New South Wales Supreme Court CITATION : McLaughlin v Dungowan Manly Pty Limited [2010] NSWSC 187 HEARING DATE(S) : 21, 22, 23, 24, 25 September, 9 October 2009 and 18 February 2010 JUDGMENT DATE : 16 March 2010 JURISDICTION : Equity Division JUDGMENT OF : Ward J 1. Declare that the September 2006 resolution approving the payment of a $250,000 fee to Mr Garratt is ineffective and of no effect. DECISION : 2. Order the defendant to pay to the plaintiffs the sum of $200,000 by way of damages for breach of the contract constituted by the Articles of Association (such breach constituted by the pursuit of the redevelopment insofar as it abrogated, varied or restricted rights of the plaintiffs in relation to the their occupation of their home unit). 3. Order the defendant to pay to the plaintiffs the sum of $59,885.93 by way of interest on 50% of the January 2000 special levy from the date on which demand was first made for its return (21 March 2007) to 30 September 2009. 4. Give leave for the plaintiffs to commence a derivative suit in the name of the company against the directors for breach of statutory duties in relation to the redevelopment. CATCHWORDS : CORPORATIONS – company title – oppression – construction and breach of articles of association – meetings procedure – validity of resolutions – assessment of damages for breach of articles of association and oppression – whether leave should be granted to commence derivative suit – defendant company undertook extensive re-development of block of units – re-development opposed by plaintiffs who were company members – whether conduct of re-development, including the striking of levies and entering into loans to fund re-development, the selective buy-back of shares and a remuneration payment to director were capable of valid resolution and undertaken according to articles of association or amounted to oppression – HELD – re-development project constituted breach of articles of association – resolution to remunerate director invalid due to inadequate notice – decision to undertake re-development in particular manner not oppressive – unequal treatment of plaintiffs in respect of a special levy constituted oppression – leave granted to commence derivative suit for breach of statutory duties LEGISLATION CITED : Trade Practices Act 1974 (Cth) Corporations Act 2001 CATEGORY : Principal judgment Ashburton Oil v Alpha Mining NL (1971) 123 CLR 614 Australian Hydrocarbons NL v Green (1985) 10 ACLR 72 Bain & Co Nominees Pty Ltd v Grace Bros Holdings Ltd (1983) 7 ACLR 777 Bak v Glenleigh [2006] NSWCA 10 Baltic Shipping v Dillon (1993) 176 CLR 344 Bancorp Investments Ltd v Primac Holdings Ltd (1984) 9 ACLR 263 Belgiorno-Zegna v Exben Pty Limited and Ors (2000) 35 ACSR 305 Browne v Panga Pty Limited (1995) 14 WAR 393 Bulfin v Bebarfalds Limited (1938) 38 SR (NSW) 423 Buttonwood Nominees Pty Ltd v Sundowner Minerals NL (1986) 10 ACLR 360 Campbell and Another v BackOffice Investments Pty Limited (2009) 257 ALR 610 Campbell v BackOffice Investments Pty Limited [2007] NSWSC 161 Chahwan v Euphoric Pty Ltd [2008] NSWCA 52; (2008) 65 ACSR 661 Chequepoint Securities Ltd v Claremont Petroleum NL (1986) 11 ACLR 94 Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64 Cordiant Communications (Aust) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005; (2005) 55 ACSR 185 Corporations Act; Homes v Life Funds of Australia Limited ([1971] 1 NSWLR 860 Crumpton v Morraine Hall Pty Limited (1965) NSWLR 240; (1965) 82 WN (Pt 1) (NSW) 456 Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956 Ding v Sylvania Waterways Ltd [1999] NSWSC 58 Doyle v ASIC [2005] HCA 78;(2005) 227 CLR 18 Duke Group Limited (in liq) v Pilmer (1998) 27 ACSR 1 Dunn v ASCPA (1998) 29 ACSR1 Ehsman v Nutectime Int'l Pty Ltd (2006) 58 ACSR 705; [2006] NSWSC 887 ENT Pty Ltd v Sunraysia Pty Ltd [2007] NSWSC 270; (2007) 61 ACSR 626 Farley v Skinner [2002] 2 AC 732 Fexuto Pty Limited v Bosnjak Holdings [2001] NSWCA 97; (2001) 37 ACSR 672 Forge v ASIC [2004] NSWCA 448; (2004) 213 ALR 574 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 G W Sinclair & Co v Cocks [2001] VSCA 41 Gambotto v WCP Ltd (1995) 182 CLR 432 Ghabrial v Romolly Pty Limited (1991) ACSR 611 Goldsmith v Colonial Finance Mortgage Investment & Guarantee Corporation Ltd (1909) 8 CLR 241 Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534 Harlowe's Nominees Pty Limited v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483 Howard v Mechtler [1999] NSWSC 232 Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited [2008] NSWCA 206 Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited [2007] NSWSC 124; (2007) 63 ACSR 1 Jones v Schiffmann (1971) 124 CLR 303 Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1426; (2005) 55 ACSR 583 CASES CITED : Lucy v Lomas [2002] NSWSC 448 Maher v Honeysett & Maher Electrical Contractors Pty Ltd [2005] NSWSC 859 Mamouney v Soliman (1992) 9 ACSR 63 Martin v Australian Squash Club Pty Limited (1996) 14 ACLC 452 McLaughlin v Dungowan Manly Pty Limited [2006] NSWSC 1001 McLaughlin v Dungowan Manly Pty Limited [2007] NSWSC 197; (2007) 61 ACSR 335 McLure v Mitchell (1974) 6 ALR 471 Mitchell v Foster (1840) 12 Ad & E 472 Ngurli Ltd v McCann (1953) 90 CLR 425 Olympic Holdings v Lochel [2004] WASC 61 Permanent Building Society v Wheeler (1994) 14 ACSR 109 Proctor v Chahl [2008] NSWSC 1252 Ragless v IPA Holdings Pty Ltd (in liq) [2008] SASC 90; (2008) 65 ACSR 700 Re Agriculturalist Cattle Insurance Co (Stanhope's Case) (1866) LR 1 Ch App 161 Re Broadway Motors Holdings Pty Ltd (in liq) (1986) 6 NSWLR 45 Re Caysand No 64 Pty Ltd (1993) 11 ACLC 1,197 Re George Newman & Co [1895] 1 Ch 674 Re Imperial Chemical Industries Ltd [1936] Ch 587 Re John Smith's Tadcaster Brewery Co Limited [1953] Ch 308 Re Waldcourt Investment Co Pty Ltd [1988] WAR 1 Re Tantalex Limited (1986) 8 NSWLR 8 Regina v The Justices of Shropshire (1838) 9 Ad & E 173 Residues Treatment & Trading Co Ltd v Southern Resources Ltd (1988) 14 ACLR 375 Residues Treatment & Trading Co Ltd v Southern Resources Ltd (No 2) (1988) 51 SASR 177 Robinson v Waddington (1949) 18 LJ QB 250 Ryan v Edna May Junction Gold Mining Co NL (1916) 21 CLR 487 Seabrook, Re Takeovers Panel and the Corporations Act [2002] FCA 1219 Shelton v NRMA [2004] FCA 1393; (2004) 51 ACSR 278 Smith v Permanent Trustee Australia Limited (1992) 10 ACLC 906 Spackman v Evans (1868) LR 3 HL 171 Stanham v National Trust of Australia (NSW) (1989) 15 ACLR 87 State of New South Wales v Burton [2008] NSWCA 319 Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 Thomas v HW Thomas Ltd [1984] 1 NZLR 686 Wayde v NSWRL Ltd (1985) 180 CLR 459 Westchester Financial Services Pty Ltd v Acclaim Exploration NL (1999) 32 ACSR 499 White v Bristol Aeroplane Co Limited [1953] Ch 65 Whitehouse v Carlton Hotel Pty Limited (1987) 162 CLR 285 Wilson v Meudon Pty Limited (2005) NSWCA 448 Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666 Young v Higgon (1840) 6 M & W 49 Patrick David McLaughlin (First Plaintiff) PARTIES : Jennifer Therese McLaughlin (Second Plaintiff) Dungowan Manly Pty Limited (Defendant) FILE NUMBER(S) : SC 258866 of 2006 COUNSEL : S Burchett (Plaintiffs) D Priestley (Defendant) SOLICITORS : Turner Freeman (Plaintiffs) Pikes (Defendant) - 231 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WARD J TUESDAY 16 MARCH 2010 06/258866 PATRICK DAVID MCLAUGHLIN V DUNGOWAN MANLY PTY LIMITED JUDGMENT 1 On 26 February 2010 I made orders in these proceedings in respect of various claims brought by Mr and Mrs McLaughlin in relation to the conduct and affairs of the defendant company in which they jointly hold a parcel of shares. I gave a brief summary of my findings at the time and indicated that I would shortly publish my written reasons. These are those reasons. Introduction 2 Dungowan Manly Pty Limited was incorporated in 1957 as a 'company title' home unit company, with the objects, inter alia, of acquiring, managing and conducting a home unit building in Manly known as "Dungowan Flats". Under its Articles of Association, holders of parcels of shares in the company, such as the McLaughlins, have rights in respect of designated home units within the building as well as rights in relation to the common areas. 3 Broadly, the dispute between the McLaughlins and the company relates to the steps taken over the period from about 2000 onwards for the repair and extensive redevelopment of Dungowan Flats (steps which have involved a costly and unsuccessful appeal to the Land and Environment Court and subsequent modifications to the company's initial plan for redevelopment of the building). 4 There is no doubt that as at 2000 there was a need for repair to the building (the problems associated with which included concrete spalling and water penetration, as well as fire safety issues and a non-functioning elevator). With hindsight it seems clear that the problems with the building were extensive. Dr Facioni, a civil engineer who was involved in the project and gave evidence in the proceedings, explained that once works to the building commenced it became clear that if no works had taken place the building "had no serviceable life remaining" due to the level of deterioration of the concrete slabs. With high levels of corrosion and low strength of the concrete, Dr Facioni's report of 10 September 2009 says "It was a building waiting for a catastrophic failure to occur, the consequences of which could have been life threatening". That evidence was not seriously challenged. 5 However, from 2000 the McLaughlins consistently disputed both the extent of the repair work which was necessary to be carried out and the means chosen by the company to address the building's structural problems. The McLaughlins' position was that, because steps were taken to support the front of the building which did not require the demolition of that part of the building, there was no reason to suggest that such steps could not have been carried out to the rear of the building. (The engineering reports do not support such a contention.) 6 The McLaughlins' initial preference, as I understand it, was that only the minimum repairs necessary to remedy particular problems, as they arose from time to time, should be undertaken. Once it became likely that the minimum level of repair would not be sufficient to address the building's problems in the medium to long term, then the McLaughlins suggested various steps to enable existing shareholders such as themselves to avoid the risk of incurring substantial repair costs – by calling for expressions of interest for the sale to, or development by others, of the building or by facilitating the buy-out of their shares (on the basis that they did not wish to be part of what they regarded as a speculative development project). The McLaughlins made it very clear throughout the course of the project that they did not support the project and Mr McLaughlin frankly conceded that he and his wife had done everything they could to prevent the project from proceeding (although at one stage in the witness box Mr McLaughlin said that they might have supported a one storey addition, of the kind proposed by the engineer they called in the proceedings – Mr Rickard, (T 67) conceding that such an addition would have cost the company a considerable sum as well.) 7 The building repairs were eventually carried out by the company in the course of (and were proposed largely to be funded by) a substantial redevelopment of Dungowan Flats, involving the demolition of the rear of the building, the conversion of two ground floor units to facilitate additional car parking, the construction of three additional floors (with eight new units) at the top of the building, and the internal modification/reconfiguration of existing units (apparently to take advantage of town planning concessions available for "heritage" buildings). What had been a three storey "heritage" home unit building was converted to a six storey home unit building with a car-stacker on the ground floor (under the level on which the McLaughlins' unit was situated); the extension being modern in character. 8 For the purpose of the redevelopment, various amendments were necessary to be made to the company's constituent documents (in order to enable the creation of various new share groups with rights in respect of the occupation of the new units which were in due course built). The company also entered into agreements to buy-back the shares relating to the two ground floor units required to be converted for the purposes of the redevelopment, at a price above the then estimated 'as renovated' value of those units, which was said to provide "compensation" for the loss by the owners of those shares (respectively, the chairman of the company, Mr Garratt QC, and one of its directors, Mr Heyworth) of their ground floor units (units 22 and 23 respectively). The company further resolved in 2006 to make a $250,000 payment to Mr Garratt for his efforts in progressing the redevelopment to that point (such payment not to be made until completion of the sales of the new units as part of the project). 9 All shareholders of the company, including the McLaughlins, were required to vacate their home units for a period of what transpired to be approximately two years (from September 2006 to November 2008) while the construction works were undertaken. Members have also been subjected to special levies struck by the board totalling a not inconsiderable sum (including a very substantial levy in January this year, after the completion of the hearing, in order to enable the company to discharge debts owing to two of its creditors – the builder, Southern Cross Constructions Pty Limited, and the Australian Taxation Office – in the face of a winding up application commenced by the builder in November last year). 10 The redevelopment project has involved borrowings by the company of somewhere in the order of $20 million. (When the matter came back before me in mid-February this year, the bank debt as at 28 February 2010 was then estimated to be $8.6 million.) Not all of the new units had been sold as at the time of the hearing last year (nor had they all been sold at the time of the subsequent application by the McLaughlins to reopen the hearing and tender further evidence on 12 February 2010). It is not therefore known what will be the ultimate outcome of the project for the company (or its shareholders) from a profit/loss point of view. Nevertheless, by the time the matter came before me in September last year, it was not anticipated that there would be anything more than a nominal profit for shareholders at the end of the day and there was no suggestion that any part of the special levies struck in relation to the project would be refunded to those shareholders who had paid the levies by that time. (Not all of the earlier special levy of January 2007 had been collected by the company as at the time of the hearing.) 11 A strata plan was registered in early 2009 in respect of the building and strata titles have been issued for the respective units. At least until February this year, those strata titles were being held by the financier as security for the company's borrowings. 12 Since the completion of the hearing in early November last year, the company has updated shareholders (by letters dated 4 and 25 January 2010) on the financial outlook for the project. This led to the application brought by the McLaughlins on 12 February 2010 for leave to re-open the hearing in order for that correspondence, and other material in relation to the financial aspects of the project, to be tendered (and for injunctive relief in relation to a proposal that the company enter into agreements with shareholders for the surrender of their shares in return for the release to them of the strata titles for their respective units). For the reasons I gave on 26 February 2010, I gave leave for the additional material to be tendered in the hearing but denied the application for interlocutory injunctive relief. Subsequently, and on the eve of the final orders I made on 26 February 2010 in these proceedings, the company itself sought to reopen the hearing (though not seeking to challenge the interlocutory decision I had made in its favour) to tender a signed copy of a document which had been tendered in unsigned (and now, it would seem, apparently draft) form on the application by the McLaughlins to reopen. (That document was a deed entered into between the company and the builder, the recitals to which - in the unsigned version – suggested that the company was on notice of a statutory demand in relation to the builder's debt prior to the conclusion of the hearing before me. As I had expressed concern as to this aspect of the matter in my reasons on the interlocutory application, I considered it appropriate to re-open the proceedings to admit the tender of that deed and did so over the McLaughlins' objection. It was not, however, a matter relevant to my decision on the substantive proceedings.) 13 From the fresh material received on the respective applications to re-open, it not only appears that the debt owed by the company to St George Bank was expected as at 28 February 2010 to be $8.6 million, but also that there remain other outstanding company debts (of $1.1 million due to the Australian Taxation Office, a balance owing to Southern Cross of about $300,000, and moneys due to each of Mr Garratt and Mr Heyworth under their buy-back agreements (together initially totalling $1.9 million, although included in the latest financial figures, without explanation, at a somewhat lower amount)). It is not clear whether the further amount resolved to be payable by the company to Mr Garratt to remunerate him for his efforts on the project (of $250,000) has been paid. 14 On the company's latest figures, the highest any estimated return to shareholders out of the redevelopment is put is somewhere in the order of $10,000 - $12,000 and even then this seems uncertain. 15 At the hearing, it had been anticipated that, depending on the prices obtained for the two newly constructed penthouse units, there might be a further special levy to cover any shortfall in respect of the works. That levy has now been struck (albeit not to meet a shortfall as such but rather to pay creditors and avoid a winding up of the company, in advance of the sale of the two new penthouses). In the meantime, shareholders have been back in occupation of their units since late 2008. 16 Having secured the agreement of the bank to apportion its existing debt across the various strata titles, the board put forward a proposal in January this year by which shareholders would be permitted to surrender their shares in release for the strata title to the unit(s) in respect of which those shares give a right of occupation, so that they could refinance or sell their units to fund the latest special levy (and thus both avoid the winding up of the company and reduce the bank debt). The McLaughlins sought, unsuccessfully, to restrain the release of those strata titles. As part of the agreements under which the company proposed to release strata titles to individual shareholders, outgoing shareholders were to be required to accept liability for a proportionate share of any shortfall on a final reconciliation of the company's asset/liability position as at 28 February 2010. Hence, my concern to have made final orders in relation to any liability of the company in these proceedings prior to the reconciliation date (a matter I had taken into account in weighing the balance of convenience on the McLaughlins' unsuccessful February injunction application). Claims 17 The McLaughlins allege that the conduct of the affairs and acts of the company over the period were oppressive to, unfairly prejudicial to, or unfairly discriminatory against the members of the company or them in their personal capacity within the meaning of s 232 of the Corporations Act 2001. The McLaughlins also allege that various resolutions passed by the board and/or by the company in annual general meeting, including resolutions in relation to the special levies, are invalid (for various reasons, which differ somewhat as between the respective resolutions). The McLaughlins further allege that the redevelopment was carried out in breach of their rights under the company's Articles of Association to the exclusive occupation of their unit as a home. 18 The McLaughlins had earlier sought injunctive relief from this Court in relation to the project on two occasions: first, to restrain the company from acting upon the first set of resolutions made in relation to the project at a general meeting of the company in September 2006 (relief which was refused by Barrett J for the reasons set out in his judgment of 27 September 2006 – McLaughlin v Dungowan Manly Pty Limited [2006] NSWSC 1001) and, later, to restrain the company from taking action to forfeit their shares or otherwise from relying upon non-payment by them of a levy notified in late January 2007 (relief which was also refused by Barrett J for the reasons set out in his Honour's judgment on 9 March 2007 – McLaughlin v Dungowan Manly Pty Limited [2007] NSWSC 197; (2007) ACSR 335). 19 Following his Honour's March 2007 judgment, and the refusal by the Court of Appeal later that month of an application for leave to appeal therefrom, the McLaughlins paid (expressly under protest) the full amount ($119,000) of their portion, as shareholders, of a then due January 2007 levy (which had been the subject of their second application for injunctive relief). 20 Subsequently, the McLaughlins sought a refund from the company of half of the amount so paid, the board having in the interim (and prior to payment by the McLaughlins) resolved that shareholders need pay only a 50% proportion of the levy as initially struck. The McLaughlins' requests for a refund of 50% of the levy they had paid (made on more than one occasion) were refused. A variety of reasons have, over time, been proffered for that refusal – including concerns as to the McLaughlins' ability to pay the levy; the fact that the McLaughlins had opposed the levy and had challenged the board's power to strike the levy; and (quite extraordinarily in my view in the circumstances) on the basis that the payment (expressly made under protest) was a "voluntary advance" payment (as pleaded in the company's Defence to the Further Amended Statement of Claim). As to this last reason, Mr Garratt in the witness box appeared to concede that a payment under protest would not ordinarily be regarded as "voluntary" but said that the payment was made by the McLaughlins knowing that the company would not accept any condition being imposed thereon (as to it being held in a separate account) (T 538.35 – 538.46). The most recent response in this regard is to be found in the submissions put forward by the company at the conclusion of the hearing, in which it is said that the McLaughlins put forward no legal or equitable entitlement to a refund of any part of the levy. 21 The McLaughlins contend that, on the board's latest financial information, the project has cost them at least $422,732.45. Prior to that financial information they had assessed their loss and damage, as a result of the project, at $229,626.17 (that said to be comprised of the levies paid by them (as at the date of hearing $320,000 though since then a further $263,357.59 was levied), loss of rent during the period in which the building was unable to be occupied ($69,626.17), and loss of the benefit of alterations which had previously been carried out by them to their home unit ($10,000), offset against what was said by the company to be the estimated increase in value of their unit by reason of the redevelopment ($170,000)). 22 They also claim general damages for breach of the contract between the company and the members constituted by the Articles of Association, by reference to the pain and suffering they have experienced as a result of their treatment by the company (which it is said has deprived them of the use, as their home, of their only significant asset for the past 8 years). (In that regard, it should be noted, however, that the McLaughlins had chosen to rent out their unit well prior to the time at which the eventual building works commenced in late 2006 and, at least in 2004, were contemplating a return to the United Kingdom. Therefore, in practical terms the unit has for some time represented an investment for them, not their home, even though that may not have been their intention when the shares entitling them to occupation of the unit were first acquired.) 23 Alternatively to the loss and damage claimed by way of project losses, a claim is made for loss in the capital value of the shares (assessed at $275,871.56) by reference to what the McLaughlins say would have been the position had alternative repair options been pursued by the company (in particular, an option which had been put forward at an early stage by a firm of engineers, Bonacci Rickard, for the repair costs to be funded by a one storey addition to the building). 24 The McLaughlins claim reimbursement of the January 2007 special levy of $119,771.86 which they paid under protest, subject to any allowance in the capital loss assessment referred to above, or alternatively interest on 50% of the special levy ($59,885.93) from the date on which they made demand for its return (21 March 2007) at least until the balance of the special levy was required to be made by all other members (said to be 30 September 2009). 25 The McLaughlins seek orders pursuant to s 233 of the Corporations Act 2001, including a compulsory purchase order and/or an order for the appointment of a receiver/manager to the company to pursue remedies against the directors. The McLaughlins, alternatively seek leave under s 237 of the Corporations Act to bring derivative proceedings against the directors of the company for alleged breach of their duties as officers of the company to exercise their powers with a reasonable degree of care (s 180 Corporations Act), in good faith in the best interests of the company for proper purposes (s 181 Corporations Act) and not improperly to use their position to gain an advantage for themselves to the detriment of the company (s 182 Corporations Act). 26 The company denies the claims made against it and opposes the grant of leave in relation to the derivative suit sought to be brought in its name against the directors. In its Defence to the Further Amended Statement of Claim, the company alleges that the McLaughlins, in seeking leave to bring derivative proceedings "as in the prosecution of this proceeding throughout", have been motivated by an improper collateral purpose, that being "to coerce the company or a member or members of the company to purchase [their] shares for more than their value" (paragraph 72 of the Defence to Further Amended Statement of Claim). 