansson it was said (at 320–21) that it will be relatively easy for the applicant to demonstrate good faith where the applicant is a current shareholder of the company who has more than a token shareholding and the derivative action seeks recovery of property so that the value of the applicant's shares would be increased. 260 The two factors identified by the court in Swansson as being relevant to consideration of the good faith requirement in s 237(2) were applied by Barrett J in Goozee v Graphic World Group Holdings Pty Ltd. His Honour held that the applicants were acting for a collateral purpose in that the applicants' purpose in seeking to bring the derivative action was to force the directors to pay dividends or else force the directors to arrange for the applicants' shares to be purchased. The application to bring a derivative action was therefore denied. The evidence before me does not permit a conclusion that these proceedings or the derivative claim sought to be pursued is being pursued for a collateral purpose. 261 Best interests of the company – It is for Mrs Vadori to establish that it is in the best interests of the company that she be granted leave. In determining whether an application is in the best interests of the company, it is said that the fact that the applicant has a personal interest in the outcome of the action or the applicant has personal animus against other members of the company is not significant or decisive because this would be common in the types of disputes which lead to derivative actions (Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859; Ehsman v Nutectime Int'l Pty Ltd [2006] NSWSC 887; (2006) 58 ACSR 705). Clearly, if there were to be a compulsory purchase order then it could not be suggested that it would be in the best interests of the shareholders, other than Mrs Vadori, for such proceedings to be commenced (they having acquiesced to date in the events which have transpired), particularly in light of the likely cost of such proceedings. In light of my finding on the compulsory purchase order, this criterion could not be satisfied. 262 A serious question to be tried - In order to determine whether there is a serious question to be tried, the applicant must provide the court with sufficient material to enable the court to make this determination (Charlton v Baber, above at 46). There is the same relatively low threshold to surmount as in the case of an application for an interlocutory injunction (Swansson). 263 It has been said that whether there is a serious question to be tried can be answered only by reference to an infringement of some legal or equitable right or the commission of some legal or equitable wrong (Goozee v Graphic World Group Holdings Pty Ltd, above, at 542 and Ragless v IPA Holdings Pty Ltd (in liq) [2008] SASC 90, at [40]; (2008) 65 ACSR 700; 254 LSJS 225). I consider that here a serious question has not only been established but the claimed breaches of duty have been made out. 264 Notice of proceedings to company – Section 237(2)(e)(ii) contemplates that a court can grant leave even if the applicant has not given written notice to the company of the intention to apply for leave and of the reasons for applying. It is not clear to me whether written notice was in fact given within the time required of intention to commence these proceedings and seeking the relief in this regard. However, AAV and its remaining shareholders and directors have been on notice of Mrs Vadori's intention to seek relief of this kind since the commencement of the proceedings. I consider that any failure to notify of an intention to make such an application strictly within the section should not preclude the grant of leave. 265 Therefore, but for the fact of the compulsory purchase order that I propose to make, I would have considered it appropriate to grant leave to bring the derivative proceedings. As it is, the requirement for the bringing of such a claim to be within the best interests of the company is not met and I do not grant any such leave. Conclusion 266 In essence, the respective parties' positions and my conclusions in that regard may be summarised as follows. 267 Mrs Vadori says that, without consultation with her (and in fact having excluded her from the initial meeting and not invited her to the subsequent decision meeting), the directors of AAV (having agreed that they could no longer work together as tradesmen) chose to divide up the assets of the company between themselves and proceeded to divert the business from the company to their respective new entities (and in terms of the employees/work/client opportunities, the diversion was largely to the new company with which Andrew and Paul were associated). In so doing, they rendered of no value any goodwill that there may have been in the company and Andrew and Paul took for themselves the substance of the business of the old company (of which they nevertheless remained directors). Mrs Vadori was left as a one-third shareholder in a company in which there was little value, but which was continuing to incur costs by reason of its ongoing existence as a corporate entity and whose only function was as trustee for the directors' investment vehicle and superannuation trust. 268 Andrew and Paul (who remain as directors of AAV), and their wives, as directors and shareholders, respectively, of their new corporate entity, have not only taken the existing work (with all but one of the company's employees and making use of the existing business premises) but have had the benefit of ongoing work by reason of the decisions made by the company's two main clients (a business opportunity clearly deriving from the relationship between those clients and Andrew), that ongoing work having represented at least a potential business opportunity for AAV. 269 The defendants' position is that, although criticism might perhaps legitimately have been made of the manner in which the three directors decided to split up the business and assets of AAV (without apparent reference to the shareholders' interests or wishes), the oppressive conduct which has been pleaded relates only to the conduct occurring after that decision had been made (and thus, in colloquial terms, after the damage was done). It is said that by 1 December 2006, when the oppressive conduct is pleaded, there was no goodwill left in the company for the defendants to appropriate (or for the shareholders, for that matter, to benefit from) and that the company was no more than a superannuation fund trustee and not in a position to complete the existing work or to pursue any future business opportunities. 