27 In respect of the claim for a compulsory purchase order, the company alleges that even if there has been oppressive conduct (which is denied) the McLaughlins are not entitled to such relief because they have already, by their conduct, elected not to accept offers by the company for the purchase of their shares on fair terms (paragraph 73(f) of the Defence to Further Amended Statement of Claim). Particulars of those offers were provided by letter dated 8 October 2009 (Exhibit 13) from the company's solicitors (Pikes), namely: offers made by letters dated 21 February 2003, 7 May 2003, 4 January 2007, 15 February 2007 and a "standing offer" (said to have existed from 21 February 2003) to purchase the shares on the basis of an independent valuation (that standing offer said to have been confirmed at paragraphs 26 and 27 of the written submissions dated 28 February 2007 which were served on behalf of the company in connection with the second interlocutory application before Barrett J). 28 In relation to the McLaughlins' claim for a refund of the special levies paid by them, the company alleges that any such refund would be unjust without a full accounting to the company of the benefits which have flowed and will flow to the McLaughlins in respect of their shares as a consequence of the work carried out by the company (paragraph 73(g) of the Defence to the Further Amended Statement of Claim). Those benefits are particularized in Exhibit 13 as including the increase in the capital value of the McLaughlins' shares as a result of the works, the increased rental income for the McLaughlins as a result of the works and the avoidance of losses (in the form of increased general levies, greater and further special levies, reduced capital value of the shares and reduced rental income for the McLaughlins) had the works not been undertaken. (The McLaughlins, however, complain that as a result of the company's actions they are at risk of being left as minority shareholders in a company with no real assets.) 29 In paragraph 74 of the Defence to Further Amended Statement of Claim, it is pleaded that if, which is denied, a defect, irregularity or deficiency of notice or time has occurred of any of the kinds alleged by the McLaughlins in relation to the various resolutions, the same has not caused and will not cause the McLaughlins any substantial injustice. 30 What is abundantly clear from a review of the correspondence tendered during the hearing (and, dare I say, from the tone of the submissions filed for both parties) is that this dispute is one which has engendered a considerable degree of acrimony, reflected by (and no doubt from the company directors' view a product at least in part of) the fact that outside of these proceedings the McLaughlins have not been averse to voicing their opinions on the competence and integrity of (nor to ascribing improper motives to) many of those associated with the project and, in particular, have made serious (and unsubstantiated) allegations of fraud (and, in one instance, perjury) against the chairman of the company. 31 It is the McLaughlins' view, which has been forcefully (and at times inappropriately) expressed, that the board has acted improperly and in breach of its duties in relation to the project and has consistently failed to provide them with adequate information either to assess the project or to facilitate a sale of their shares in the company. (In that regard, although it was put to Mr McLaughlin that the reason he had continued to ask for information about the project was because he might be able to have the decision stopped if the board failed to give enough information, I considered Mr McLaughlin's emphatically put response, in the witness box, to be heartfelt namely that he and his wife had pressed for information "because it was our home and it was costing us a lot of money to be a member of that company" (T 62). (See also Mr McLaughlin's response to similar effect at T 64, T 74.) Mr McLaughlin's frustration in the witness box at the manner in which the company had dealt with him was manifest, as was his wife's distress in the courtroom when some of the evidence was being given.) 32 What the McLaughlins (perhaps understandably) seem to have wanted from the outset (and what, perhaps not surprisingly, the board was not always in a position to provide) were definitive answers as to what was wrong with the building and as to the minimum cost of the repairs and/or of the project (and/or assurances as to their exposure in that regard). However, what they sought was a level of detail perhaps more appropriate for those with the management responsibility for the company (ie the board) in circumstances where they were not personally undertaking obligations to third parties in the project (their liability being limited, as members of the company, to the shares they held in the company). In any event, the fact that the company was not always able (or prepared) to provide such information is not of itself evidence of any oppressive conduct and the criticism levelled by the McLaughlins and their legal representatives against the board in that regard was not in my view always warranted. 33 It is the company's position, on the other hand, that repairs to be building were essential; that the redevelopment works provided the only practical means of effecting the repairs at minimal cost to the shareholders and thus were for their benefit; that the shareholders were kept appropriately informed of matters in relation to the works (and, indeed, the evidence adduced by the company in the hearing established that the shareholders were broadly kept up to date with matters in relation to the redevelopment even if not with the minutiae of detail demanded by the McLaughlins); that the McLaughlins were not genuinely interested in any information of the kind that they had sought (other, perhaps, than insofar as it might provide a basis for attacking the board); and that the McLaughlins were simply seeking to put pressure on the company to buy out their shares at a price above market value. (Mr McLaughlin agreed that he had done everything he could to stop the development but insofar as he sought information he said this was not as a tool to block the project but because he needed the information for potential purchasers: We were looking for information to see how bad it was because we were trying to sell the unit. We required as much information as we could get to make it in fact sellable rather than the current situation that was put by the chairman that it was in an imminent state of collapse, that it could collapse at any stage, that the building was going to be evacuated at any stage (T 103-104).) The McLaughlins lawyer, Mr Bonanno confirmed that his recollection was that on many occasions the company was asked for information and it was not forthcoming (T 160). I note also that it was not as if the McLaughlins' requests for information suddenly commenced (or were manufactured) once lawyers became involved from mid 2005. Their demands for information were a constant theme from at least 2000 onwards. 34 Mr Priestley, however, went so far as to submit that the McLaughlins "saw an opportunity to leverage advantage for themselves from the difficulties confronting all shareholders at the expense of the other shareholders which they then determinedly pursued. They wished to be bought out by the others at a premium to market value. To increase their prospects, they applied pressure to the other shareholders by opposing the project by any means at their disposal, including dishonest means" (my emphasis). (There was no evidence of dishonesty, nor was such an allegation made. There was, however, evidence of serious and unsubstantiated allegations having been made with what seems to be best described as reckless abandon by Mr McLaughlin, to which no doubt Mr Garratt took (and was entitled to take) objection.) 35 As to the contentious issue of a buy-back of their shares, I note that the McLaughlins have contended, at least since the approval in 2006 by the general meeting of an amount of $950,000 each to buy-back the shares for the ground floor units, that the "market value" of their shares should be determined by reference to what two of the directors were to obtain for their ground floor units as part of the project. (That said, the McLaughlins had earlier been prepared to sell their shares for an amount commensurate with the lower value which had been placed on their unit during the course of the Land and Environment Court hearing.) Issues 36 The issues to which the pleadings give rise may be summarised as follows: (i) Were the impugned resolutions, or any of them, invalid, void and of no force or effect and/or was the conduct of the company in breach of the contract constituted by the Articles of Association? (ii) Have the affairs of the company been conducted oppressively or otherwise within the prohibition in s 232 of the Corporations Act ? (iii) If there has been a breach of the Articles of Association in relation to the steps taken by the company, or a breach of s 232 of the Act, what is the appropriate relief? (iv) Should leave be granted to the McLaughlins (and/or should a receiver be appointed) to pursue a derivative suit in the name of the company against its directors for alleged breach of their duties to the company? Summary 37 In summary, for the reasons set out below, I have concluded that: (i) Validity of resolutions / breach of Articles of Association 38 Subject to the following qualifications, the respective resolutions were either validly passed (or, in the case of those of the impugned September resolution to amend the company's Articles, which had not properly been notified as a special resolution, validly ratified) or, if affected by procedural irregularity, any irregularity was not such as to cause substantial injustice which could not otherwise be remedied by orders in these proceedings. (A number of the earlier resolutions of which complaint was made had no operative effect in any event, as had been noted by Barrett J in his first interlocutory judgment.) 39 The qualifications I make are, first, that I find that the resolution approving the amount of a compensation payment to the chairman for his efforts in relation to the project was ineffective by reason of the inadequacy of notice of such a resolution and the failure to disclose all relevant or material information in relation to that resolution. (In particular, the extent of Mr Garratt's interest in the company and the basis of which such a sum was recommended). 40 Secondly, (applying the reasoning in Wilson v Meudon Pty Limited [2005] NSWCA 448) I find that the redevelopment abrogated, varied or otherwise restricted the rights of the McLaughlins under article 3 of the Company's Articles of Association insofar as the creation of a car stacker on the level directly under that of their unit affected the amenity of their unit and, as such, the pursuit of the redevelopment project required their consent, which was never given. There was, therefore, a breach by the company of the contract with the McLaughlins constituted by the Articles of Association, for which a remedy in damages will lie. (ii) Oppression 41 I find that the affairs of the company have been conducted oppressively (within the meaning of s 232 of the Corporations Act) but only in relation to the unfair and discriminatory treatment of the McLaughlins in relation to the January 2007 levy (namely, in the refusal by the company of their request for a refund of 50% of that levy in circumstances where all other shareholders had not been required to pay the full amount or otherwise to satisfy the company of their ability/intention to pay the balance of the levy). (iii) Relief 42 I have assessed the damages for breach of contract at $200,000. I consider that the appropriate remedy for the oppressive conduct is an order for the payment to the McLaughlins of interest on 50% of the January 2007 special levy from the date of the request for a refund (21 March 2007) to the date to which payment of that sum by all other shareholders was deferred (quantified by the McLaughlins at $59,885.93). (iv) Derivative suit 43 I consider that the McLaughlins have established a basis on which leave should be granted to bring a derivative suit in the name of the company against the directors for breach of their statutory duties as directors. In particular I consider that there is a serious question to be tried as to such a breach of duty in relation to the circumstances in which construction contracts were entered into in advance of satisfaction of the conditions to which finance for the project was subject and in light of the non-disclosure to shareholders of the extent of Mr Garratt's beneficial shareholding in the company (in the context of the resolutions put to the members both to approve the buy-back of certain of his shares for $950,000 and the $250,000 payment to compensate him for his efforts in relation to the project, information which might have led the meeting to a different result in relation to those resolutions). Facts 44 Given the history of this dispute (and the exhortation by Mr Priestley, Counsel for the company, in his submissions of the need for examination of the primary sources), it is necessary to set out the facts giving rise to this dispute in some detail. I do so in paragraphs 47 - 279 below. 45 Mr and Mrs McLaughlin acquired their parcel of shares (designated as share group "D") in the company in 1996. Ownership of that parcel of shares entitled the holder under the Articles of Association to the use and enjoyment of unit 4 (which, as part of the redevelopment, is now renumbered unit 6) in Dungowan Flats and to the use of common areas in the building. 46 It appears that in October 1994, Mr Garratt, the now chairman of the company, or his service company (Loafer Pty Limited) had acquired an interest in the company through an undisclosed agent, Ms Sheridan Pether. That interest related to the (former) unit 17. In 1995 and again in 1997, shares entitling the holder to occupation of two other units (the former units 20 and 11, respectively) were acquired by Ms Candida Ashford, as undisclosed agent for either Mr Garratt or Loafer Pty Limited. (Ms Ashford was for some period in 1999/2000 a director of the company.) 47 In 1997, a parcel of shares (in relation to the then numbered unit 6) was acquired by Mr Peter O'Meagher as undisclosed agent of Loafer Pty Limited (in evidence was an Agency Agreement between Mr Garratt, Loafer Pty Limited and Mr O'Meagher in relation to that acquisition.) 48 Thus, by 1997, Mr Garratt had a beneficial and apparently undisclosed interest (directly or indirectly as the case may be) in at least four units in the building. 49 Mr Garratt's interest in the building, by 2000, also included shares in respect of two other units, one in the name of an associated company, Garmen Pty Limited, and another by his service company Loafer Pty Limited. A seventh unit (unit 22) was acquired in his and his wife's name. In the witness box Mr Garratt was unsure of the precise number of units (6 or 7) in which he or his companies or agents had held an interest as at 2000 (T 411) but conceded that he was the company's largest shareholder. Mr Garratt's evidence was that he purchased the first four units in the names of other people as he was not on the board and (as those people were then living in the building) this was a means of keeping tabs on a "significant investment" (T 419) (an explanation the immediate logic of which escaped me). More understandable was his evidence that his interest in the building was at first undisclosed in effect so as not to push up the price for shares in respect of other units in which he ht later acquire an interest (T 420). In either event, it seems to belie the suggestion that Mr Garratt's interest in the outcome of the project was the same as any other shareholder. In relative terms, the greater the size of his investment the more he had to gain (or less he had to lose) overall on the outcome of the project (a matter which in my view was material when the general meeting came to consider the proposal for him to be remunerated for efforts thus far voluntarily provided in relation to the project). 50 In late 1997, the McLaughlins, with board approval, undertook renovations to their home unit, including the removal of an internal wall, balcony floor levelling and treatment of what was described as "concrete cancer" at a cost of $10,000. (Part of their present complaint relates to the reconfiguration of their unit which renders useless those earlier works.) By 2000, Mr Garratt and/or companies associated with him had an interest in six or seven of the then 22 units in the building although the extent of his interest in the building would not have been apparent from an inspection of the company's register of members. (The company records (to Mr Garratt's apparent surprise in the witness box) did not disclose, for example, that the shares held by Ms Ashford and Ms Pether were not beneficially held by them.) 51 In May 2000, Mr Garratt was elected to the board of the company at an extraordinary general meeting called by Mr Garratt apparently due to his concerns as to the then financial stewardship of the company. Mr McLaughlin held similar concerns at that time (T 21.45). 52 Ironically, in light of the complaints subsequently made by the McLaughlins, it seems that Mr Garratt had expressed his dissatisfaction with the level of information provided to members of the company and had disputed the company's contention that he was disqualified from voting for non-payment of certain levies (which he had disputed because of a lack of information as to that for which the moneys were being levied). 53 It seems that there had been ongoing problems from at least 1982 in relation to the structural condition of the building with concrete spalling (or concrete cancer) and water penetration (though Mr McLaughlin would only concede that there were minor structural issues with the building as at May 2000 or, as he put it, 'minor maintenance issues of the kind you would associate with any building' (T 22)). 54 In August 2000, Mr Garratt, writing as chairman to shareholders not long after his appointment, referred to 20 years' worth of company records indicating problems in relation to the water/concrete issues and the necessity to attend to a proper understanding of the structural condition of the building (TB 200-202). 55 In 2000, the building lift broke down. Reports were obtained by the board in 2000 in relation to the repairs necessary to the lift and to the building generally (see Exhibit 9, TB pp 203-204). In the meantime, in October 2000, a special levy of $200,000 was struck for the repairs to the lift or for replacement of the building's lift. The payment of the levy was to be spread over two years, apparently in recognition of the fact that many of the shareholders had limited financial means (see Mr Garratt's letter TB 205-206). However, the proposed repairs to the lift were, in the main, not carried out until the redevelopment took place and then only as part of that redevelopment, a matter of no little complaint by the McLaughlins. (In that regard, although Mr McLaughlin seemed to resist the proposition that the board had advised shareholders what was happening with the lift – T 43 – he ultimately accepted that the board had given shareholders information in the form of a letter on this issue.) 56 The correspondence reveals that consideration was given by the board as to whether it was appropriate to do minimum work to reinstate the lift (and later replace the lift to an acceptable standard), as recommended by one firm of engineers, Close Consultants, (TB 203-4) or whether the cost of immediate lift repairs would simply be wasted expenditure if further repair work was required to the building. Mr Garratt said in his evidence that there was doubt as to whether the minimum work necessary to reinstate the lift would meet WorkCover/insurance requirements and it was considered likely that the lift would require replacement in any event within one to two years. A decision was ultimately made by the board to postpone the lift repairs and to investigate ways in which to carry out the more extensive repairs required to deal with the structural conditions of the building (namely, the concrete spalling and water penetration problems). 57 At about the same time as the "lift" levy was struck, the board resolved to appoint two firms of engineers (Bonacci Rickard and Close Consultants) to review the structure of the building. By letter dated 16 October 2000, Mr Garratt engaged those two firms to provide a preliminary report as to the building's structural condition and to address the ability of the building to support penthouses on the roof or reconstruction, strata title, lift replacement/refurbishment and fire protection. (A report as to the safety and fire protection issues was also sought.) Interestingly, given the terms of Mr Garratt's letter, it would seem that the possibility of an extension to the building (whether or not with the aim of funding the repairs) was something which first emanated from Mr Garratt, or the board, not the engineers who were advising in relation to the structure of the building, though nothing turns on this. 58 In November 2000, Bonacci Rickard gave a preliminary report to the directors on the building's condition, proposing that one extra storey be constructed with two to four new units. It was said that this would allow tenants to use the new units as units were upgraded. (This proposal seems to have been made with a view to utilising the funds generated from the renovation to pay for the repairs; not because the repair work of itself necessitated an extra storey being added to the building.) This report recommended that additional tests be carried out, as well as maintenance of the lifts in the short term but with their replacement in the master plan (TB 207-219). (Close Consultants had reported that the fire safety protection work could be carried out without major building works but recommended further investigation.) 59 Although much emphasis was in due course placed by the McLaughlins on the recommendation contained in this report, it was clear from Mr Rickard's evidence that the recommendation was very much preliminary in nature at that stage. Mr Rickard (at T 235) acknowledged that the extent of the concrete cancer in the building had not been quantified. The basis of the conclusion that a one storey addition could be made to the building also seems to have been a preliminary view in that he expressed the opinion that the roof was the principal cause of the building's problems (that being a waterproofing issue) and he said that in his experience the 'rule of thumb' was that there could be up to a 25% weight increase to a building without the need for (expensive) underpinning of a building. Hence, his recommendation that the board consider addressing the roof problem by adding one floor to the building, which he said would create a new capital asset "if not to offset, to equal the cost of repairs". 60 Mr Rickard said that he did some broad costing, based on the quantity surveyor WT Partnership's figures, in effect excluding car park costings and underpinning, and attributed a cost per floor of $1.1 million for the extension. 61 From the outset, the McLaughlins were critical of the board's decision not to carry out the lift works (for which the $200,000 levy had been struck) and as to the extent of the repairs pursued by the board. In particular, the McLaughlins were critical of what they say was the failure of the board to carry out any further investigation of the proposal put forward by Bonacci Rickard for repairs to the building to be funded by one additional level to the building rather than (as the board ultimately chose to do) by pursuing a more ambitious redevelopment. Mr McLaughlin persisted, up to and during the hearing, in contending that (what I might call patchwork) remedial repairs from a local builder, Joe Clancy, would have been sufficient by way of repair, an assertion which flies in the face of the expert evidence as to the building's problems. 62 According to Mr Garratt, by January 2001 the board realised that very extensive repairs were required to the building and that neither the company nor the shareholders had the funds to pay for them. 63 In January 2001, a consultant retained by Close Consultants (Savcor Pty Limited) reported to Close Consultants as to the building condition and recommended that a pilot repair of one unit and area of façade (costing $45,000 to $65,000) be carried out. Savcor's estimate was that it would cost approximately $1.3 to $1.6 million for the repairs in total to be carried out, subject to the findings once the pilot repair was carried out. (Mr McLaughlin said in the witness box that he accepted the Savcor report's conclusion that there be a test on one unit to find out the extent of the problem (T 26.22-25).) 64 By letter dated 4 January 2001, shareholders were advised as to the preliminary reports which had been received from Bonacci Rickard, Close Consultants and Savcor. The state of the lift was said to be of pressing importance. It was recommended that shareholders think carefully about taking on tenants for longer than six month leases (due to the possibility of building repairs). The prospect of significant levies was drawn to shareholders' attention. It was noted that shareholders would be presented with a proposal outlining costs, risks, delays and benefits (TB 235-237). 65 Close Consultants' report of 31 January 2001 concluded that major works were required and also recommended (as had Savcor) that there be a pilot repair of one unit. An estimate of $2 million for total repair costs was given, subject to the results of the pilot test (TB p 238). 66 In February 2001, the directors decided to defer the lift repair works pending the building restoration proposal. According to the minutes of the 4 February board meeting it seems that Mr Garratt and Close Consultants informed the board that building repairs were not feasible (Exhibit 9) and that a full report as to options would be given to directors and shareholders. It is not clear why the recommendation for a pilot repair was not adopted (as advised in Mr Garratt's letter of 17 May 2001). 67 By letter dated 27 February 2001 the McLaughlins were provided with copies of the reports of Close Consultants and Bonacci Rickard, as well as the minutes of the board of directors meeting on 4 February 2001 (Exhibit 10). 68 Almost immediately, Mr McLaughlin raised complaints as to lack of information in relation to the repairs. He also (by email of 7 March 2001 – TB 256-257) sought clarification of the extent of Mr Garratt's interest in the company (an odd request unless by then he had some reason to believe Mr Garratt had a greater interest than in one unit). Mr Garratt (who, in the witness box, suggested that, at least by 2006, there was no secrecy in relation to his interest in the company) responded to Mr McLaughlin that the board (not he) would respond to Mr McLaughlin. The board does not seem to have so responded and the extent of Mr Garratt's beneficial interest in the company was not apparently made clear to the McLaughlins until his evidence in these proceedings. What the knowledge of other shareholders was in this regard is not clear but, in the absence of disclosure of that interest at the relevant meetings, I can only assume that Mr Garratt's overall interest in the building (as the company's largest shareholder) was not generally known – a matter of some relevance when I come to consider the information put before the meeting when Mr Garratt's compensation payment was approved. 69 By letter dated 17 May 2001, Mr Garratt advised the shareholders that Savcor had recommended a pilot project be conducted on a vacant unit, at an estimated cost of $45,000 to $60,000, and that Close Consultants had advised the board to add to that cost estimate the costs of fire safety works, lift replacement, and repair/restoration works on the windows and balconies, for a general budgeted cost of $2.5 million or more. Mr Garratt's letter (TB 268), relevantly in the context of Mr McLaughlin's complaints on this issue, advised that the board had decided there was no point in proceeding with a pilot work at that time and that it should investigate the options available in relation to the repair, renovation or reconstruction of the building. The letter noted that one (unidentified) owner had raised the possibility of selling the building (but did not suggest that the board was actively pursuing that possibility). The letter also noted that, after further testing, Savcor had advised that it was essential for an inspection of the concrete below the floors to assess the extent of the cracking and the action required to prevent the possibility of structural failing caused by the cracks. The letter noted the fact that a special levy of $250,000 had been raised for the purpose of the lift replacement (or its complete renovation) and advised that the board was keeping the situation with the lift under review. 70 Mr Garratt's concern at that stage was said to be that the company investigate options for the greatest value in order to enhance individual investments and fund development (TB 277-287). 71 By May 2001, an issue had arisen between the then company secretary (Mr Adrian Stark) and the McLaughlins (who had apparently expressed strident criticism as to his competence and/or integrity). Whether for that reason or otherwise, Mr Stark advised Mr McLaughlin in a letter dated 19 May 2001, that the board would not release any records except to an agreed accountant but that the board minutes were available (Exhibit 10). 72 Notwithstanding Mr McLaughlin's insistence to the contrary, it does not seem seriously able to be disputed that, as at 2001, the common areas of the building were in a poor state and there was a need for repairs to be carried out to part or all of the building (to address water penetration, concrete cancer problems and to repair or replace the lift). During 2001 steps were taken by the company to investigate the options for the company to fund repairs to the building by way of a redevelopment of Dungowan Flats (see TB 288-290). 73 In 2001, the board, having been provided with certain recommendations from Architectural Projects Pty Limited (a firm retained in that regard), advised Architectural Projects that it was proposing to proceed with one of the then identified options of rebuilding (option 3), namely for a four storey addition to the building (TB 291). 74 In September 2001, the McLaughlins vacated their unit and rented it out for $415 per week. (Mr McLaughlin's evidence in the witness box was that this occurred after Mrs McLaughlin was assaulted – T 84.) They have not occupied their unit as a home since then (nor is it suggested that they now wish to do so). 75 In October 2001, shareholders were given notice of the Annual General Meeting, together with a summary of information in relation to the condition of the building. They were advised that the cost of repairing the slabs was likely to be in the order of $1.3 to $1.6 million and that the current building would not support more than one additional storey on the roof. Mr Garratt's 19 October 2001 letter to shareholders also noted the engineers' proposal for demolition of the rear and the construction of four additional floors with ten new units. The letter advised as to the possibility that shareholders would have the opportunity to be included in the design process and might be able to reconfigure or retain particular features of their units. (Mr McLaughlin says he did not ask for anything in this regard as he understood the board was proposing to build as per the development application subsequently obtained, which indicated that heritage features were to be retained (T 53).) 76 The Annual General Meeting was held on 14 November 2001 (the minutes of which are at TB 338-339). There were presentations at the meeting, which was attended by a heritage architect (Mr O'Reilly) a fire services consultant and a consultant town planner. Mr McLaughlin accepts that he raised various questions at the meeting. (He was not, however, entitled to vote at that meeting due to non-payment of levies.) The McLaughlins say that at that meeting it was said that the board expected there to be a surplus from the proposed development. (I interpose at this stage to note that the McLaughlins have taken issue with the varying estimates given over the course of the project as to the likely final outcome of the development. However, at no stage does it seem that any assurances were given by the board as to the financial outcome of the project, nor would I have expected it likely that the board would have been in a position to do so given the uncertainties associated with any redevelopment project of this kind.) 77 In March 2002, Richmond & Ross Pty Limited, engineers, reported to Architectural Projects Pty Limited, summarising various reports over a 20 year period and concluding that major works were required. Richmond & Ross outlined various repair options for consideration (TB 367-432) (from reactive maintenance to re-building). 78 Another firm of consultants, BDA Consultants Pty Limited, also reported to the company, favouring the option of a construction of four additional levels with eight new units. It was said that this was the only option addressing heritage conservation requirements and generating enough dollars to fund the project. Estimated construction costs were put at $11.2 million with an estimated sale price on completion per unit of $1.5 million (TB 434-440). 79 Mr McLaughlin raised further complaints with the board in March and April 2002 (having by, or around that time, paid his outstanding levies) and asked for the plans/costings of the works (Exhibit 10). 80 A development application was lodged with Manly Council on 29 April 2002 for the addition of four floors with twelve new units (TB 441). (This was in due course rejected by the Council). 81 On 13 May 2002, the McLaughlins emailed Mr Garratt seeking information in relation to the special levy account and as to past and planned expenditure and raising various concerns. In particular, it was asserted that the lack of detail was causing them concern. There was a reference to a still awaited promised options paper (which I assume was a reference back to the January 2001 letter promising that a proposal would be put to shareholders, unless the McLaughlins were referring to an options paper foreshadowed at the November 2001 meeting). 82 The McLaughlins suggested that expressions of interest should be called for the development of the site and to put proposals in relation to the site. They asserted that most of the problems which arose from inadequate drainage could be addressed with less disruption and uncertainty than the proposed development and that the rear demolition was unnecessary. Complaint was also made as to lack of accountability and lack of transparency (Exhibit 10). 83 By letter dated 16 May 2002 (TB 434-440), Mr Garratt informed shareholders that the development application had been lodged on 29 April 2002. The letter enclosed a copy of BDA Consultants' report of 25 March 2002, a draft environmental impact statement and quantity surveyor's costing and an economic viability statement. That letter expressed the opinion that even if the project only broke even, or had a net loss, the shareholders would be in a greatly improved position (and that until the receipt of tenders and the presale of units, actual costs and revenue would not be known). 84 On 18 May 2002, apparently responding to their 13 May email, Mr Garratt emailed the McLaughlins, noting that an information package to shareholders was in the mail and that they would receive theirs early the next week with a copy of the engineer's report to Council including as to the structural condition of the building (Exhibit 10). 85 The McLaughlins opposed the development application. Mr McLaughlin expressed that opposition at a meeting of the Council. The basis on which he said he opposed the project at that stage was that it was for an additional four floors (105% over the height restrictions) (T 29; T 31.49; T 67, T 75). He also said that he thought any figures forwarded were unreliable (T 58), emphasising the difference from a figure of $2.78 million to the consultants' figure in 2002 of $11.2 million. At the Council meeting, Mr McLaughlin apparently said that the basis of the application was 'fraudulent' (T 59), justifying that description, in the witness box, on the basis that the cost of repairs would not have been in the millions and asserting that there was no need to demolish and put in new floors (T 60). 86 It was Mr McLaughlin's firm opinion that the work could not be done without his consent (T 60.40), although the advice on which he based that opinion at the time seems to have been very general advice as to the import of company title (T 61). The company relies on this as support for the submission that the McLaughlins have sought to use their perceived 'upper hand' by reference to such an effective right of veto to put pressure on the company to pay above market price for their shares. I say more about this in due course. However, I think it fair to say that the emphasis placed by the McLaughlins at the outset on the need for their consent seems principally to have been directed to their understanding that they could prevent the redevelopment from proceeding, not to any attempt by them to force a buy-out of their shares (though they did put that forward later as a means of extracting themselves from a development with which the other shareholders, but not they, wished to proceed). 87 Fundamentally, the McLaughlins' objection was to the four storey addition as a basis for the carrying out of repairs to the building (T 75). Mr McLaughlin, in his evidence, emphasised more than once his view that it was a "speculative" development (T 75, T 76) and one which exposed shareholders to significant financial risk. (Not surprisingly, Mr McLaughlin sees the result of the project as having vindicated his unwavering criticisms of it.) 88 In early November 2002, Manly Council refused the development application. By letter dated 26 November 2002 (TB 493-496) Mr Garratt reported to shareholders on the rejection by Manly Council of the development application. That letter stated that the company would appeal and would pay the costs out of the special levy funds held and general receipts. A report from Mr O'Reilly of Architectural Projects (of 14 November 2002), setting out three options for the building, was enclosed. 89 On 3 December 2002, the company lodged with the Land and Environment Court its appeal from the rejection by Council of its development application. (That appeal was in due course unsuccessful.) 90 The material provided in the notice of the Annual General Meeting (sent January 2003) to be held on 31 January 2003 (TB 497-499) included an estimate of the total cost of renovation at $11.2 million and a real estate agent's estimate of unit values as renovated. Both the McLaughlins' unit (unit 4) and Mr Garratt's ground floor unit (unit 22) were valued in the order of $600,000 - $650,000. 91 At the Annual General Meeting on 31 January 2003, Mr McLaughlin complained about the minutes of the previous general meeting, and the decision to appeal to the Land and Environment Court. At that meeting the suggestion of a buy-out of the McLaughlins' shares seems to have been raised for the first time (TB 501-503). Mr Garratt's recollection is that Mr McLaughlin suggested at that meeting that the other shareholders "band together" to buy him out (T 386). (Mr McLaughlin says he offered a buy-out at the estimated or agreed cost price as at the Land and Environment Court proceedings (T 69).) 92 At that meeting, Mr McLaughlin indicated his view that all shareholders were required to agree to any redevelopment of the building (an opinion which the board does not, and did not at the time, share). Therein, lies the nub of the present dispute. 93 The directors, at a meeting on 31 January 2003, confirmed the November decision to appeal to the Land and Environment Court (TB 499-500). 94 By letter dated 21 February 2003 (TB 505-566), Mr Garratt, on behalf of the company, wrote two letters to the McLaughlins. In the first, he noted that they had been asked at the Annual General Meeting to state their reasons for opposing the project and he recorded that the primary reason given by them was rent loss and that they felt that a local builder (Joe Clancy) could do all that was required. Mr Garratt sought a considered written statement of reasons within 14 days. The second letter on that date indicated that shareholders might be willing to buy-back the McLaughlins' shares, either after auction with an agreed reserve price or on an average of two independent valuers. Mr Garratt noted that this would need an agreement approved by the general meeting and that if the Land and Environment Court appeal was lost it was unlikely that the general meeting would approve such an arrangement (TB pp 505-506). (It must be noted that not only was this offer conditional on shareholder approval but also that Mr Garratt had, in effect, indicated that such approval would be unlikely in the circumstances which later transpired. Nevertheless, this letter is now relied upon by the company as a "standing offer" to purchase the McLaughlins' shares at an independent valuation.) 95 The McLaughlins' response, by letter dated 10 March 2003 (TB 507-508) was, in effect, that they had made their reasons for opposing the development very clear and that if Mr Garratt had an offer it should be made, reiterating that they opposed the development application and saw no benefit to shareholders. They asserted that they were waiting for a cost breakdown and board minutes. 96 Mr McLaughlin was adamant in the witness box that the independent valuation proposal put forward in the context of a buy-out offer was not workable: "Well how was it going to be valued? … on the new development that was going to take place? … on the valuation of the Land and Environment Court. We didn't believe there was any need to have an independent valuer, because the board knew how much all the units in there were sold for, because they had to pass each change of shares …" (T 71) (and see T 72 and T 73). 97 Consideration was apparently not given by the parties to there being agreement as to a set of assumptions on which the shares could have been valued, so as to resolve any issue as to uncertainty of the basis for the valuation (nor, indeed, is it apparent that the McLaughlins had articulated this uncertainty as the basis for not accepting such a proposal). In any event, it seems clear that Mr McLaughlin was not prepared to accept the uncertainty of the buy-out figure which an independent valuation might produce (T 74) (or, perhaps more accurately, the possibility that any buy-out would be at a price reflecting the assertions which the chairman and/or the board had made to the effect that the building was in imminent danger of collapse). At the heart of the McLaughlins' refusal to contemplate an independent valuation process, there thus seems to have been a distrust of the board. 98 On 14 April 2003, an amended development application was lodged with the Land and Environment Court. The company wrote on the same date to shareholders advising that the plans had been revised to adopt recommendations from the Council's expert (causing a loss of the Land and Environment Court hearing date which had thereafter been relisted for September that year) and copying the exchange of correspondence with the McLaughlins in February/March of that year. 99 By letter dated 7 May 2003, (TB 512-514) Mr Garratt responded to the McLaughlins that he was unaware of the reasons for their opposition, enclosed a schedule of renovation costs as had been requested at the Annual General Meeting, and asserted there was no doubt as to the ability of the company legally to issue shares and to convert the building to strata title (which, as a statement of general principle, seems uncontroversial but which did not address the particular facts pertaining to this redevelopment). 100 In July 2003, a valuation of the units in the building "as is" was obtained by the company. Unit 4 (the McLaughlins) was valued at $650,000; the two ground floor units 22 (Mr Garratt) and 23 (Mr Heyworth) were valued at slightly more, $675,000; and the building overall was valued at $14.675 million. This valuation was apparently obtained for use in the Land and Environment Court proceedings. 101 In August 2003, Richmond & Ross provided an engineering report for the purposes of the Land and Environment Court proceedings, in which it advised that under the option of a "do nothing" approach the building would have 10 to 20 years left and was no longer feasible. The report also advised that to adopt a "patch" approach of making repairs in a haphazard manner was akin to a "do nothing" approach but might extend the life of the building some time beyond the "do nothing approach" (TB 525-544). (Mr McLaughlin accepted, in the witness box, that any solution to the building problems would need to take into account both upfront costs and ongoing maintenance costs – T 35; a relevant consideration in light of engineering reports which put the ongoing costs of "reactive maintenance" at $100,000 per annum and of "aggressive maintenance" at $40,000 per annum.) 102 On 3 August 2003, there was a meeting of directors at which two further special levies were resolved to be struck (for legal expenses and on account of emergency repairs - $110,000) and it was noted that a similar levy was to be raised in December to cover the balance of the appeal costs (TB 518-521). 103 On or about 23 July 2003, the company wrote to the McLaughlins advising as to the change of the development application. By letter dated 7 August 2003, the McLaughlins wrote to the board complaining that they had received an inadequate response from the company on 23 July 2003 as to the amendment to the development application and requesting that all documents in relation to concrete problems be provided for an independent structural engineer to survey. A breakdown of the (then said to be $12.6 million) renovation option was sought (Exhibit 10). 104 On 8 August 2003, a further special levy notice was issued for $5,175.85 in addition to the quarterly general levy of $705.80. 105 By letter dated 11 August 2003 (TB 523-524), the company wrote to shareholders notifying of the $110,000 general levy for costs of the appeal and emergency repairs, noting that another "wrap up" levy would come in December; that the spalling in at least one unit must be dealt with as soon as possible; that the general levy had been kept low by not doing patchwork repairs and that nothing further had been heard from the McLaughlins in relation to a buy-back of their shares. 106 By letter dated 14 August 2003, the company secretary responded to the McLaughlins in relation to the costs and forwarded the reports of Close Consultants and Savcor (Exhibit 10). 107 The Land and Environment Court appeal proceedings were heard commencing in September 2003. Mr Garratt advised shareholders by letter dated 30 September 2003 (TB 550-552) that the company's engineering evidence was that the building, without major works, had 10 to 20 years' remaining life; that extensive repairs, but not replacing the slabs, would extend the building's life to 30 to 50 years, but that the proposed course was best and would extend the building's life by 100 years. The letter also noted that the agent had advised that (unnamed) investors were keen to buy the entire block but that enquiries had produced no name. 108 On 17 December 2003, Mr Garratt advised shareholders (TB 553-556) that the Land and Environment Court had taken a longer time than anticipated; that there would be a further special levy of $260,000 for legal costs and that the alternative to appeal was a repair cost of $7 million. 109 At around this time, Mr McLaughlin lodged a complaint against Mr Garratt with the Legal Ombudsman (Exhibit 11) and there was a suggestion (from a draft letter, dated 19 January 2004, prepared by a firm of solicitors, Adamsons (Exhibit 10)) that Mr McLaughlin had left abusive telephone messages with them (the solicitors acting for the company in relation to the recovery of levies). (While I consider that no weight can be put on a "draft" letter of complaint - for the obvious reason that, even if it had been issued, it would not of itself be cogent evidence that any "abusive" phone calls were made - the complaint made by Mr McLaughlin against Mr Garratt was a very serious one, and there was no suggestion on the material before me that it could have been substantiated.) 110 On 30 January 2004, the company's solicitors wrote to the McLaughlins threatening forfeiture of shares for non-payment of levies. 111 The further hearing of the appeal in the Land and Environment Court took place in February 2004. There was a directors' meeting on 21 February 2004 at which it was noted that there were outstanding levies from four shareholders and it was resolved that the McLaughlins' shares should be forfeited and sold. The minutes refer to an offer to buy the building (which was said to have increased from $9 million to $11 million), but that the board had decided that as that was less than the valuation obtained at the time of the Land and Environment Court appeal (some $14 million), this was not to be referred to shareholders (TB 561-563). 112 On 6 April 2004, there was an Annual General Meeting at which Mr Garratt held proxies for Ms Ashford, Ms Pether and Mr O'Meagher). The meeting resolved that the McLaughlins' shares be forfeited and sold. The McLaughlins point out that at that meeting another shareholder, Mr Murphy (who had resigned as a director in September 2003), complained as to non-receipt of statements and suggested that the appeal had been rushed into and the design was wrong (TB 566-569). (Mr Murphy subsequently sold the shares for all five units which he owned in the building – some to Mr Brown and some to Mr Heyworth.) 113 On 21 July 2004, the Land and Environment Court dismissed the company's appeal from the rejection by the Council of the development application. (A copy of the judgment is at TB 579-655). It appears from the judgment that both Ms Ashford and Mr Garratt had given evidence at the hearing. (Criticism was made by Mr McLaughlin, though not put to Mr Garratt in the witness box, of the evidence given by Mr Garratt at that hearing.) 114 The McLaughlins apparently instructed the managing agent to pay the rent ($400 per week) from their unit directly for the levy and on 9 August 2004, the company restored the McLaughlins' shares (after they had paid outstanding levies and approximately $2,000 in legal costs). 115 On 11 August 2004, the company wrote to shareholders reporting on the Land and Environment Court decision (TB 656-657). 116 In November 2004, the McLaughlins moved from Sydney to Melbourne. Mr McLaughlin says that they were unable to return to the UK until they could sell their shares. According to Mr McLaughlin, he was informed by the managing agent that they would not be able to sell their unit (more precisely, their shares) unless they could provide additional information to any prospective purchaser about the current problems in regard to the maintenance. It was said that they would not get the "best price" for the unit until they knew what was happening with the building and that large levies "put people off". (I interpose to note that the idea that large levies might deter potential purchasers is hardly surprising but nor is it a matter for which the company would necessarily be responsible insofar as the potential levies were required to address a problem with the structural condition of the building. The company points out that the board's proposal to address that problem had been stalled by the fact that it had not met with regulatory approval.) 117 On 10 November 2004, a second development application (number 524/2004) was lodged. This time the proposal was to add three floors to the building. However, the proposal did not at that stage include the demolition of the two ground floor units (including that in respect of which Mr and Mrs Garratt had rights of occupation – unit 22). 118 On 27 December 2004 two levy notices were issued – a general levy of $750.80 and a special levy of $5,175.85. 119 On 4 January 2005, the company wrote to shareholders (TB 665-670) advising in relation to the Land and Environment Court appeal; stating that if additional works were not allowed the building would have to be closed; that the building continued to deteriorate and that it needed in excess of $5 million worth of repairs. A further special levy was struck of $110,000. It was said that once annual financial statements came in an Annual General Meeting would be called. (The McLaughlins have complained at the delay in calling this meeting.) 