270 The defendants say, moreover, that Mrs Vadori's interests were being 'looked after' at the critical meeting in November 2006 by her husband (and/or, though this is not itself pleaded) by an accountant, Mr Carpenter, and that, through her new company Vadori Plumbing, Mrs Vadori has had the beneft of a one-third division of the plant and equipment of the company – and has been in a position where she could have collected one-third of the stock of the company. 271 Fundamental to the defendants' assertion that Mrs Vadori is estopped from denying (or now making complaint as to) the arrangements made by the directors in November 2006 (and acted on by them from December 2006), is that Mrs Vadori's husband was acting as her agent at all relevant times. This is based on no more, it seems to me, than that he was her husband; that for some time she had allowed him to make the decisions in relation to the running of the business; that she knew that he was attending the relevant meetings at which the split up of the business would be discussed; that she understood he would be 'looking out' for her interests; and that she accepted the benefit of some of the division of assets that thereafter occurred. 272 Mrs Vadori's conduct in signing the letter authorising Cutcher & Neale to proceed with the proposed November meeting and for Mr Carpenter to attend in order to assist her and her husband with their affairs, does not seem to me sufficient to amount either to an express appointment of Mr Carpenter as her agent (nor is it pleaded as such) or a holding out that he was her agent (since the other directors and their wives were on notice of the limitations in the letter of 6 November 2006 in that regard). It is not suggested that at the 21 November 2006 meeting there was any clear statement made as to the basis on which the wives' interests were being 'looked after', nor does it appear that at the meeting the directors turned their collective minds to the fact that this was not their business to dispose of, but was in fact the business of their wives. 273 Significant in my view is the fact that Mrs Vadori had made it known that she wanted to attend at least the first meeting at which the future of the company was to be discussed and had been excluded from that meeting by Andrew. I do not think she can be criticised for forming the view that similar requests would be met with the same opposition. 274 Not only was there no evidence of any express agency arrangement, there is no evidence in my view to suggest that Mrs Vadori ratified (by accepting the benefit of the company car and excavator which her husband took or the cash payment made to Vadori Plumbing) any arrangement or agreement at the November 2006 meeting other than in respect to those matters alone. Mrs Vadori was never asked to confirm her agreement to the division up of the company's other assets or business; she did not communicate any agreement to the proposed allocation of stock (as to which I consider there was an arrangement reached between the directors at the relevant meeting); and she certainly did not agree to the defendants' assertions as to the position in relation to goodwill. The evidence suggests that neither Mrs Vadori nor Mr Bramble thought that any final agreement had been reached at the 21 November 2006 meeting for the disposal of the whole of the business and undertaking of the company. 275 In circumstances where Andrew and Paul did not turn their minds to the question of what interest or entitlements the respective wives had or may have had in the future direction of the company or the division up of its assets and business, they can hardly be said to have understood that Peter was in attendance at the meeting as his wife's agent in her capacity as shareholder. 276 As directors of the company, it was not the place of Andrew Paul and Peter to divide up the company between themselves and to divert its existing business and then business opportunities away from the company to their respective new corporate entities. A closer case to that considered in Cook v Deeks would be hard to find. 277 Granted, there was no evidence of any non-compete covenant (nor of any requirement for any particular period of notice to be given if there directors wished to leave the employment of the company, from which I would infer that a reasonable period of notice should have been given), so that there would have been nothing to stop Andrew and Paul deciding to resign as directors and to finish their work for the company within a reasonable notice period. However, this they did not do. 278 Provided that there was no misuse by them of any confidential information (and it is hard to see how there could have been, since the work know-how was something they would have been entitled to use and there is no evidence of any trade secrets to be protected, nor of any extensive client lists which the company might have been in a position to protect as confidential information), I cannot see that the decision to leave AAV and thereafter to compete with it (even though this would have had the detrimental effect on goodwill to which the experts deposed) could have amounted to oppressive conduct. 279 However, what Andrew and Paul did was, in effect, to take for themselves and their new company the benefit of AAV's resources (both in terms of its manpower and the facilities available to it, including its business premises which it occupied rent-free for a number of months), at least two-thirds (or more, depending on how the stock is viewed) of the company's plant, equipment and tangible assets; and the benefit of both its existing work and the business opportunities it had based on Andrew's relationship with the clients, without the consent of at least Mrs Vadori. Consent from her, as a one-third shareholder, was simply not sought (and seems to have been regarded as unnecessary). 280 That conduct seems to me to be in clear breach of their duties as directors (both under statute and by reason of their position as fiduciaries), and was oppressive in breach of s 232 of the Corporations Act. Insofar as it is suggested that any oppression was prior to the date pleaded (and hence irrelevant to the claim as pleaded), I do not agree. Apart from anything else, the oppression pleaded includes the alleged breaches of duty in having made use of their position as directors to take the benefits they did from the ongoing work. Further, it seems to me that the implementation of decisions reached at an earlier point was itself oppressive conduct. 281 The question then is as to what is the appropriate remedy for such oppressive conduct. All parties seem to accept that a compulsory purchase order would be the most appropriate form of relief (leaving the winding up of the company to be effected in an orderly fashion by the Antunovichs). It further seems to be accepted that the appropriate time to value Mrs Vadori's share is at 1 December 2006 rather than as at the date of the commencement of the proceedings, at which later time the oppressive conduct will necessarily have affected the value of the share. 