120 During February 2005, solicitors acting for the McLaughlins proposed resolutions for the forthcoming Annual General Meeting for the sale of the building or to buy-back the McLaughlins' shares for $650,000 as per the July 2003 valuation. A breakdown of levy expenses was also sought (see letter at TB 671-675, 676). 121 On 31 March 2005 (TB 678-679) solicitors for the McLaughlins wrote again to the company asserting that the McLaughlins had not received the annual report or the Annual General Meeting notice, that the meeting was nine months overdue, the past reports and financials were also late, and that they intended to seek the winding up of the company or other relief unless the company agreed to buy their shares for $650,000. This seems to have been the first occasion on which a buy-out was demanded in the context of threatened court proceedings. 122 I pause to note that at this stage (whatever be thought of the fact that the demand was made under threat of a winding up application), it surely could not be suggested (unless, perhaps, it was thought that the share value had dropped over the period from July 2003) that the McLaughlins were seeking to coerce the company or other shareholders into buying their shares for more than the market or fair value for their unit, insofar as they were seeking a buy-out based on the very valuation of the shares on which the company had itself relied in the Land and Environment Court proceedings. 123 In early May 2005, and prior to the Annual General Meeting, the second DA was approved by the Council. The Annual General Meeting for the year ended 2004 was ultimately held on 8 May 2005. A resolution sought to be put by the McLaughlins (that the building be sold or that they be bought out for $650,000) was included in the notice for the meeting. (The McLaughlins claim that no copy of the 2003 Annual General Meeting minutes, which were to be confirmed at that meeting, was included with the notice dated 11 April 2005) (TB 688-689). 124 At the Annual General Meeting for 2004, Mr Garratt again held a number of proxies, including those of Ms Ashford and Pether. Mr O'Meagher was present at the meeting. Mr Garratt advised the meeting that the development application had been approved the previous week for three instead of four storeys. He ruled that Mr McLaughlin was ineligible to vote because of his non-payment of levies and, on a poll put to the meeting by Mr Garratt, it was agreed that Mr McLaughlin was not able to put resolutions to the meeting or to speak (TB 694). (It should be noted, however, that the McLaughlins were not the only shareholders who had been in arrears of levies. The minutes of the 8 May 2005 directors' meeting note that three shareholders were consistently late in paying levies (Mr Lambert, Mr McLaughlin and Mr Murphy), something of relevance when it comes to a consideration of how the board later responded to the McLaughlins' requests for a refund of part of the 2007 levy.) 125 From May 2005, the McLaughlins were represented or accompanied at various Annual General Meetings by representatives from their solicitors (Turner Freeman). Mr Bonanno was one such solicitor (who gave evidence at the hearing). His file note of the 8 May 2005 Annual General Meeting is at TB 695-698. 126 On 21 June 2005, Turner Freeman wrote to Mr Garratt, recording a telephone call in which they said he had offered to lend Mr McLaughlin the outstanding levies for 12 to 18 months at interest but on the condition that he have the right to vote their shares in relation to the development. Mr Garratt does not deny that he made such an offer. It was also noted that Mr Garratt had indicated that in his view a price of less than $500,000 for the McLaughlins' shares was "realistic" (TB p 698-701). 127 In mid-2005, a real estate agent (or vendors' advocate) was appointed by the company to assist in selling units off the plan in respect of the proposed redevelopment (Ms Christina Trotter). 128 In about August 2005, Mr Steven Bartrop (or, more precisely, his then company Stane Project Services Pty Limited) was approached by the board to assist with the project. Mr Bartrop understood his role to be to act as development manager representing the company in discussions and negotiations with builders and others and to liaise in relation to the project. 129 I interpose to note that a common theme by the McLaughlins (persisting insofar as various witnesses were cross-examined on this issue) was to challenge the independence or integrity of those engaged in the project, such as Ms Trotter and Mr Bartrop, and/or their competence (and to suggest that there was some connection between those individuals and Mr Garratt), conduct which no doubt exacerbated the acrimonious nature of this dispute. There seems to be no basis for any suggestion as to the lack of integrity or independence of persons such as Ms Trotter and Mr Bartrop nor that there was anything underhand in the appointment of either of them. (Their competence on this project or, in the case of Mr Bartrop, on other such projects is not for me to judge in these proceedings.) 130 On 9 August 2005, Mr Heyworth wrote to the McLaughlins indicating that he was prepared to buy their unit if they were interested in selling (TB 702). He said he was purchasing another unit in the building (and was aware of the proposed renovation) but preferred unit 4 to that other unit. It is not clear why that proposal did not proceed. (Mr Heyworth subsequently acquired unit 23, one of the ground floor units later earmarked for conversion for the car stacker, for $740,000.) 131 On 16 August 2005, Turner Freeman put forward a proposal for the McLaughlins' outstanding levies to be paid off with an initial lump sum payment and monthly repayments thereafter. It seems this was rejected (para 57A McLaughlin affidavit) for reasons again not made clear to me. 132 By letter dated 22 August 2005 (Exhibit 10), Turner Freeman wrote to Mr Garratt, acknowledging that a copy had been provided of the development application but asserting that it was meaningless without plans which would not be released by the Council. Approval was sought for the company to authorise release of a copy of the plans to Turner Freeman and to supply the fire safety consultant's report mentioned in the development application. Mr Garratt's response (given quite promptly on 24 August 2005 (TB 703-5) was that the McLaughlins could obtain copies of the development application material from the company's architects (and arrangements were apparently made by Mr Garratt for that purpose). 133 On 30 August 2005, a resolution was again passed that the shares relating to the McLaughlins' unit be forfeited for non-payment of levies. Mr Garratt wrote to the McLaughlins on 31 August 2005, rejecting the proposal for payment by instalments made on 16 August 2005 and noting that since May 2005 Mr Murphy had sold three or four units (seemingly implying that there would be no obstacle for the McLaughlins themselves to do so). He asked them to advise by 9 September 2005 why the company should not sell their shares. 134 On 21 September 2005 (TB 706-709), Mr Bartrop's company, Stane Project Services, was retained and was asked to make a presentation to the board the following Sunday. (Perhaps somewhat curiously, Mr Bartrop's retainer letter seems to have been in the form of a letter with an accompanying memorandum of fees for work yet to be done.) 135 By letter dated 23 November 2005, Mr Garratt rejected the proposal put in relation to levies and imposed conditions for sale of the McLaughlins' unit at a reserve of $475,000. By letter dated 30 November 2005, Turner Freeman wrote to the company advising that all costs and interest claimed had been paid, without admission, and requesting information in relation to the proposed development for the purpose of advising proposed buyers. The proposal for sale was rejected because the value of the Land and Environment Court appeal had been put at $650,000. An oppression suit was threatened (TB p 712-714). 136 Richardson & Wrench, by letter dated 1 December 2005 (TB 715-6), advised the McLaughlins that there was no comparable sales information to assess the price of their unit; there were unknown variables due to the redevelopment; that the recent three sales (the Murphy sales) were either on specific information or speculation on profit from the development; and that information was needed in relation to the development in order to advise buyers (TB 715-716). 137 The 2005 Annual General Meeting was held on 21 December 2005. The McLaughlins were not present at that meeting but had an observer (a solicitor from the office of Turner Freeman). (At that stage the McLaughlins' shares remained as having been forfeited.) At that meeting, Mr Garratt is noted as having advised that a feasibility study was almost finished, that a summary would be circulated in coming days and that a real estate agent had been selected; Mr Bartrop confirmed that he had been appointed development manager to do a feasibility study for shareholders' benefit, that the development would be on a non-recourse funding basis with all profits to shareholders, and that Southern Cross Constructions had been chosen as the builder after discussion with the board; and Mr Andrew Box from Southern Cross confirmed that the re-design had reduced the cost to $13.99 million and construction would take a 12 month period. Mr Box also advised that it was thought feasible to retain the back section of the building, install a car stacker in Units 22 and 23 and strengthen the footings for three extra floors. Mr O'Reilly from Architectural Projects advised there was a need for a s 96 amendment to the development application. Mr Bartrop advised that the building contract would be a guaranteed maximum price and that Southern Cross would bear all risk of latent problems or defects. Mr Garratt advised that a special levy of $20,000 would be due in January 2006 for part of feasibility study costs (TB 717-722; 726-731). Mr Brown and Mr Heyworth were appointed as directors. 138 By letter dated 15 March 2006 (TB 723-731) Mr Garratt advised that with the replacement of the roof and adding nine car spaces for existing units the costing still showed a break-even result. The letter said that since November 2005 the board had investigated a joint venture with developers for which there was insufficient interest. The only feasible course was said to be a fixed price design/construction contract. 139 On 21 March 2006, Mr Garratt wrote to the McLaughlins' solicitors advising that rescission of forfeiture of their clients' shares would be considered at the next directors' meeting, refuting that there was any basis for an application to the court for access to company documents or for any information for purchasers; advising that he considered that the McLaughlins' opposition to the development was 'selfish'; and making various other allegations as to the McLaughlins' conduct (Exhibit 10). 140 On 3 April 2006 Mr Garrett wrote to inform the McLaughlins of the directors' resolution to rescind the previous resolution for the forfeiture of shares for the McLaughlins' unit. 141 On 11 April 2006, the company entered into a Memorandum of Understanding (binding for six weeks) with Southern Cross Constructions for a $14 million contract (with a provisional $1 million for an additional nine car spaces). That Memorandum of Understanding provided a penalty of $150,000 for withdrawal. Mr Bartrop appointed quantity surveyors (WT Partnership) to vet the costing by Southern Cross and to verify that the final price was reasonable. 142 By letter dated 12 May 2006, Mr Garratt advised the McLaughlins that a Memorandum of Understanding had been entered into with Southern Cross Constructions. Final layout plans and schedules of finishes were enclosed. The McLaughlins were advised as to a substantial upgrade of the existing units and common areas. Costings to the end of the month were provided. It was said that until finalization of the building contract, funding and presales it could not be said whether the project would break even or make a small loss or profit (TB 735-736). 143 By letter dated 16 May 2006 (TB 1008-1015), Mr Garratt confirmed that, over a 12-18 month period from mid 2005, the shares referable to Mr Murphy's respective units had been sold. 144 On 30 May 2006, a s 96 amendment application was lodged with Manly Council to allow the construction of car stackers and the demolition of unit 23 (Mr Heyworth's unit). 145 As at 30 June 2006, it appears that there were four shareholders (units 1, 4, 8 and 12) in arrears in relation to levies (TB p 2126). 146 On 14 July 2006, (T770-772) Mr Garratt wrote to shareholders noting that only a two level car stacker would be feasible, in place of units 22 and 23; that there was a firm fixed price of $14.85 million including upgrading existing units, adding some costs but significant value; that Mr Bartrop remained confident that the project was close to breaking even and was on track to commence in September 2006; and that most consultants' payments would be deferred to first funding draw down to avoid levies. At that stage Mr Garratt reminded shareholders that it remained necessary to enter into a construction agreement, finance agreements and presales agreements (expected for August 2006). 147 In July 2006, a potential purchaser was located for the shares owned by the McLaughlins (a Mrs Rose). A contract was prepared and forwarded to the purchaser disclosing a sale price of $680,000. (By that stage there had been a number of sales in the building ranging in prices from $540,000 (unit 2) to $733,000 (unit 7), $707,000 (unit 14); $908,000 (unit 15) and $740,000 (unit 23) (TB 754). 148 On 18 July 2006, Landsbury valued all of the units in the building on an 'as renovated' basis and put the value of the McLaughlins' unit (once renovated) at $770,000 (TB 773-968). 149 The solicitor acting for the proposed purchaser of the McLaughlins' unit sought information, by letter dated 24 July 2006, including a copy of the Southern Cross Memorandum of Understanding, a copy of the building valuation, advice as to funding, particulars of ongoing amounts and special levies to be paid, and advice in relation to the project generally (TB 1008). Turner Freeman wrote to the company on 26 July 2006 (TB 1010-11) requesting the information which had been sought by the proposed purchaser's lawyers. Some information was provided by letter dated 27 July 2006 (TB 1012-1013), broadly noting the Memorandum of Understanding and the fixed price building contract. 150 Unfortunately for all parties (except perhaps Mrs Rose), the proposed sale to Mrs Rose did not proceed. There was some dispute as to why this was the case. By email on 31 July 2006 (Exhibit9), the real estate agent advised that the buyers had withdrawn after learning that contracts for building and funding had not been signed (TB 1015). 151 Mr McLaughlin said, more than once, in the witness box, that he had been unable to sell his unit since 2000 (see eg T 80) but he did concede that at one point, after the court proceedings in September 2006 and for only a short period of time, he and his wife had not wanted to sell their shares (or at least were prepared to await the outcome of the redevelopment in order to do so). However, this seems to have been on the basis of the understanding expressed by Mr McLaughlin in the witness box that from then on they would suffer no loss; that they did not believe they could be levied (although it is by no means apparent why that would have been the case) and that as the building work was supposed to finish in October 2007 it would be better waiting for that to happen. 152 Accordingly, it would seem that at best for a short period from about September 2006 until the January 2007 levy was raised it could be said that the McLaughlins may have chosen not to mitigate any perceived loss by seeking a buyer for their shares – at all other times their position is that they wanted to sell their shares but were unable to do so because of a lack of information as to the project. 153 On 7 August 2006, Mr Garratt emailed the real estate agent, demanding that a "for sale" sign placed on the property by the McLaughlins be removed so that company marketing signage could be placed on the building in relation to the planned presales. (The McLaughlins take issue with the fact that Mr Brown was more recently permitted to display such signage for the sale of some of the new units he had acquired in the development.) 154 By letter dated 8 August 2006, (TB 1016-1017), Mr Garratt wrote to shareholders providing information in relation to the valuations for their respective units on an 'as renovated' basis and the process for bids for car spaces; advising that the work should commence on 1 October 2006 and the building needed to be vacated by 30 September 2006; and that it was still expected that the project would break even or be close. 155 An indicative facility offer was given to the company by St George on 11 August 2006 (TB 971-976). It noted the existing land value at $6 million, construction cost at $15 million with a $700,000 contingency; and indicated the provision of a facility of $18.73 million with security including guarantees by the shareholders of the residual debt, estimated at $2 million, plus 10%. It noted that it was likely that there would need to be a mortgage over all shares and an acknowledgement by shareholders of a charge over their unit for the full facility. There was also provision for shareholders to ratify the decision. The letter expressly noted that this was not a binding offer. 156 Preparation for the marketing of the new units began in late August 2006. 157 By letter dated 15 August 2006 (Exhibit 10), Mr Garratt wrote to Mr Bonanno advising that he expected that there would be a finance agreement within two weeks and that the building would be uninhabitable and uninsured from the end of September. The letter stated that there was no reason to think the s 96 application would be unsuccessful and the company would then execute the construction contract. No assurance of a break-even result was given. 158 On 18 August 2006, notice of the Annual General Meeting on 9 September 2006 was forwarded to Turner Freeman (TB 1018-1039) by way of an agenda which included proposed amendments to article 3, a resolution endorsing the proposed redevelopment and a resolution approving the terms of the sale of one new unit each to Mr Garratt and Mr Heyworth. There was no reference to any resolution relating to a payment by way of remuneration for Mr Garratt. Reference was made to an indicative offer of finance from Capital Finance of $19.4 million plus costs and contingency. 159 On 22 August 2006, the quantity surveyor's report (WT Partnership) noted that a $15 million building contract price was reasonable but recommended that it should have a contingency. The report noted that with fixed price design/construct contracts there was a risk that the builder would look for cheaper design alternatives (TB 977-1007), a proposition which Mr Bartrop was not prepared to accept in the witness box. 160 Curiously, while Mr Bartrop's evidence was that he discussed the indicative facility letters with Mr Garratt many times and told the board that it would be difficult to get formal approval despite the indicative letters (Bartrop affidavit para 22), Mr Garratt denied that this was the case (T 470) "He certainly did not tell me he expected a difficulty to get a formal offer of funding". 161 By letter dated 30 August 2006, further complaint was made on behalf of the McLaughlins in relation to the lack of details in relation to the project (TB 1040-1045). 162 In September 2006, Mr Bartrop met with the board. He says he was asked by one of the directors, Mr Cannen, to ascertain as an independent observer what a reasonable fee would be to pay Mr Garratt for his services in relation to the project. 163 On 4 September 2006, Mr Bartrop (writing on the letterhead of Stane Project Services Pty Limited) wrote to Mr Garratt a letter, which was then circulated by Mr Garratt to shareholders, (TB 1089-1096) advising (among other things) that a s 96 application had been lodged three months ago and was expected to be approved; that Southern Cross Constructions had guaranteed a maximum price contract of $15 million; that all construction risk was with the builder and not with the company; that three indicative offers of project funding had been received (the most attractive of which was from St George Bank) none of which had required a level of pre-sales as a condition of funding; and that the board would be seeking shareholder approval for a compensation allowance to two shareholders (Mr Heyworth and Mr Garratt) whose ground floor units were required to be surrendered to make the project feasible. 164 The letter noted that the "completed" value of their units (as per the Landsbury valuation) was $710,000 and that compensation should bear in mind the following: "(i) Both shareholders will forego any further capital growth, a likely lift in values over the bank valuation figures, on completion of the project and conversion to strata title. [though this value had arguably already been taken into account when using an "as is" renovated valuation.] (ii) Each shareholder will have to pay capital gains tax in consequence of the surrender, and will lose the investment worth (in Manly seaside real estate) of the money paid in tax. [though no assessment was apparently made as to this amount.] (ii) [sic] They are acting voluntarily in the interests of all shareholders and are not 'holding the company to ransom'. [though Mr Heyworth might be thought in due course to have attempted to do so when he later demanded increased "compensation" for his unit.] (iii) The compensation is not payable until after completion of the project. [though not dependent on the outcome of the project.] (iv) Each must compete on the open market along with all other potential purchasers in order to purchase one of the new units, notwithstanding the work that he has done to bring the Project to realization. [seemingly suggesting that they risked losing the opportunity to retain an interest in the building.] This could mean that either or both could miss out on purchasing a unit, though their compensation will probably push the yield to the company higher." 165 The letter went on to say that Mr Bartrop had discussed this at length with board members (Messrs Brown, Cannen and Dunn) and believed that a total sum of $950,000 would be "fair and reasonable compensation" for forfeiture, together with the right to share on a 50/50 basis on the first $500,000 of any surplus. (I note that the latter component of the compensation was apparently not pursued at the meeting, although it is not clear who made the decision in that regard). 166 The letter also noted that Mr Bartrop had been asked by the directors, except the chairman, to recommend compensation to the chairman for his contribution; that the chairman had been involved for 12 months and that, but for his involvement, the company would not be in this "fortunate position". It noted "our recommendation" of a $250,000 payment on completion of the project. (Seemingly, therefore, this payment was for what Mr Garratt had done to progress the matter to that point – ie where there was an approved development application and negotiations had reached the point where it was anticipated that contracts for the building/construction and finance aspects would shortly be signed – not for any work he might do later in connection with the project.) The McLaughlins criticize this payment (among other things) as it was not contingent on the success or otherwise of the project (the payment to be treated as a project expense before any calculation of profit). 167 The letter noted that project costs were locked in at $18 million, allowing a project contingency of $400,000 and the St George funding package was for $18.793 million; that if sales were at the minimum of the expression of interest figures then there would be a shortfall of $2.15 million (being the amount of the directors' compensation). The letter said that a 10% movement above the minimum would reduce the deficit to $375,000 while a 15% movement would provide a surplus of $500,000 (to go 50/50 to the directors). Feasibility schedules were enclosed. It was recommended the shareholders approve the project going forward. 168 By letter dated 6 September 2006 (TB 1097-98), Turner Freeman asserted that various requests for information the subject of the Annual General Meeting had been unanswered and that they required a reasonable opportunity in advance to consider the information. They advised that they considered notice of "terms to be circulated" was inadequate and suggested a withdrawal of the development items on the agenda until information was obtained. Also sent on that date was a "without prejudice" letter with the McLaughlins offering to accept $880,000, including GST, for their shares (TB 1108). 169 By letter dated 8 September 2006, (TB 1109-1112) the McLaughlins' solicitors responded in relation to the documents in the letter of 6 September 2006 (said to have been emailed to them at 4.54 pm that day), in particular noting that there was no basis for the assessment of the compensation calculation and that it seemed particularly advantageous to Mr Heyworth, who had bought with knowledge of the development for $740,000 in September 2005; that there was no approved development application yet; that the Southern Cross price had increased, and that it was contemplated there be payment to Mr Garratt for the project irrespective of any losses caused. It was said that there was no basis for the assessment of the payment to Mr Garratt and no contact details for Mr Bartrop to obtain information from him. 170 The 2006 Annual General Meeting was held on 9 September 2006. The McLaughlins (represented by their solicitors) voted against the proposed resolutions for amendments to the articles and asserted that unanimous consent was required both for those and for the compensation payment. (TB 1115). I refer to the resolutions at this meeting as the "September 2006 Resolutions". 171 The minutes record that the following resolutions were passed at the meeting: that the company enter into agreements for an implement [sic] to redevelopment of Dungowan, the resolution approving the buy-back of shares for units 22 and 23 for $950,000 each and the resolution that a $250,000 allowance be paid to Mr Garratt. The only dissent recorded was that of Mr Bonnano, on behalf of his clients, the McLaughlins (TB 1118). What is not clear on the minutes is whether Mr Garratt and Mr Heyworth voted on the respective resolutions (although Mr Garrett declared his interest and stood down as chairman, and Mr Heyworth declared his interest (TB 1117)). 172 In September 2006, the s 96 amendment was passed by Manly Council. 173 On 11 September 2006, there was a sales launch in respect of the units. There was also a rather curious exchange of correspondence with Richardson & Wrench suggesting that an offer to buy the McLaughlins' shares for $700,000 (with a three to six month delayed settlement) had been made and that a second buy-out offer (with no strings attached) for $680,000 (Exhibit 8) existed. As to the $700,000 offer, Mr McLaughlin's evidence in the witness box was that he understood Mr Bartrop had personally offered $700,000 but he said that he had probably by then spent $200,000 on the development in levies and had a huge legal bill, so the offer was only worth $580,000. He agreed that the company's final offer to buy the shares for $700,000 was one he did not accept (T 274). (There was an internal email of Richardson & Wrench which suggested that the vendors had offered to sell for $880,000 but as at 11 September 2006 were thinking of increasing the offer to $950,000 considering what the two directors had received (Exhibit 8). However, Mr McLaughlin did not admit to any knowledge of this exchange.) 174 As to the $880,000 offer, Mr McLaughlin seemed to concede that this built in a payment to allow for the cost of having sought information to sell on the market (T 120). "I was trying to get what I thought was a reasonable price less than the directors were willing to pay themselves for units. I thought it eminently reasonable to do that". 175 By letter dated 15 September 2006, Mr Garratt wrote to the McLaughlins' solicitor asserting, among other things, that an offer at $880,000 was "several hundred thousand dollars" above value (TB p 1129-1133). 176 Undertakings not to act on the resolution having been sought and rejected, these proceedings were commenced in September 2006 by the McLaughlins and injunctive relief was sought. The first interlocutory application was heard in September 2006 and, as noted above, was unsuccessful. 177 By letter dated 22 September 2006, Mr Bartrop summarised the outstanding project costs to that date as $784,287. 178 During the first week of October 2006, Southern Cross Constructions took possession of the site. There was an issue as to precisely what work was done at that stage but at the very least it appears that work to prepare the site had commenced around this time. (The reference in the work programme to demolition was said not to refer to the ultimate demolition of the rear of the building, which happened at a later stage, as described in the witness box by Dr Facioni.) 179 When the matter came before Barrett J, on the McLaughlins' first application for interlocutory relief, his Honour flagged the question whether a responsible board of directors, acting prudently, would have allowed a situation to arise in which builders had started work but no binding promise of loan finance was available [at 36]. The evidence before me on this issue, with respect, did not allay such a concern. 180 On 4 October 2006, a facility offer letter was issued by St George Bank for a facility for $18.793 million. Conditions precedent to draw down included pre-sales totalling of $12.75 million and evidence that all shareholders approve of the special levy required by the Bank. The security was described as including acknowledgements/security from the shareholders, including the McLaughlins, over their shares and entry into a tripartite agreement with the builder (TB 1134-1145). 181 On 13 October 2006, St George amended the facility offer (the amendment in question relevantly relating to the level of pre-sales required before the first draw down of funds could take place. Under the amended offer, the conditions precedents to draw down included the release of all other security over the shares as well as were pre-sales of $9.35 million (by the second progress payment, pre-sales of $12.75 million in total were required) (TB 1146-1149). 182 On 18 October 2006, Mr Garratt and Mr Brown signed both the building contract with Southern Cross Constructions and the finance documentation in the offices of the company's lawyers (Exhibit 4). It is not, however, clear that there was an exchange of contracts at that stage; Mr Garratt's evidence was that the contracts were signed and the original counterparts left with the company's lawyers (T 385). The signed documents were to be forwarded to the bank's lawyers. Mr Garratt did not retain a copy and seemed surprised at the suggestion that he might have done so. 183 Mr Bartrop says that, in late October 2006, he was told by the bank of further requirements for draw down including a change to the articles to make provision for a levy in relation to the bank debt (see his affidavit paragraph 33). 184 By letter of 25 October 2006, (Exhibit F), the bank's solicitors advised the company's solicitors that the substantive issues remaining outstanding included the shareholders' agreement to a special levy in relation to all amounts owing to the bank as per the facility letter of 4 October 2006. The bank required certainty in relation to the special resolution to amend the article to include rights to new units and a special levy declaration prior to funding referable to all amounts owing to the bank. It was said that the directors' powers to levy were not wide enough and needed amendment. The bank required to be satisfied that the directors had power to call a levy to pay the bank debt and to sell shares if that levy was not met. 185 There was an issue as to whether the special levy was to be for the shortfall or for the whole of the facility. Mr Bartrop says that by early November 2006 he was told by the bank that it probably did not need a levy for the whole of the facility and that it was not sure whether unanimous consent was still required. 186 In mid November 2006, it appears that the tripartite agreement was signed by Southern Cross Constructions, St George Bank and the company. 187 On 15 November 2006, Mr Bartrop confirmed with the bank the need for an acknowledgement from shareholders. On 20 November 2006, Mr Bartrop and Mr Garratt, with their solicitor, met St George Bank officers in order to resolve the outstanding documentary requirements. Mr Garratt said that he told the bank it was unlikely the McLaughlins would sign and expressed his view that this was unnecessary. Mr Garratt says that the bank's representatives indicated that this was acceptable to them. 188 Mr Garratt was taken at some length in the witness box to the chronology of events in relation to the situation which pertained as at the time the company had permitted the builder to take possession of the site and commence site preparation works. Mr Garratt was adamant that "I would not have allowed the board to commit itself to the builder or the builder to commence work if I did not consider that we had funding in place." (T 398). He says he had no doubt in his mind that the bank had committed itself to the funding and that it had verbally done so by October 2006 (T 398). (No conversation to that effect between Mr Garratt and the bank officers is deposed to in his affidavit.) 189 Nevertheless, equally dogmatically, Mr Garratt said that he "wouldn't expect anyone who knew anything about borrowing from a bank to think that funding was certain until there was an unconditional or final letter of offer" (T 465) and he was aware as at the time of the September 2006 meeting that the bank's requirements had not yet been resolved (T 464). 190 Mr Garratt said that it was always his position that he "certainly would not sign a building contract until the finance was there. I was not going to allow the board or the company to incur a liability to a builder without finance in place" (T467). Yet it is hard to see how that is not precisely what was done. Mr Garratt accepts that the building contract was signed and the builder allowed into possession (and seems to have commenced some work) prior to the time at which it was known what the bank's final conditions for draw down of funding were to be, let alone whether the company would be in a position to satisfy those conditions. The basis on which Mr Garratt seems to have rejected the suggestion that he had acted inconsistently with what he says was always his position appears to turn on the reliance he placed on what was told to him by Mr Bartrop and/or the trust he placed in the builder and the bank. 191 Mr Garratt says that the builder acted on the expectation that the contract which had been negotiated with the builder would in fact be finalized (T 467); he said that "The actual execution of the banking documents and the building contract had by that time simply become a matter of formality" (T 469); that the bank officers had indicated (it seems to Mr Bartrop not to Mr Garratt himself – T 476) that the bank was happy for the builder to take possession (T 468) and had told "us" that construction could proceed (T 475), having visited the site to express that opinion; that being why he says that he was happy to execute the building documents. It was Mr Garratt's opinion that it was "self evident that the bank was lending money because the bank had told him and it was directed to solicitors to prepare the security documents. Banks do not do that without having agreed a loan" (T468). 192 Mr Garratt, somewhat testily, observed that he had no understanding as to what might be the content of an onerous condition in relation to presales at the time the bank's indicative letter was amended in relation to the level of pre-sales but then said that "You would not agree to the finance unless you were comfortable that you could meet the condition. There would be no point" (T 473). He described the bank's requirement as to the need for shareholder ratification as new (T 475) (although by reference to the indicative letters it would seem that the requirement for shareholder acknowledgement had been foreshadowed and so at best it might have been the bank's subsequent insistence on that requirement that came as something new to Mr Garratt). 193 Rather surprisingly (or at least I suspect it would come as a surprise to many of those practising in the area of banking and finance), Mr Garratt thought one thing was clear – that he was "never going to get on the same day and in the same place execution of all things at the same time" (T 476). Even if that were to have been the case, there surely would have been mechanisms (whether in the form of conditional contracts or the like) which would have permitted the company not to have finally committed itself to exposure under the building contract until the banking arrangements had been concluded such that the bank was committed to allow draw down of the funds. Be that as it may (and the company may well have suffered no loss as a result of being put in the rather precarious position as it was in late 2006), the explanation seems to be that Mr Garratt considered the legal documentation a formality and that it was appropriate to proceed on the basis of trust. Tellingly, when asked what his legal advice to clients would be he said "My advice would be that it is a matter of negotiation between customer and bank and most important thing is trust" (T 477). 194 By notice dated 23 November 2006, shareholders were notified of an extraordinary general meeting to be held on 17 December 2006 to consider a special resolution that the amendments at the previous Annual General Meeting be ratified, that article 4 be amended and that article 27A be amended to provide that the share on which the company has granted security may be transferred to a mortgagee or purchaser for a mortgagee (TB 1397-1398). The notice did contain express reference to the resolutions being proposed as special resolutions. The McLaughlins' solicitor, Mr Della Marta, in his affidavit sworn 21 February 2007, deposes that the McLaughlins received this notice "on or about 28 November 2006" (at [3]). Similarly, Mr McLaughlin, in his affidavit sworn 28 July 2009, states he received the notice of the extraordinary general meeting "on or about 28 November 2006" (at [73]). Article 110 deems notice to have been given 24 hours after the notice is posted. Absent evidence as to when the notices were actually posted, notice would therefore be counted from and including 28 November 2006 up to and including 16 December 2006 (section 105 of the Corporations Act), ie it seems that 19 days' notice was given. 195 By letter dated 8 December 2006, Mr Garratt wrote to shareholders (TB 1387-1393). This letter, according to the McLaughlins, was not received by them until 12 December 2006. Its content is heavily relied upon by the McLaughlins for the assertion that the December 2006 resolutions were procured by material misrepresentations. The letter referred to the extraordinary general meeting which had been called to pass the amendments required by St George Bank and to ratify the September amendments to the articles, and to consider Mr Heyworth's request to raise his compensation to $1.15 million. It noted that the builder had taken possession in October 2006 and that there was a delay pending the bank's requirement for shareholder acknowledgement of the article amendments; that six of the eight new units had been sold for $12.75 million; that it was expected that there would be a $1 million shortfall payable at the end of the project and no levies until completion, and that there was no practical choice but to amend the articles as required by the bank in order to finalize funding. (This letter was roundly criticised by the McLaughlins in these proceedings for having made no mention of Barrett J's comments in relation to the adequacy or otherwise of the information provided before the September 2006 general meeting, and for simply referring to the need for ratification of the special resolution as being to put beyond argument their validity as per the findings of Barrett J.) 196 The level of disclosure required to be provided by directors to shareholders is a question influenced by the nature of the decision that shareholders are required to make (ENT Pty Ltd v Sunraysia Pty Ltd [2007] NSWSC 270; (2007) 61 ACSR 626; 25 ACLC 399). Where the directors have a personal interest in a matter to be approved by a general meeting, the notice must clearly bring the nature and extent of the interest to the attention of the members with full disclosure (Chequepoint Securities Ltd v Claremont Petroleum NL (1986) 11 ACLR 94, at 96). 197 As to the adequacy of information, generally, it is said by Mr Priestley that the McLaughlins were given extensive information about the structural condition of the building in the reports provided in February 2001 (including reports from Close Consultants and Bonacci Rickard, the Savcor report on concrete structure and reports on fire safety and the lift); they were provided with material in May 2002 as to the project costing and viability statement; they were informed in August 2005 that development application materials could be obtained from the architects, they were informed in March 2005 that their representatives could attend to inspect the contract documents (but did not do so). Mr Priestley further asserts that the information sought from June 2006 was put on the basis that it was necessary to inform purchasers not that it was necessary to consider the proposed development. Mr Burchett takes issue with that and refers to requests made for information which went to the consideration of the project itself (TB 712). My impression, from the material produced as to the communications made by the company to shareholders was that there was a reasonably regular flow of information in relation to the project provided to shareholders and that what the McLaughlins complained of (at least up until the time at which requests were made for copies of the contractual material) was the summary nature of some of the information provided or the conclusions reached by the board to which reference was noted in the material (but the reasoning for which was not always included). 198 At the 17 December 2006 extraordinary general meeting, which was attended by Mr McLaughlin and Mr Bonanno, the amendments to the articles were passed. I refer to the resolutions made at this meeting as the "December 2006 Resolutions". The minutes of the meeting held on 17 December 2006 record that the special resolution to ratify the amendments to article 3 which had been passed in September 2006 was approved without any dissent being recorded (TB 1406). Mr Bonnano's file note of that meeting does not record anything in relation to the resolution regarding the ratification of the previous resolution to amend Article 3, TB 1410). As to the special resolution to make amendments to articles 4 and 27A, the minutes record that all voted in favour but for Mr McLaughlin who voted against (by his solicitor Mr Bonnano). There was no resolution regarding, let alone ratifying the compensation payment to Mr Garratt or the buy-back amounts. 199 Mr McLaughlin said that at this meeting he sought copies of the building and finance contracts and that these were refused. (Mr Bonanno's evidence was that he wanted to look at these documents in order to see where risk was apportioned (T 168). He referred to a view "however naively held" (which I understood to be a view he believed was held by the McLaughlins) that if other members were given information as to how losses were or were not to be apportioned some might also think that was not the best option (T 170).) There was discussion about the possibility of a swap between Mr Heyworth's unit and the McLaughlins' unit (as to the contents of which discussion there was some dispute, in particular as to whether the board had advised Mr Heyworth not to pursue such a swap). Mr McLaughlin says that Mr Garratt assured the meeting that the finance contract had been signed in October 2006 (T 118) (and had confirmed that the car stacker was included in the May 2006 amended development application which had been passed in September 2006) (TB 1405-1409). 200 As at the end of December 2006 it seems that three further requirements had been raised by the Bank – that there be a clearance of an existing mortgage over one particular shareholder's shares; that Mr Brown settle the sale of other properties; and that the McLaughlins sign an acknowledgement or sell and settle the litigation. Mr Garratt says he became aware of these additional requirements in early January 2007, only when Mr Bartrop told him. 201 By letter dated 29 December 2006, Turner Freeman confirmed to Pikes that the McLaughlins repeated the offer to swap their unit shares for Mr Heyworth's unit shares on the basis of the compensation package (TB 1415-1416). That letter asserted that Mr Heyworth had been "warned off" by the board (something that Mr Garratt denies). (Mr Heyworth did not give evidence in the proceedings.) 202 By letter dated 4 January 2007, Pikes responded that Mr Heyworth was not interested in unit 4 (though, at least in 2005 Mr Heyworth had expressed an interest in that unit) and was only interested in a front unit worth $950,000 on completion; that the board would be prepared to recommend buy-back of unit 4 at current market value "being in the order of $700,000" or to procure a buyer at a price per valuation. The letter also noted that the $950,000 (sought by the McLaughlins) was "grossly inflated", that sum for Mr Heyworth's unit having been based on a larger unit and factors having no bearing on unit 4, and that it took no account of the special levy to be paid on shares of up to $100,000. 203 By email 9 January 2007 (Exhibit L(1)) the McLaughlins' lawyer, Mr Della Marta, informed his clients that the board was prepared to recommend a buy-back for market value at $700,000 and that Mr Garratt was anxious to obtain a response to the proposed offer. 204 On 10 January 2007 Mr Garratt emailed Mr Della Marta (TB 1482-1502) advising that debts incurred in the project were of the order of $2.5 million; that although finance was approved by the bank it would not allow a draw down without the McLaughlins signing the acknowledgement form and resolving the litigation, and that, if they did so then the company would waive costs as part of the settlement of the litigation, but that if they did not do so by 5.00 pm on 12 January 2007 then the board would need to strike a special levy of approximately $2.5 million and that this would be enforced promptly against any shareholder who did not pay on time. (The McLaughlins describe the acknowledgement required by the company to be signed by them as one to the effect that the unit holder could be forced to sell everything the unit holder owned; had been advised that if all new units sold the shortfall was likely to be $2 million but could be in excess of $20 million; had sought independent legal and financial advice before signing; and had not signed under duress or forced to or persuaded by anyone (TB 1482-1502).) 205 It was again noted that the board was willing to buy-back the McLaughlins' shares or to find a purchaser at an agreed price by 15 January 2007. Otherwise, to avoid the levy, the McLaughlins were required to produce evidence of a third party sale and settlement. On 11 January 2007, Pikes proposed to Turner Freeman a put and call option for the purchase of the McLaughlins' shares at an option fee payable of $40,000 but with the price to be agreed. On the same day, Mr Bartrop presented to the board a schedule of expenses incurred and outstanding for the project of $2.8 million. 206 On 12 January 2007, St George Bank forwarded a further amended facility letter, superseding its letters of 4 and 13 October 2006, noting that the loan amount ($20,887,000) included an amount for the purchase of unit 4 for up to $950,000. It required, among other things, a contract for the sale of unit 4 plus a waiver and indemnity in relation to the legal proceedings; as well as evidence that the shareholders had received independent legal and financial advice; that the shareholders were liable to pay a special levy anticipated to exceed $150,000 per shareholder and that their liability continued and would not be released until all money owing under the facility was repaid; and that a special levy resolution had been approved by all shareholders. 207 By letter dated 12 January 2007, Turner Freeman advised Pikes that it could not comply with the two day time frame advised in the 10 January 2007 letter; and noted that copies of loan documentation had been refused; that they requested copies of relevant documents and information to be able to advise the plaintiffs and that any proposal requiring valuation was likely to cause further dispute that it would be better to agree on a price. The letter asked whether Mr Garratt was prepared swap his unit (22) and right to "compensation". 208 By letter dated 12 January 2007, Pikes responded that they were prepared to allow limited inspection of loan documents (if the relevance was explained) and of the building contract on Monday and that two progress payments were due totaling $1.63 million with a further $570,000 due after the end of the month. The total due at the end of January 2007 was said to be $2.8 million. The letter stated that Mr Garratt was not interested in swapping his unit. The letter stated that the company was willing to buy-back at a fixed price but needed it to be substantially resolved by 15 January 2007 or the board would need to strike a special levy. 209 The McLaughlins' then negotiating position (as appears from an email sent from the McLaughlins to Mr Della Marta on 14 January 2007) was that $950,000 would end the legal action, without costs, as well as to sell their shares (thus presumably netting the McLaughlins less than the full purchase price for their shares but also costing the company, in effect, more than $950,000). 210 Just before 5.00 pm on 15 January 2007, Pikes forwarded to Turner Freeman a letter enclosing a draft put and call option including a Notice of Discontinuance, noting that the board was considering the amount of the special levy for the expenses of the project and seeking advice by 5.15 pm whether the signed Acknowledgement or terms would be considered. An offer was then made by Turner Freeman to Pikes on 16 January 2007 for the company to buy-back unit 4 for $950,000 or for a swap of either units 22 or 23 for unit 4. 211 At the same time as the correspondence in relation to the buy-back was taking place, Mr Garratt emailed the managing agent (Christine Frith at Robinsons) at 1.12 pm on 16 January 2007 in relation to the special levy, instructing her to prepare notices for $2.8 million to be posted to the McLaughlins that afternoon (unless he, Mr Garratt, advised otherwise) with the rest to be sent to him so that he could do a covering letter to the others. Ms Frith asked what the due date for the levy notice was to be and Mr Garratt responded that it was 30 January 2007. There was some curious evidence in relation to the first line of this email, one copy of which contained the sentence "McLaughlin proving difficult to deal with", which I am told did not appear on the copy email produced by the company on discovery. 212 On 16 January 2007, Pikes emailed Turner Freeman saying that they had asked for an offer by 4.00 pm that day and that none had been made; that if they wished to make a signed offer to the company per option or otherwise they should do so; in the meantime the directors must proceed. 213 Turner Freeman emailed in response on that same day that an offer had been made; that it was not in final documentary form as this would be onerous to prepare without acceptance of basic terms; and seeking advice as to whether the terms were acceptable. 214 On 17 January 2007, an email was sent from Mr Garratt to Christine Frith at Robinsons, "Thanks for voice mail, assume levy will go this morning, McLaughlins' sent directly and balance to me for dispatch. Change date to Thursday 30/1/07" (Exhibit E). 215 There was further communication about the $950,000 offer. On 22 January 2007, Pikes emailed Turner Freeman that the form of the documents was acceptable and requested execution by the McLaughlins in anticipation of identification of a grantee. The email stated that it was imperative that an option be entered, levies struck or acknowledgement signed that week. On 23 January 2007, Turner Freeman forwarded to Pikes the option and sale agreements for execution. 