282 But for the oppressive conduct, the company would have had the opportunity to continue its business. However, as Mr Young submits, that opportunity may have been worth very little as the directors were free to leave the company at any time. Had Andrew and Paul simply resigned as directors in November 2006 and left the employ of the company, there seems little doubt that the business of the company would have been adversely affected. Moreover, Mr Humphreys, whose evidence was I thought eminently logical in this regard, is that there is no goodwill attaching to a company whose directors and employees are not subject to any effective restraints. 283 Thus it is said by Mr Young that if the appropriate order is a compulsory purchase order then the buy-out figure would be nominal (in that he says there would be nothing or only a residual value for goodwill and the one-third profit margin on the existing work (approximately $16,000) would have to be offset by existing employee entitlements which were taken over when the new employees commenced with the new company and after account was taken of the plant and equipment obtained by Vadori Plumbing. 284 However, looked at in practical terms, what Andrew and Paul did was to divert to their new company, and in effect re-badge as the business of A & P Plumbing, the whole of the business operations of AAV, at the same time as they owed statutory and fiduciary duties to AAV to act in the best interests of that company, and not to put themselves in a position of conflict with that company or to take make use of their position to make a profit in effect at the expense of the company. In my opinion, as there has been a clear breach by Andrew and Paul of the duties owed by them as directors of AAV, AAV's assets as at 1 December 2006 must be taken to include the chose in action comprised by any claim it was in a position to make in relation to that breach of duty. 285 In valuing Mrs Vadori's share of AAV at that time (whatever the position in relation to the existence or otherwise of goodwill in the company), account should be taken of the value of AAV's claim against its directors. This seems to me to be akin to the cases in which the appropriate basis for valuation of the oppressed member's share or shares has been to treat the the company to which the business was transferred as a notional subsidiary or to those in which an account of the profits made by reason of the breach of duty has been the basis of an award. 286 In essence, Mrs Vadori's one-third share of the AAV business now reposes in A & P Plumbing. I am of the view that where this is a result of the fact that the directors have improperly diverted business from the company in breach of their duties, the value of Mrs Vadori's share should take into account the amount for which they could or would be likely to be required to account to the company for the said diversion of its business. 287 With that in mind, I consider that the appropriate amount for which Mrs Vadori's share is to be purchased is $190,800. I have reached that amount on the basis that the value of her one-third share in the business of AAV as at 1 December 2006 was valued by the experts at approximately $83,000, of which she has received around $50,000 comprised of cash and the equity in the car/excavator taken by Peter from the company; that a one-third share of the remaining stock as at 1 December 2006 was in the order of $16,300 (ie one-third of $49,000); that Mrs Vadori should be paid one-third of the profit conceded by Andrew on the existing work taken over from AAV (just over $16,400 which I have rounded up to $16,500); and that the amount for which Andrew and Paul should account to the company for the breach of their duties should be measured by the profits reasonably likely to have been obtained from or referable to that business for the 2007 year. 288 As to the last component of the award, I have worked on the basis that the 2006 financial accounts for AAV showed a profit of $375,000 and that there is no reason to think that the profits of A & P Plumbing would be materially less (given that both AAV's clients made the decision to follow Andrew and Paul to A & P Plumbing – Montgomery Homes absolutely and Contour Building, until its receivership to a large extent). I have therefore allowed a sum of $125,000 for the value of the chose in action. 289 That, together with the sums of $33,000, $16,300 and $16,500, leads to a purchase price of $190,800. 290 As it does not appear that Peter has obtained in any real sense the ongoing business of AAV, I do not consider it necessary to take into account in this regard any claim which might have been brought by AAV against him for a corresponding breach of his duty as a director, nor would it be appropriate for the Antunovich interests, in effect, to be asked to compensate Mrs Vadori for his breach of duty. 291 As A & P Plumbing has had the ongoing benefit of the employees who transferred to it, and given that I have assessed the share value based on the assumed net profits, I do not consider that any adjustment should be made for the assumption of those liabilities by A & P Plumbing. 292 As it appears that Mrs Vadori has had the opportunity to collect the on-third stock held by A & P Plumbing for some time and has not done so (and the stock may well have depreciated in value over that time) I do not consider it appropriate to order interest on the component of the purchase price referable to the value of that stock. I will hear submissions as to whether there should be any interest component otherwise as part of the purchase price. 293 For completeness, I note that had I not been prepared to make a compulsory purchase order that reflected the value to the company of a claim against Andrew and Paul for breach of directors' duty, I would have considered it appropriate to grant Mrs Vadori leave to bring derivative proceedings in the name of the company against them. Orders 294 For the reasons set out above, I propose to make the following orders: 1. Declare that the affairs of the first defendant have been conducted in a manner that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff within the meaning of section 232 of the Corporations Act (Cth) 2001. 2. Order the fourth and fifth defendants to purchase the share of the plaintiff in AAV Plumbing Pty Limited for the sum of $190,800. 295 I will hear from the parties in relation to costs and if there are any further submissions as to the orders (such as the question of interest). ********** 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.