216 Somewhat inexplicably in that context (the agreements seemingly by then having been approved by the company's lawyers and being in the throes of execution), at 11.23 am the following morning Mr Garratt emailed Christine Frith at Robinsons instructing her to prepare the special levy notices per recent email and dispatch to the McLaughlins that day, with copies of the other shareholders' notices to him in Melbourne so that he could send a covering letter to them (Exhibit G). Ms Frith sought confirmation of the date of determination (by email 4.19 pm) and the address in Melbourne that all other levy notices were to be posted to and Mr Garratt responded at 10.52 pm "treat the levy as struck today … send notices for the shareholders other than the McLaughlins to me". 217 Minutes of a directors' resolution on 24 January 2007 show the passage of the resolution for the special levy of $2.8 million and to serve levy notices and default notices on any shareholder who "opposes payment" (T 28(2)07) (TB 1627-1628). (I refer to this as the January Levy Resolution.) That resolution of 24 January was as follows: The Directors resolve, noting that debts totalling $2.8 million have been incurred by the Company in relation to the renovation and construction works in progress in relation to the Company's building at 7 South Steyne, and having regard to the continuing delay in the provision of funds to the Company by St George Bank Ltd to pay those debts, to strike a special levy in the amount of $2.8 million payable by the shareholders in proportion to their shareholdings in the Company on 12 February 2007. The Directors resolve further to instruct the Company's managing agents to serve levy notices accordingly, and that a default notice be served promptly on any shareholder who or which opposes payment of the levy. 218 On 25 January 2007, Turner Freeman received from their clients the executed documents and had confirmed receipt of the executed document (as per Mr Della Marta's affidavit). 219 The McLaughlins appear to have received notice of special levy due 12 February 2007 by at least 29 January 2007. The amount of the levy payable by them was $119,771.86. 220 On 30 January 2007, Mr Della Marta telephoned Pikes to say that he held the executed documents. Mr Baxter at Pikes said he was waiting for the name of purchaser from Mr Garratt, that the purchaser might require an indemnity from the company that the property was worth $950,000 when the work was done and that he did not know the levy had been struck but that the company was under pressure from the bank. 221 By letter dated 1 February 2007, Pikes advised Turner Freeman that the special levy had been struck to put the company in a position to meet its obligations, that resolution of these proceedings was one of the outstanding conditions which had been imposed by St George Bank, and it was further said that the builder would not continue without payment. 222 According to Mr Garratt, construction work by the builder ceased on 2 February 2007. 223 By letter dated 5 February 2007, Turner Freeman again sought advice as to which of the bank's conditions had not been met. They sought copies of the loan approval and security documentation, the building contract, progress claims, particulars of information provided to shareholders in respect of the issue of the levy, and other information. 224 By letter dated 6 February 2007 (TB 1636-1639), Mr Garratt advised shareholders in relation to the levy and said "The McLaughlins have not signed the shareholders acknowledgement or sold their shares, nor have they put forward any separate proposals to resolve the litigation. Instead they have offered to sell their shares and settle the litigation for $950,000", noting that this required a special resolution to buy-back and that it would take a month and was not assured. It was said that it was likely a valuation would be at $700,000 and they could find a purchaser at that price; that there was no alternative but to issue the levy to meet debts and assure the builder. The letter stated it was considered that the bank would allow draw downs if there was a substantial payment and that if it were possible to suspend all or part of the levy the company would do so (TB p 1636-1639). 225 On 10 February 2007 (before the levy was due), Mr Garratt emailed Robinsons asking for the exact amount of levy unpaid by the McLaughlins and stating that "a default notice will be served directly on Tuesday" (ie 13 February 2007) (TB p 1347). 226 By letter of 12 February 2007, Turner Freeman wrote to Pikes demanding certain undertakings by 5.00 pm on 16 February 2007. They asserted that there was no power of speculative development or to strike a levy for it, that the McLaughlins were not bound by amendments to the articles increasing their liability, and they asserted the misuse of the board's power to appropriate part of the building and oppression of the minority. (Mr Garratt relies on this letter as indicating that the McLaughlins would not pay the levy. He said that no one else disputed the levy, though most wanted additional time to pay.) 227 By letter dated 13 February 2007 Mr Garratt (TB p 1651-1652) wrote to the McLaughlins advising that unless the special levy was paid by 28 February 2007 their shares would be liable to be forfeited and for sale without notice. The letter noted that "Mr Kent" may still be interested in purchasing the shares for $750,000. (There was no evidence as to Mr Kent, although Mr McLaughlin seemed to acknowledge an offer which he believed had been made by Mr Bartrop of around $700,000 at about this time.) 228 By letter dated 15 February 2007, Pikes repeated a proposal to buy-back at "market value" and refused to provide the undertaking sought in relation to the forfeiture notice. The letter noted that the substantial reason for the levy was the decision of the McLaughlins not to settle the litigation and either sell their shares at market value or sign a shareholders acknowledgment (TB p 1656-1659). 229 There was evidence (Exhibit F 21) that on 6 March 2007 the managing agents, Robinsons, had printed a receipt dated 21 February 2007 noting that unit 5 (Garmen Pty Limited; Dunn) had paid $7,000; unit 22 (Garratt) had paid $10,000 and unit 3 (Garmen) had paid $12,000 of the special levy. (Garmen Pty Limited is a company associated with Mr Garratt.) As discovered, the notices of levy disclose an issue date of 23 February 2007 (Exhibit G). This, however, must be a computer glitch as there seems no doubt that the levy notice was received by the McLaughlins on at least 29 January 2007, if not before, since that was the date it was forwarded by them to their lawyers. 230 By email of 25 February 2007, Mr Lambert (Unit 1) advised Mr Garratt that he had received the special levy notice after the due date and thought he would be in a position to pay half in the next few weeks and understood from his conversation "that some resolution is expected this week that could result in the levy being substantially less" (TB p 1660). 231 By letter dated 5 March 2007, Mr Garratt wrote to St George Bank in which among other things he said that calling in half the levy in 45 days should satisfy for the draw down and that in the board's view the striking of the levy afforded the basis for draw down (Exhibit F 19). Mr Garratt says that in early March 2007, Mr Bartrop told him that St George Bank only required 50% of the special levy to allow draw down of funds. 232 As at 6 March 2007, it appears that of the special levy due 12 February 2007 only $29,000 had been received. No other default notices had been issued. 233 In correspondence passing at the time, reference was made to a telephone conference on 8 March 2007, in which the bank's solicitors apparently confirmed that the bank required three things: that there be no other mortgages over the shares; that pre-sale contracts to the requisite value had been exchanged; that shareholder acknowledgements were obtained and a resolution of the McLaughlins' litigation, preferably by purchase of shares (TB 1667-1668). 234 Mr Garratt says that on 12 March 2007, the directors resolved that only 50% of the special levy due in respect of each parcel of shares be required by 24 April 2007 with the balance stood over for the time being. The resolution made no reference to any conditions pertaining to the ability of shareholders to take the benefit of this resolution. Pikes, by letter dated 14 March 2007, advised Turner Freeman of this resolution (TB 1670). Turner Freeman responded (perhaps as a matter of more abundant caution) that day requesting whether the relief from the obligation to pay the levy in full included the McLaughlins. 235 On 15 March 2007, (TB 1672-1673) Pikes reported that "the board has ascertained the position of all the shareholders in respect of the special levy. [I interpose to note that there is no evidence that it had done so, although there are some email communications from shareholders in relation to the levy which were in evidence.] All shareholders [except the McLaughlins] intend to pay the special levy and apparently have means to do so. As a matter of fair treatment, all are to be informed that 50% of the amount in respect of each parcel of shares is to be paid by 24 April 2007, with the date for payment of the balance held over for the time being. … The board will not respond to a hypothetical situation such as you postulate in your letter about [the McLaughlins] somehow coming into funds at some uncertain time". (In that regard, how it was that the board had ascertained the position of all shareholders in respect of the special levy was not apparent on the evidence before me.) 236 By letter dated 16 March 2007, the company wrote to shareholders advising of the board's resolution that only 50% of the special levy need be paid by 24 April 2007 and the remainder held over for the time being (TB p 1678). (On its face that would not exclude the McLaughlins from the category of shareholders required only to provide a 50% levy.) 237 By 16 March 2007 letter (TB p 1675-1679), Pikes again said that the board would not respond to inquiries about time to pay based on hypothetical premises, such as the McLaughlins coming into funds at some future date by some uncertain means and then deciding to make a payment towards a levy that they denied any liability to pay. "All other shareholders are paying the special levy without protest and apparently have the means to do so". Again, the basis on which the latter assertion was made is not clear to me. 238 Turner Freeman requested information by letter dated 16 March 2007 as to what the company required to show an ability to pay part of the levy, what information it had had from other shareholders that it had apparently found acceptable and what payments had been made by shareholders other than the three disclosed in the Supreme Court proceedings before Barrett J. 239 By letter dated 19 March 2007, Pikes responded that it seemed to them that the McLaughlins were seeking time to pay a levy which they stated they had no means to pay and had no intention of paying and asked if this was not the case. Their letter stated that the only practical way that the company might achieve payment of the contribution in respect of the levy due in respect of unit 4, by about the date that the other shareholders were obliged to pay it, would be if the company were to pursue enforcement action in respect of the shares of unit 4 at the first available opportunity (TB p 1680). 240 By letter dated 19 March 2007, Turner Freeman advised that the plaintiffs were attempting to borrow funds from a third party but that if they had to make a payment under protest they would do so. Pikes responded, by letter dated 20 March 2007, that they would consider any reasonable credible payment proposal but would not "grant indulgences" and the only practical basis for payment appeared to be forfeiture. It stated that the board had relied on what it knew of the finances of other members, "who always paid on time without threat" (TB p 1682-1683), an assertion that seems to ignore the fact that at least Mr Lambert and Mr Murphy had at times been in default of payment of levies. In fact, less than 22% of the lesser (50%) portion of the total January 2007 special levy was paid by 24 April 2007. 241 On 20 March 2007, Turner Freeman enclosed a cheque for 100% of the special levy for the McLaughlins under protest disputing the validity of the levy. 242 By 21 March 2007 letter, Turner Freeman then requested a refund of the 50% levy paid and noted that the McLaughlins had now shown that they could pay the levy (TB p 1685). The response from Pikes on 21 March 2007 was that they would only remit the payment as part of a wider agreement if the proceedings were discontinued and the McLaughlins signed a shareholder acknowledgement (as required by the bank) (TB p 1686-1687). 243 On 10 April 2007, Pikes wrote to St George Bank's lawyers in relation to outstanding items, including the requirement that Mr Garratt's agent (Mr O'Meagher) provide a shareholder acknowledgement (TB p 1690-1695). (It was the later discovery of this letter that led to a subpoena being issued by the McLaughlins for evidence of any agreements or arrangements between Mr Garratt and other shareholders in order to ascertain the extent of his interest in the company.) 244 Minutes on 20 April 2007 of a directors' meeting show the ratification and confirmation of execution of the Bank's facility offers of 4 October 2006 and 2 April 2007, mortgage, charge, Builder's Tripartite Deed, Shareholders' Ratification, Bluestone contract 17 March 2006, road dedication deed with Manly Municipal Council, Building Contract 10 November 2006 and settlement deed with Southern Cross Constructions (TB p 1749-1752) and refer to the pre-sales contracts entered into by Mr Brown and his company in relation to certain of the units to be constructed. 245 The first draw down of funds occurred on 3 May 2007 and Southern Cross Constructions re-commenced work. 246 As at May 2007 Mr Garratt had apparently had no further contact with Mr Lambert and emailed asking for the half levy payment from him and saying it would be "good if the payment could be got out of the way soon" (Exhibit F (25), correspondence which seems inconsistent with the assertion that the board had satisfied itself as to the ability and intention of all shareholders to make payment of the levy within the time specified. 247 By letter on 6 June 2007, Mr Garratt wrote to shareholders enclosing notice of extraordinary general meeting of 28 June 2007 to authorise buy-back of unit 22 for $950,000 within 30 days of strata title registration. It enclosed a feasibility from Mr Bartrop showing a deficit of $1.67 million and that the special levy instalment due 24 April 2007 had been substantially paid by 15 of 22 units (with 8.2% interest capitalised monthly payable "where time to pay has been requested" on the outstanding amounts of the levy) (TB 1755-1756). I was informed that the arrangement as agreed by the board was that interest was to be payable only on any outstanding portion of the 50% component of the levy required to be paid by 24 April 2007, not the balance due at some later time as notified by the board – ultimately 30 September 2009. 248 On the same day, a notice of intention to carry out a share buy-back was lodged with ASIC (Ex N). However, this notice related to an intention to buy-back Mr Garratt's shares only (ie not those of Mr Heyworth, who at that stage was pressing for additional 'compensation') and the share buy-back agreement was an earlier version of the agreement into which the company ultimately entered with Mr Garratt. There was no evidence of any further notice lodged in relation to the intention to buy-back either of the directors' shares. Accordingly, as a procedural matter there was non-compliance with the requirements under the Act in relation to the buy-backs in this regard. 249 On 28 June 2007, the Annual General Meeting was held. Proxies for Ms Ashford and Ms Pether were given to Mr Dunn. Amended motions were put in relation to both Mr Heyworth's and Mr Garratt's units, namely that the buy-back be at $950,000 or a value determined by an independent valuer 60 days after completion (TB p 1757-1759). 250 By notice dated 27 December 2007 (TB 1784), the January 2008 annual general meeting was convened. It is not clear when the notice was posted or received (TB 1784; Affidavit of Mr McLaughlin, sworn 28 July 2009, at [84]) – there would have been 27 days' notice assuming that the notice was posted on the day it was dated (27 December 2007), given the deeming provision in article 110), ie notice would run from and including the day of 28 December 2007 to the day of the 23 January 2008 (section 105 of the Corporations Act 2001 (Cth)), which is 27 days. (Voting on the Buy-Back Resolutions at the 2008 annual general meeting was not by any means unanimous as the McLaughlins voted against (TB 1792).) 251 Mr Garratt's letter to shareholders enclosing the notice of Annual General Meeting included the accounts to the end of June 2007. Mr Garratt noted that of the special levy $2,545,455 had been received and $1,677,820 was receivable "in arrears"; that all shareholders had paid 50% of the levy except unit 12 (per agreement), units 7, 14 and 15. 252 Draft share buy-back agreements were prepared, clauses 5 and 7 of which had the effect that those shareholders would not be liable to contribute to any losses/levies after completion of the buy-back. (Mr Burchett submits that this provided an incentive to Mr Garratt to ensure that the final units were not sold (or a final accounting done) until after 21 days after the strata plan was registered. However, nothing was put to Mr Garratt to suggest that there was any deliberate delay in that regard and the evidence would not support any such conclusion – the difficulty in sale of the penthouse units being attributed to a hitherto undisclosed encroachment with the neighbouring property). 253 According to Mr Porman of Turner Freeman, at the January 2008 meeting Mr Garratt said that the reason why half the levy had not been refunded to the McLaughlins was that the board had offered to exempt shareholders where the board was satisfied they were able to pay (if required) or had undertaken to pay interest when required that the board was not satisfied that the McLaughlins were able to pay and therefore the full amount was "considered voluntary". Mr Porman says he asked whether the shortfall would be $1 million and would need another special levy and that Mr Garratt had said that the project was within budget and the shortfall would be unknown until sales. 254 By letter dated 16 January 2008, Mr Garratt wrote to the McLaughlins advising that on transfer to strata title the company would be wound up with final accounting of moneys and costs of the litigation set off against anything due. Mr Garratt expressed the view that the litigation did not prevent the transfer of strata titles and could leave the McLaughlins as the only shareholders (with unit 4 sold up to defray the costs of liquidation (TB 1785-1787). The McLaughlins (not unreasonably) perceived this letter as a threat to reduce the company's capital and leave to them as "the only shareholder left in the company". (Much reliance was placed on the import of this letter in the February 2010 injunction application before me). 255 According to the minutes for the 24 January meeting, it is not clear whether Mr Garrett and Mr Heyworth were absent during the consideration of and passing of the buy-back resolutions. The minutes indicate that both the resolutions in relation to the buy-back of units 22 and 23 were passed as special resolutions and that the sole dissenters were the plaintiffs (TB 1788 – 1792). Reference to the sole dissenters being the plaintiffs does not automatically lead to the conclusion that Mr Garratt and Mr Heyworth did vote on these resolutions as they could have abstained, rather than dissented, although there is no express record of either Mr Garratt or Mr Heyworth abstaining or being absent for these resolutions. It is noted that Mr Garratt declared his interest with respect to the resolution regarding the buy-back of his share and stood down as chair in respect of consideration that resolution (TB 1791). 256 By letter dated 15 February 2008 Mr Garratt wrote to shareholders updating them as to completion due in May/June 2008, with the roof and lift works due to be completed by the end of February 2008, and as to the procedure for buying one of the three new car spaces. The letter asserted that $150,000 to $200,000 had been added to the value of the units and also attached the company's letter to the McLaughlins, which was mentioned at the Annual General Meeting, setting out the course to be followed in making the transition from company title to strata title. 257 By letter dated 26 February 2008, Turner Freeman again requested a refund of half the levy on behalf of their clients on the basis that (by in fact paying the sum) their clients had shown that they could pay the levy. They also demanded a withdrawal of the "threat" selectively to reduce capital which they said had been made by Mr Garratt in his 16 January letter (TB 796-1798; TMP 106). 258 By letter dated 27 February 2008, Pikes refused to refund the half levy requested, saying that it had been paid as a voluntary advance payment (stating that this was since the levy had not been rescinded and the parties knew that only a 50% payment was required). It was said that payment did not demonstrate the ability of the McLaughlins to pay. 259 After further correspondence, by letter dated 7 May 2008 Pikes again seemed to suggest (at TB 1810-1815) that the 50% was paid voluntarily (and was not paid not under protest), this time on the basis that no demand had been made for payment in full at that time, and noted that there was an inference that there was a third party maintaining the litigation (though it is not clear how the latter related to the voluntariness of the payment or the company's refusal to refund half.) 260 By letter dated 19 June 2008, Mr Garratt wrote to shareholders advising that completion was due on 15 July 2008 and to expect re-occupation on 1 September 2008. The letter said that the marketing of the two unsold units would be by the end August. (It was anticipated that by the end of August bank debt would be reduced to approximately $4.5 million.) A complete accounting, it was said, would be provided once penthouse sales were settled. 261 On 1 July 2008 the agreement to buy-back shares from Mr Garratt was signed. It made it clear that Mr Garratt would be liable for levies only until completion of the sale (which was to take place on the earlier of winding up of the company or 21 days after strata registration). (Thus, as Mr Burchett has noted, Mr Garratt will not have incurred a liability for any part of the January 2010 levy referable to his surrendered shares for unit 22 – though he will of course have been liable for levies in respect of the remaining units in which he has an interest. Conversely, holders of shares in respect of the new units would presumably also now have a liability to share in those levies – unless exempted in some fashion.) 262 On 18 September 2008, the agreement to buy-back shares from Mr Heyworth's company (Permfast Pty Limited) was signed - again, as an outgoing shareholder he was to bear all levies referable to unit 23 only to completion of the sale on the earlier of the winding up of the company or 21 days after strata plan registration. 263 By letter dated 17 October 2008, Mr Garratt advised shareholders as to the delay in Council approvals; that the penthouse had failed to sell on 20 September 2008 but contracts had exchanged for $3.92 million; and that, on settlement of sales, the company should be able to repay almost all construction debt. 264 On 22 October 2008, Mr Garratt wrote to shareholders advising of Hookers' rental estimate for the renovated units - $750 per week for McLaughlins' unit - and that completion was expected in November. 265 On 6 November 2008, Mr Garratt wrote to shareholders (TB 1857-1863) advising that their units would be available for occupation on 15 November 2008. Notice was given of an extraordinary general meeting to be held on 30 November 2009 to amend the articles to amalgamate the four units on level four into two units (which was a condition of sale in respect of those units – acquired by Mr Brown) and that the proceeds were to go towards the bank debt. 266 On 1 December 2008 McLaughlins' unit was tenanted again at an increased rental of $750 per week. (The McLaughlins complain, however, that there is no access to the ground floor drying room, garden area with outside washing line, storage room at back of ground floor stairs or roof area.) 267 In February 2009, the strata plan for Dungowan was registered. 268 On 8 May 2009, Turner Freeman again wrote to Pikes requesting repayment of half levy to enable the plaintiff to visit an ill relative in England. Information was requested as to why an advertising sign had been allowed for Mr Brown's unit and why there was a change to configuration of the McLaughlins' unit. (In evidence at the hearing, the answer to that last question was provided by Mr O'Reilly, namely that it was regarded as necessary to meet Council heritage requirements.) 269 On 14 May 2009, notice of Annual General Meeting to consider enclosed reports for end June 2008 was issued. The enclosed directors' report noted that all members had paid 50% of the January 2007 special levy except the owners of unit 12 and the owners of units 7, 14 and 15 who had agreed to pay with interest on completion. The bank loan owing was said to be $15.638 million, with total assets said to be $18.3 million including the unpaid balance of the special levy. 270 On 18 May 2009, Mr Garratt wrote to shareholders advising that the registration of the strata plan had been delayed by an encroachment until the end of April 2009 and that the strata titles would not be released until bank debt was paid. In the letter it was recommended that the company redecorate the foyer, keeping the penthouses vacant and selling them within three to six months. The letter noted that the balance of the special levy was now required and there would be another when the penthouse was sold. Reference was made to the renegotiation of bank facilities for another 12 months. A shortfall was forecast and as was second levy of $2.177 million. 271 On 6 June 2009, the first Annual General Meeting of Owners Corporation was held. The quarter yearly levy increased from roughly $750 to $1,370. 272 On 10 July 2009, Pikes wrote to Turner Freeman, noting that as the balance of the January 2007 levy was shortly to be called no refund could be made. 273 By letter dated 20 August 2009, St George Bank emailed Mr Bartrop advising of an increase in the facility limit to $8.6 million. The email stated that if the sub-penthouses were sold at valuation (for $6.5 million) there would still be a further $2 million debt to extinguish. 274 By letter dated 27 August 2009, Cooraclare Pty Limited (Mr Bartrop's new company) advised the bank that with all levies and the current levy, over $3 million had been "raised" without recourse to security (a questionable statement when in fact that sum had been levied but not by that stage in fact received by the company) and all had contributed to the development. (The main outstanding creditors were disclosed to be Southern Cross Constructions, $380,000, Australian Taxation Office, $1.1 million, and Mr Heyworth, $950,000, totalling $3.3 million. No mention was made of any amount due to Mr Garratt, something said by Mr Bartrop in the witness box to be an oversight.) 275 30 September 2009 was the due date for balance of first levy to be paid by all other shareholders. 276 Following the hearing, a further (short) extension of the St George Bank facility was approved in December 2009. In the meantime, as noted earlier, winding up proceedings were commenced by Southern Cross in November 2009. 277 There was a report to shareholders as to the financial status of the development in January 2010 and, as indicated earlier, the company issued a further special levy in 2010. The company also forwarded to shareholders in January 2010 a pro forma Deed of Surrender of Shares, which it informed shareholders it would enter into in order to release to them the strata titles for their respective units. That deed made provision for a reconciliation of company debts as to 28 February 2010 and for outgoing shareholders to be liable to the company for any shortfall on the reconciliation of these debts. 278 It was asserted by the McLaughlins, in their response (issued through their lawyers) to the company's letter of 25 January 2010, that what was being proposed would undermine any judgment of this Court in favour of the McLaughlins. An undertaking was sought from the company not to deliver any titles to shareholders pending delivery and satisfaction of judgment "or that any shareholder who seeks to have their share certificate exchanged for release for their individual strata title will be required to undertake to contribute any shortfall of the company for any money it may owe to our clients as a result of any orders made in the court proceedings including any order for costs related to those proceedings." The company, in effect, acceded to that demand. 279 An undertaking was also sought (and in due course given by the company) that the company not seek to enforce against the McLaughlins any non-payment of the proposed levy (at all if there were to be a judgment in the McLaughlins' favour or otherwise until at least 30 days after the judgment was handed down). 280 Given the 28 February 2010 reconciliation date, (and the fact that I had refused interlocutory relief to restrain the release of strata titles to unit holders under the proposed arrangement which included potential liability for outgoing shareholders in relation to debts of the company arising under these proceedings, at least if those accrued prior to 28 February 2010), I adopted the course of making final orders in advance of publication of these written reasons. 281 Finally, before turning to the relevant Articles of Association and the issues for determination, I should note that there was a suggestion put during cross-examination of Mr Garratt and Mr Bartrop that there had been some collusion between them as to their evidence (although no submission to that effect was made at the close of the hearing). It arose at least in part because paragraph 57 of Mr Garratt's affidavit, as sworn (though this part was not formally read), contained the following statement "Steve: give as much detail as you can", in a paragraph commencing with the words "Mr Bartrop told me most times when we spoke in December and January that creditors were pressing him for payment and that they were becoming increasingly agitated." Mr Garratt agreed that those words had been left in the sworn affidavit by oversight. Mr Garratt, who accepted as "axiomatic" the impropriety of collaboration between witnesses as to their evidence (T 391), insisted that this was an instruction to the company's solicitor (Ms Kim Probert) to follow up the issue with Mr Bartrop (T 395). As a short hand mode of conveying such an instruction this might be so, although an instruction to Ms Probert would surely not commence with the word "Steve". That said, Mr Bartrop appeared genuinely taken aback in the witness box at any suggestion that he had discussed his evidence with any other witness and it seems to me that the infelicitous method of conveying instructions to Ms Probert, if that is what this reference was, is insufficient to form any adverse conclusion as to the credit of the respective witnesses in relation to a matter (contact from creditors) of which it is not suggested that Mr Garratt had personal knowledge and to which he did not attempt to depose other than in the broad terms which were contained in that unread part of his affidavit. Articles of Association 282 The company's Memorandum of Association (TB 107) set out the specific objects for which the company was established as being, inter alia, to "purchase… manage and conduct the building known as Dungowan Flats … as first class homes, flats or self-contained units with all necessary and convenient facilities, garages and appurtenances for the use and occupation of members" (clauses 3(1) and (2)) and to acquire other land or buildings to and "reconstruct and adapt any … buildings… found necessary or convenient for any of the purposes of the Company: (clause 3(9)) (my emphasis). 283 Clause 3(26) empowered the company "to do all such acts matters and things as are or may appear to the company to be incidental or conducive to the attainment of the above objects or any of them or any objects of a like or similar nature". 284 Prior to the amendments made in the course of the redevelopment project, the share capital of the company was divided into 56,550 shares with power to reduce or increase the share capital and to divide it into several classes to which special rights could be attached (clause 5). 285 Under the Articles of Association (TB 116), the company's shares are classified into 26 "share groups". Mr Burchett submits that this creates different classes of shares (each group being a separate class) with both common and individual attached rights (citing Crumpton v Morraine Hall Pty Limited (1965) NSWR 240; (1965) 82 WN (Pt 1) (NSW) 456 and Wilson v Meudon). 286 The holding of each of the share groups relating to units in the building confers on its holder "the right to use as a home" the unit to which the particular share group relates (with corresponding rights of use as an office or garage conferred on holders of shares in the groups relating to the office/garage areas) as well as the entitlement "to use in common … all hallways, lifts, passage-ways and stairways and other portions of the … building and the grounds …, which are available for the general use of members (article 3(b)). (The holder of shares in share group Y (had such shares been issued) would be entitled to use of the roof space and to erect thereon a penthouse.) 287 Although not stated as a right of "exclusive" use of the units in question, it seems to me that this follows from the right that the unit(s) are to be used "as a home", which to my mind would connote exclusivity of use. 288 Sub-articles 3(c)-(e) make provision for the further rights and obligations of those described variously as "the holder of each such group", "the holder of the group" and the "holder of any group", including the right to lease the unit to which the share group related with the consent of the board. 289 Relevantly, for present purposes, article 3(f) provides that: the rights conferred on [sic] the obligations imposed by this Article shall not be abridged, varied, restricted or released except by unanimous resolution of the members who are holders of a share group (my emphasis) 290 Article 4 (with the amendments passed in January 2007 italicized) provides: The Directors shall have the right in each year at six monthly intervals or oftener if they shall so determine to make a levy on the holders of shares in the Company for an amount not exceeding the amount of the expenses charged and outgoings referred to hereafter and so that each shareholder shall only be required to contribute to such levy his proportion of these expenses charges and outgoings in the same proportion as the total number of shares in each group bears to the total number of issued shares in the Company save that where any shareholder has or shareholders have not paid an amount previously levied the directors may include any such unpaid amount in a subsequent levy ('a shortfall levy') which shall be calculated and payable by the other shareholders on the basis that the shares relating to the shareholder or shareholders who have not paid are excluded from liability in respect of the shortfall levy and the total number of issued shares in the Company for the purposes of the calculation is reduced accordingly. Any unpaid levy amount as aforesaid remains payable to and recoverable by the Company, notwithstanding the striking and payment of a shortfall levy, and when payment of any such unpaid amount is received, the same shall be credited to the account of the shareholders the subject of the shortfall levy in the proportions in which the shortfall levy was struck. The expenses charges and outgoings abovementioned shall be as follows:- (a) All rates and taxes. (b) The amount payable for Federal and/or State Land Tax or other charges imposed upon the said property by any properly constituted body. (c) Insurance premiums for insurance of the said building and of such of the contents as are the property of the Company against loss by fire storm or tempest premiums for workers compensation fidelity guarantee superannuation Public Risk or such other risks as the Directors may from time to time determine. (d) The costs of such external painting repairs and maintenance as are in the opinion of the Directors necessary to keep the building in good order and condition. (e) The cost of colouring repairs and maintenance of such internal and external passages and rooms as are in common use and cleaning thereof and the proper maintenance of gardens lawns paths and grounds and the replacement of articles in common areas. (f) The carrying out of any requirement of any local or statutory authority except in relation to any particular flat. (g) The amount payable for electric light and power for outside lighting and in those portions of the building which are in common use. (h) Expenses of carrying on the Company including directors' fees accountancy and legal charges management charges caretakers expenses cleaners expenses and lift maintenance and replacement. (i) Any items of expenditure carried forward from the previous year. (j) All charges and outgoings which the Board in its discretion considers expedient to maintain or enhance the value of the property. (k) Such amount as the Board in its discretion considers desirable to provide for future repairs or other contingencies. (l) Any other expenditure properly incurred in the conduct of the building as first class residential home units. (m) All money and amounts (in any currency) that the Company is or may become liable at any time (actually, prospectively or contingently, whether alone or not and in any capacity) to pay to or for the account of St. George Bank Limited ABN 92 055 513 070 and its respective successors, assigns and transferees (whether alone or not and in any capacity). It includes money and amounts: (a) in the nature of principal, interest, fees, costs, charges, expenses, duties, indemnities, guarantee obligations or damages; and (b) whether arising or contemplated before or as a result of any assignment (with or without the Company's consent) or any debt or liability. For the purposes of this clause the expression "year" shall be the period commencing on 1st July in one year and ending on the 30th June in the succeeding year." 291 Article 5 provides for a notice of levy to be given to members which becomes due and payable 14 days after notice is given, unless the directors otherwise determine. If payment is not made, a second notice is to be given and if the levy is still not paid the company may take possession of the flat. The company has a lien on the shares of the holder until the levy is fully satisfied. 292 Article 8 provides that the rights conferred by Article 3 are subject, inter alia, to the obligation not to "obstruct or hinder the rights of other occupants of the building or in any way interfere or annoy them". 293 Article 10 provides that new shares may only be issued "without prejudice to any special rights previously conferred on the holders of existing shares". 294 Article 11 provides for a 75% vote of any class of shares to vary the rights attaching to those shares. 295 Article 17 provides that the company may sell any shares on which it has a lien but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of 14 days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable has been given to the registered holder of the share. 296 Forfeiture of shares is dealt with in article 32. If a member fails to pay any levy or installment of levy on a day appointed for payment, the directors may serve notice requiring payment of the unpaid amount with interest. The notice must specify a further day not less than 14 days after the date of the notice on which payment is to be made and state that in default of payment by that day "the shares in respect of which the call was made will be liable to be forfeited". If notice foreshadowing forfeiture does not produce payment, the member's shares may be forfeited by resolution of the directors. Pleadings 297 Before addressing the respective issues for determination, I should note that much complaint has been made (particularly in the ongoing exchanges of submissions to which I referred in my February interlocutory judgment) as to the question whether the McLaughlins are now seeking to depart from their pleaded case. Mr Priestley has asserted that the McLaughlins should not be permitted to raise in final submissions a case not pleaded against the company. Mr Burchett denies that there is any such departure and denies that he has transgressed any prohibitions on the scope of submissions in reply. As to the latter issue, the dispute between Counsel as to the respective submissions I found to be unedifying. I have focussed my attention on the matters pleaded and the evidence before me in an endeavour not to be diverted by the recriminations and rhetoric employed in the respective submissions. 298 As to the pleading issue, in Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited [2007] NSWSC 124; (2007) 63 ACSR 1, McDougall J recognised that parties might, by their conduct of a case, acquiesce in the widening of a pleaded case (though noting that in that case there had been no express acquiescence nor any acquiescence by inference in any widening of the pleaded case). On appeal (Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited [2008] NSWCA 206), Ipp JA said (at [422]): At trial, there may be a departure from the pleadings where adherence to them would be unjust or unfair. In Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; 92 ALR 53; [1990] HCA 11 ( Banque Commerciale ) Mason CJ and Gaudron J said (at CLR 286–7; ALR 58–9): The function of pleadings is to state with sufficient clarity the case that must be met: In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference. Dawson J (at CLR 293; ALR 63) quoted the following statement by Isaacs and Rich JJ in Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 at 517; [1916] HCA 81: But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. and observed: (at CLR 296–7; ALR 66): But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. 299 Ipp JA noted that (at [424]), other than in a case in which the parties have chosen "to disregard the pleadings and to fight the case on additional issues chosen at the trial", any relief granted must be founded on the pleadings. 300 Insofar as Mr Priestley now seeks to hold the McLaughlins to their pleaded case, it seems to me that there is nothing inappropriate in him so doing. I am of the view that there was no acquiescence during the hearing before me in any widening of the case pleaded by the McLaughlins. (That does not mean that I accept all of the criticism made of the various submissions (a criticism perhaps more appropriately levelled in many instances at the tone and rhetoric so employed rather than their content per se).) 301 By way of example, the McLaughlins have criticized the board over a number of years in relation to a variety of matters, not all of which (though the subject of criticism in the submissions and referred to in some of the material before me) are not pleaded (or particularized) as part of the case before me – such as the question whether there was a failure by the board properly to maintain the building over the years (the McLaughlins saying that the company should not be permitted, in effect, to rely on its neglect in maintaining the building as a basis for asserting that there was no practical choice but to carry out the extensive project of renovation which it ultimately did) and whether there was a breach of duty in failing to repair the lift with the funds raised by the lift special levy. Whether or not the lift could (or should) have been repaired pending a decision as to other repair issues and whether the board was otherwise in breach of a duty properly to maintain the building, are matters not directly in issue in these proceedings. Even if those matters could otherwise be seen as an instance of the alleged oppressive conduct, they are not pleaded or particularized as such. (The alleged breach(es) of directors' duties in respect of which leave to commence a derivative suit is sought, as I understand it, go to matters relating to the decision to commence the project and the means by which that was done, including allegations as to failure to disclose matters in relation to benefits to be obtained by the directors themselves.) 302 Similarly, whether or not a one storey (or, for that matter, a three or four storey) addition to the building was, with hindsight, a better course for the company to adopt than to repair the building so as to achieve a further 10/20 years of estimated life and then to attempt to sell the building, there seems to me no basis to gainsay the fact that there were serious structural problems in the concrete slabs (referable, as I understand it, to a coke breeze form of concrete used in the construction of the building) which (even apart from any water penetration problems) needed to be addressed sooner rather than later. However prudent it may have been for the company to undertake pilot testing (or even a panoply of tests) before it committed to a particular repair project, there seems no doubt that there were structural problems which whoever then owned the building would have had to resolve within a relatively short term. 303 I have approached the determination of the issues in this case based on the claims as pleaded, as indicated in my reasons, and do not consider the complaints peripheral to the pleaded claims. Much of the criticism by the company of the McLaughlins' Submissions in Reply and, conversely, by the McLaughlins of the company's Supplementary Submissions, seems to fall away when that is understood. In those circumstances, I do not propose to address the minutiae of the complaints made in the respective submissions served after the conclusion of the hearing. Issues 1 Validity of Resolutions/Breach of contract 304 The McLaughlins have challenged a variety of decisions made by the board and/or the members of the company, respectively, those being: (i) the September 2006 Resolutions; (ii) the December 2006 Resolutions; (iii) the January 2008 Buy-Back Resolutions; (iv) the January 2007 Levy Resolution; (v) the January 2007 Notice of Levy (issued by the company's managing agent); (vi) the February 2007 Forfeiture Notice (issued by Mr Garratt as chairman of directors of the company on behalf of the company). 305 The validity of these resolutions is challenged on a variety of grounds. However, there is a real question as to the whether anything ultimately turns on a number of the complaints which have been made (particularly those in relation to resolutions which, of themselves, were not necessary for the development to occur) as noted by Barrett J as long ago as his September 2006 judgment. 306 In relation to any procedural irregularities, the company relies upon what is, in effect, the presumption of validity under s 1322(2) of the Corporations Act. Austin J in Howard v Mechtler considered the circumstances when s 1322 will be available to cure inadequacy of notice: 32. By s 1322(1)(b)(ii) the reference to a procedural irregularity includes a reference to a deficiency of notice. Therefore s 1322(2) applies to produce automatic validation of the meeting notwithstanding the lack of adequate notice, unless the Court intervenes by order. 33. The general approach of the Courts to matters of this kind is to seek to use s 1322 in a beneficial manner where it is clear that the defect is in the nature of a technical one and no injustice has occurred. In Australian Hydrocarbons NL v Green; Green v Australian Hydrocarbons NL (1985) 3 ACLC 779 at 785-786; (1985) 10 ACLR 72 at 79 Hodgson J expressed the opinion that the onus of proving substantial injustice rests on those alleging it. One infers from his judgment that he regarded the onus as a substantial one. Similarly in Re Tantalex Ltd (1987) 5 ACLC 266; (1986) 8 NSWLR 8 the Court was clearly willing to use s 1322 to cure a lack of 21 days' notice of a special resolution, notwithstanding the specific requirement of the Corporations Law that 21 days' notice be provided. The criteria which need to be established in order for the Court to intervene under s 1322(2) were explored in Sipad Holding ddpo v Nicola Popovic (1995) 13 ACLC 1,773; (1994) 61 FCR 205. 307 His Honour, there having considered the particular authorities so cited, formed the view that it was appropriate to intervene by declaring the proceeding to be invalid by reason of the deficiency of notice having taken into account, among other things, the importance of the resolution there being considered (a resolution to remove directors) and the risk of confusion which his Honour thought would result if such an order were not made. 308 In relation to the different aspects of s 1322, Thomas J in Re Caysand No 64 Pty Ltd (1993) 11 ACLC 1,197 at 1,201-1,202 had said: It seems to me that s 1322 has two streams, the first essentially under subs (1), (2) and (3), and the second essentially under subs (4), (5) and (6). They are not entirely separate, but they envisage two different types of application. The first three subsections postulate the prima facie validity of any `proceeding under this [Act]' despite procedural irregularity. Any such proceeding `is not invalidated... unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court' (s 1322(2)). The following three subsections (subs (4), (5) and (6)) provide a wider base for remedial action, in that they give the court power to cure `any act, matter or thing purporting to have been done... under this [Act] or in relation to a corporation' (s 1322(4)(a)). In this instance however, subs (6) requires that the court shall not make an order (declaring the act etc to be not valid ) unless it is satisfied of certain things including the procedural nature of the act or omission, the honesty of the persons concerned in it, and the public interest. I am of course not attempting a full paraphrase, and am attempting to indicate the essential structure of the section. Although subs (6) says that the court shall not make an order `under this section unless...', subparas (a) and (b) confine the reference to orders under subs (4). Thus, except for subpara (c), which prevents the court making an order unless satisfied that no substantial injustice is likely to be caused to any person, subs (6) has no application to an application made under s 1322(2). The essential distinction is that subs. (1), (2) and (3) primarily contemplate a declaration of invalidity by the court, for which the onus lies upon the party attacking the validity of a proceeding to satisfy the court of substantial injustice that cannot be remedied by the court... In short, s 1322(2) gives an initial presumption of validity to any `proceeding under this [Act]', and that is only displaced by an actual declaration of invalidity. On the other hand applications under subs (4), (5) and (6) give a wider coverage of matters that may be remedied, but, where a declaration of non-invalidity is sought, (which in practical terms I am prepared to regard as a declaration of validity), the onus is on those who seek such an order to satisfy the court of the matters mentioned in subs (6), as the court is expressly required not to make an order unless satisfied of those matters; Elderslie Finance Corp Ltd v ASC (1993) 11 ACLC 787, 790.' 309 Mr Burchett, nevertheless, contends that the whole course of conduct of the company (including the passing of these allegedly ineffective or invalid resolutions) was oppressive and hence, whether any procedural irregularity is such that it would not invalidate the respective resolutions, it remains necessary to consider each of those resolutions. ( i) September 2006 Resolutions 310 At a meeting on 9 September 2006, resolutions were put to the general meeting (passed with dissent from the McLaughlins) that: (a) the company adopt proposed amendments to article 3 (in summary those being): the amendment of article 3(a) to provide for an increase in the company's share capital, the re-classification of a number of shares from share groups Y and Z (which groups had entitlements to rights in respect of the roof area and the office space) to group AA, and the classification of the new shares into 8 new share groups; and the amendment to article 3(b) to delete the entitlements of share groups Y and Z to use of the roof space and office; and to confer on the new share groups rights of use and parking rights in respect of the respective new units to be built, as well as the right to use in common with all other members the common areas and garden; (b) subject to the board's satisfaction with the construction and finance agreements, the company enter into agreements for, and implement, the redevelopment of Dungowan Flats as proposed by Mr Bartrop; (c) the shareholders approve $950,000 as the amount for which the company might buy-back the shares to each of units 22 and 23, payable on completion of the project; and (d) an allowance of $250,000 be paid to Mr Garratt on completion of the project for his work in relation to the project. 311 Paragraph 5 of the Further Amended Statement of Claim, contains the allegation that each of the September Resolutions was invalid, void and of no effect. This allegation is put on a number of bases. It is alleged that: (a) there was not the unanimous consent required of the members to the amendments to article 3, in breach of article 3(f) and s 246B of the Corporations Act ; (b) each resolution amounted to a fraud on any power to pass it and on the minority dissenting members (ie the McLaughlins); (c) the notice convening the Annual General Meeting (in breach of ss 249H and 249L of the Corporations Act ) failed to state any of the resolutions other than the resolution for the adoption of the articles; failed to state that any resolution was being put forward as a special resolution; failed to provide information in a clear, concise or effective manner; and failed to give the requisite period of notice of the meeting; (d) the company had failed to provide members with such information as was reasonably necessary for them to make an informed decision whether to attend the meeting or vote in respect of any of the resolutions, within a reasonable time prior to the meeting or at all; (e) the respective resolutions as to entry into the construction and finance agreements and as to the allowance payable to Mr Garratt were uncertain; (f) the resolution approving the amounts for which the company might buy-back the respective shares to units 22 and 23 provided for a selective buy-back of shares without compliance with s 259A of the Corporations Act ; (g) each of the resolutions was procured by material misrepresentation as to specified matters, namely that the terms of the funding and construction agreements had been finalized in principle and were reasonably acceptable to the company (when they were not) and that the compensation to directors had been assessed by an independent expert (when the position was that Mr Bartrop was the company's development manager and personally interested in promoting approval of the development and compensation package). 312 As the McLaughlins have not formally withdrawn any part of their claim (even though they may not have addressed in submissions part or all of the pleaded case in respect of all of the said resolutions) it is necessary to consider each of the particular resolutions in respect of which complaint is made. Where the validity of a group of resolutions is attacked on the same basis, I will, for convenience, deal together with that group of resolutions for the purposes of that particular issue. I deal first with the nature of the particular resolutions. (a) Resolution to amend article 3 313 An initial question arises (which was noted by Barrett J when the matter first came before him) as to whether the requirement for unanimity of resolution in clause 3(f) refers to unanimity amongst the member or members holding the shares that make up a particular share group or refer to unanimity of all the members holding the shares making up all the share groups (but disregarding members holding shares that are ungrouped); ie whether the opening words of clause 3(f) refer to the rights and obligations pertaining to the shares of a particular designated group or to the totality of the rights and obligations created by the article in respect of all shares making up all the groups. 314 His Honour understood the McLaughlins' approach to mean that the rights and obligations attached by article 3 to a particular group of shares could not be altered except with the consent of all the persons who are holders of shares of that group. Before me, I think the contention of the McLaughlins went further and that what was submitted was that the article means that there can be no variation of the rights or obligations created by article 3 (whether that variation be referable to a particular share group or to all share groups) without the unanimous consent of all holders of share groups (perhaps with the exception that article 11 might provide some relaxation of the requirement for unanimity in cases to which it applies). 315 The company's position seems to have been that article 3(f) means only that the total scheme of rights and obligations under article 3 could not be changed without the unanimous consent of every person holding any of the grouped shares and that there must be agreement within a share group before rights and obligations in relation to that share group are relevantly affected. 316 It is submitted by Mr Burchett that article 3(f), as properly construed, has the effect that no change to the rights or obligations created by article 3 in respect of any share group can be made without the unanimous consent of all holders of all share groups (and hence, as I understand it, that it is not necessary to find that the particular amendment to clause 3 was one which affected the McLaughlins' own rights or obligations). If so, then the deletion of the rights in relation to share groups Y and Z would have required unanimous consent of the holders of all other share groups even though there was no actual holder of shares in the groups designated as Y and Z. 317 Mr Burchett submits that the proper construction of the articles is that each share group constitutes a different class of share but notes that if, contrary to that submission there is only one class of shares in the company created by the articles, then s 246C(5) of the Corporations Act deems the issue of new shares to vary the rights attached to the existing shares if not the same as the existing shares and not provided for under the Articles. Which members are comprised by the phrase "all members who are holders of a share group"? 318 The first issue arising in relation to the construction of article 3(f) is therefore whether the reference to 'all members who are holders of a share group' means that the consent of all such members (ie all shareholders other than those whose shares do not give rights in relation to particular areas of the building) is required for a change (of the kind contemplated in the article – ie abridgement, variation, release or restriction) to the rights conferred or obligations imposed by article 3 (as Mr Burchett contends) or whether the article should be construed (as Mr Priestley contends) simply as requiring the unanimous consent of all members who are holders of shares in that particular share group whose rights or obligations would be affected by the change. (On Mr Priestley's construction there would seem to be no room for operation of the provision determining whose vote counts where a share group is jointly held.) 319 Both parties accept that the word "on" in the phrase "rights conferred on the obligations imposed by this Article" should be construed as "or". 320 Mr Burchett contends that 3(f) does not, in its terms, place a restriction on the variation of the rights or obligations attaching to any particular share group but places a more general restriction on the variation of any of the rights and obligations conferred by article 3 and extends not simply to the variation of rights but also to the variation of obligations. The latter is said to be significant since all occupants of a building such as this, as recognized in Wilson v Meudon, have an interest in whether obligations owed by others for their benefit (such as those precluding noisy or offensive behaviour or nuisance by other occupants) are varied. Hence, it is said to be logical that the consent of all would be required to vary the obligations owed by one or more other share group holders to other share group holders in general. (Mr Burchett contends, and I think there is force in this contention, that it would be nonsense for there to be a restriction on the release of obligations attaching to a share group to be effected by resolution of the persons burdened and not requiring the consent of those benefited by the obligations. While such a result could be avoided by construing the reference to the variation of 'obligations' as requiring the unanimous consent of those to whom the obligations are owed, not those by whom the obligation is owed, it highlights the need for article 3(f) in effect to be rewritten if it is to bear the construction for which Mr Priestley contends.) 321 Mr Burchett says that the distinction between members and holders in this article caters for the possibility (for which provision is made in the articles) that a person may hold shares (thus be a member) but not hold shares within a share group (who accordingly would not have a legitimate interest in a resolution varying rights attached to share groups). 322 Reference is made to the different use throughout the articles of the plural and singular in relation to the category of share group holders – the singular, it is said, designating the person or persons holding a particular share group and the plural, designating the holders of all share groups (see articles 21(i), articles 61 and 62). 323 It is apparent throughout article 3 itself that a variety of terms are used. Article 3(b) refers to the holder of the relevant share group (in the singular and seemingly designating a particular share group) and 'holder of each share group' (again, in the singular and designating each individual share group). 324 It is said that by Mr Burchett that for article 3(f) to have the meaning for which the company contends, it would be necessary to read into the clause words which are not there. 325 Mr Burchett also submits that if article 3(f) were to be construed in the manner for which the company contends there would be an inconsistency with article 11, which posits a 75% vote of a particular class for amendment to class rights. 326 Thus, Mr Burchett submits that in effect article 3(f) requires the unanimous consent of all share groups to any amendment or variation of the rights and obligations provided for by article 3 and not simply the unanimous consent of the holders of shares within a group whose rights and obligations are affected by the relevant change. 327 Mr Priestley, on the other hand, submits that all that is required by clause 3(f) is that there be agreement within a share group before rights or obligations in relation to that share group are affected, drawing a distinction between the expression "all members who are holders of a share group" and "holders of all share groups". He submits that the McLaughlins' construction is 'a curious and ultimately untenable construction' in that it would mean that no member could allow or agree to the abridgement of that member's rights without the unanimous consent of all other share group holders. 328 Mr Priestley submits that what article 3(f) means is that the rights of a share group holder cannot be varied without that share group holder's (unanimous, if the shares in the share group be held jointly) consent; not that no-one's rights can be affected without everyone agreeing (a submission which seemed to be predicated on the assumption that any variation of rights would necessarily involve the share group holder giving up an entitlement, not accepting an extension or addition to the share group holder's entitlement). 329 It seems to me that it is not impossible to conceive of a variation of a particular share group holder's rights which might affect other share group holders and therefore I am not convinced that it is by any means nonsensical for there to be a requirement that such a variation be approved by all share group holders. That proposition might be tested by asking whether an amendment to the rights attaching to a particular share group to permit the use of the relevant unit as not simply a home but as, say, a commercial enterprise (to use the example given in Wilson v Meudon) would be something which one might expect could be consented to simply by that particular share group holder and no others. Surely, if such use might have an impact on the overall amenity of the building that could not be the case and yet, if Mr Priestley's interpretation were to be correct, then such a result would seem to be open. 330 In any event, the construction for which Mr Priestley contends seems to disregard the fact that article 3(f) also applies to variations to the obligations under article 3. A shareholder's rights must surely include the right to expect the observance of obligations imposed under clause 3 on other shareholders (as was recognised in Wilson v Meudon which is considered below). If so, then an amendment to the obligations of one shareholder may well impact upon the rights of another. 331 As a matter of construction, I see the relevant words in article 3(f) as meaning that for any abridgement, variation, release or restriction of the rights or obligations under article 3 there must be the unanimous consent of all members of the company who are holders of a share group (and not simply the unanimous consent of all those within a share group). (For that matter, it is difficult to see why there would need to be a provision in the articles of the company for unanimity amongst the holders in a share group. The company is entitled under the articles to act upon the vote of the more senior of the holders of a share group – it would be a matter between the holders themselves, not for the company, as to how any disagreement as to the exercise of the share group's vote was to be resolved.) 332 Accordingly, if the amendments to article 3 are amendments which have the effect of varying rights or obligations under clause 3, then as a matter of construction, I consider that the consent of the McLaughlins was necessary for those amendments to be passed in compliance with the articles. 333 Mr Burchett also invokes s 246B of the Corporations Act which requires compliance with any condition in the articles for a variation of rights of members under the articles and, in the absence of such a condition, requires a special resolution. It is submitted by Mr Burchett, that the condition created by article 3(f) applies to the project and ancillary amendments, irrespective of whether it requires unanimous consent of all holders of a share group or only of the holders of shares within a group, whose rights and obligations are affected. As I understand it, therefore, Mr Burchett contends that irrespective of clause 3(f), the consent of the McLaughlins was necessary. 334 Ultimately, I consider that the issue of construction of article 3(f) (namely, whether it requires unanimous consent of all share groups or simply unanimous consent of those within a share group whose rights or obligations are to be affected by the relevant change) does not matter if, as I think is the case, the amendment in question is one which does affect the McLaughlins' rights under article 3. I therefore turn to the question whether the effect of the amendments to article 3 was to abridge, vary, release or restrict rights or obligations under article 3 at all. Effect of amendments to article 3 335 Mr Priestley submits that neither the amendments to article 3 of the constitution, nor the development itself, operated to abrogate, vary, release or restrict any right in breach of article 3(f); rather there was merely a temporary (and, it is said, unavoidable) interruption to the enjoyment of such rights. 336 In this regard, it is necessary to focus carefully on what right (or obligation) is said to have been affected by the amendments to article 3 of which complaint was made (ie to the amendments which made it possible for new shares to be issued with attendant rights over different areas of the building) and also, perhaps, the point at which that right or obligation was so affected. Mr Burchett submits, generally, that the "rights" are abridged, varied, restricted or released by the addition of new units and the increase in the number of members entitled to use the building and grounds in common with existing unit holders and by the annexation of parts of the common areas of the building and their grounds for use as car parking; as well as by the release of obligations owed by holders of deleted share groups. 337 The rights of holders of a share group, including the McLaughlins, under article 3 (other than holders of a share group to which rights of use as an office/garage etc are provided under the articles) are, relevantly, the right to use a designated unit as a home (3(b)) (without payment of rent but subject to payment levies under the Constitution), the right to use (in common with other holders of share groups) the common areas in the building, and the right under (3(d)) to rent out the unit. 338 Mr Priestley submits (and I accept) that the articles do not confer a right on the McLaughlins to use the roof space or the space above the building which has been lost by the redevelopment; nor do the articles confer a right on holders of share groups in respect of the contents or internal configuration of a unit (he referring, by way of example, to the flooring in a unit or the placement of an internal wall – matters of which the McLaughlins have complained). 339 (In relation to the contents of a unit, I should note that it seems to me that there would be some difficulty in the company contending that it had any rights in relation to the contents of a unit other than those which might be described as fixtures and fittings which become part of the unit. Unless the company had property in the furnishings within each of the units, it surely cannot be the case that it could deal with them as it wished, to the exclusion of the McLaughlins. The only relevance of this, as I see it, would be if the McLaughlins had asserted a claim to any moveable items within their unit which were removed and thrown away as part of the redevelopment – such as the heritage claw-footed bath, to the removal of which Mr McLaughlin took particular exception. However, no such claim has been made other than a general complaint as to loss of amenity and the issue whether this could have been said to be a fixture was not raised before me.) 340 Both before me and (earlier) before Barrett J, emphasis was placed by Mr Burchett on the (to a greater or lesser extent, temporary) interruption to the McLaughlins' right of occupation as a relevant affectation of the McLaughlins' rights. As Barrett J at paragraph 12 of his September 2006 judgment noted: On the view the plaintiffs take, the right [not to be required to vacate their unit] is an absolute right that subsists in perpetuity regardless of practical necessities occasioned by matters such as refurbishment of the kind now under consideration. 341 Reliance was placed by Mr Burchett on Wilson v Meudon, a case not dissimilar on its facts, where Bryson JA, having noted that companies legislation was principally based on and appropriate to a joint stock company, being a commercial venture in which a number of people contribute to a fund or other stock with which their company trades, and was "not primarily adapted or well adapted to an enterprise in which the Company's assets are made available to members for their own use, a situation closer to other statutory schemes for regulating corporations such as Co-operative Societies" said that: [18] After decades of experience some generalisations about Company Title Home Units can now be ventured. One is that Articles of Association like [the equivalent of article 3 in the present case] create contractual licences, ... Another should ... be that the shares related to each Home Unit are a class of shares, and that rights under them are entrenched against alterations unless the holders of those shares participate . (my emphasis) 342 His Honour at [28] said: [28] It will be seen that Article 54 is directed to varying rights attached to a class of shares, and amending the Articles of Association is not necessarily the only method by which the rights attached to a class of shares may be varied. Article 54 extends to all methods. Rights and powers found elsewhere in the Articles of Association cannot be exercised so as to overrule class rights unless the procedures … are followed ... If this were otherwise doubtful, it is established by s.246B of the Corporations Act 2001. This protection extends to control all decisions of the company and its organs, including its directors, which might otherwise vary rights annexed to groups of shares; including decisions under directors' powers of management ..., and under powers relating to the issue of new shares and to attach rights to new shares. 343 As to the right attaching to each group of shares in that particular company, his Honour said: [47] In my opinion Article 6 attaches rights to each group of shares to which it refers. These rights include the right to exclusive use and occupation of a particular home unit; and the area to which that right relates is carefully established by the terms of Article 6 as first amended and of the Plan. However that is not the only right which is created by Article 6. Except as provided by Article 6, the property of the company cannot be made available for the exclusive use of any shareholder. Article 6 prescribes, in relation to the rights of the holder of each group of shares, the limits, including the limits in area, of the rights of the holder of each other group of shares. Article 6 not only creates a right in the owner of each group to use a particular part of the building; it creates a right in the owners of each group that the rest of the building will be used by other shareholders in defined ways, particularly defined as to area, and will not be used otherwise; that is, a right is conferred on the holder of each group that the rest of the building will be used in the ways specified and within the areas specified and not otherwise. All shareholders have an interest in the way in which the Company's property is used by other shareholders, and an interest in limits over the use of and the disposition of the Company's property. This has special force in a home unit company; the shareholders have an interest that the Company in which they own shares will not have its property used by others except within defined limits. It is a right annexed to the appellants' group of shares that, for example, Unit 2 will not be extended into the area shown as the caretaker's flat, or extended beyond the bounds of the building as shown; similarly it is an annexed right that the owners of other groups of shares will not use the common property otherwise than as Common Property, and that (for example) no one other than the owners of units on the second floor will use the areas set apart for use by them. (my emphasis) 344 At [58], his Honour said: [58] It was contended that the references to class and classes of shares in Article 54 should be construed in the context in which those references appear, and that the context plainly contemplates that a class consists of shares which may be owned by more than one person capable of voting. Although the machinery provisions give a contextual indication of that kind, that should not in my opinion govern the construction of Article 54. Another contextual element is that Article 54 is a standard form of article used without adaptation to the circumstances of Meudon Pty Ltd. When the articles were adopted, Article 6 was the only article which could come under consideration as possibly creating class rights. There was the possibility that class rights would later be created in some way, but if that were to happen it would be possible for the newly created class to consist of one share only, or for the ownership of all shares in it to pass into the hands of one person; and these tend to show that Article 54 should be given a construction in which it would not be defeated if all shares in a class could only be in or passed into the hands of one person. A contextual element of overwhelming importance, in my opinion, is the nature of the Articles of Association as the articles of home unit company, and of Article 6 as the protection which shareholders have of their rights of use and occupation of their homes; it is highly unlikely that, on a true view of what the Articles means, they leave that right, which after all is central to the whole purpose of organising the company at all, without any effectual protection, but deal with modification of rights only in the abstract. The machinery for variation is an unlikely place in which to look for provisions or for implications which show that purported grants of rights on a subject central to the organisation of the company are not protected . The influence of context is enhanced by the consideration that Article 54 follows exactly a standard form intended to be employed for a multiplicity for companies of all kinds, and it is unlikely that Article 54 was adopted so as to indicate limits on the rights granted by Article 6 in terms special to Meudon Pty Ltd. (my emphasis) 345 Hodgson JA (with whom Handley JA agreed) agreed with the above, but clarified at [13] that the 'rights attached to any class' protected from variation were 'the right to use the home unit with the characteristics indicated by the plan (of allocation of units in the building under the articles), including its situation...in a building of the character indicated', which would be 'varied by alterations to the building, even it they are not alterations to the home unit itself, if those alterations materially alter the characteristics of the home unit ... by altering its situation in the building or the character of the building...' (my emphasis) 346 Bryson JA held that it would be a departure from Article 6 and a breach of the Articles of Association on the part of the company, as well as on the part of the holder of the penthouse shares, "if the Company were to authorize construction of an exterior of the penthouse over the roof garden area". 347 His Honour said: [89] For reasons I have stated, the rights attached to the appellants' shares include a right that the roof above their home unit should not be used otherwise than as a roof garden: it would be a breach of those rights for any member to erect a dwelling or extend the Penthouse over the roof garden, and for the company to allow it to be done, in the absence of modification of those rights in accordance with Article 6. There has been no such modification, the Special Resolution proposed for the General Meeting of 25 June 2003 would be ineffective, and the appellants are entitled to restrain the company from considering or adopting the proposed Special Resolution. 348 While the alleged infringement on the McLaughlins' rights, as contended for by the McLaughlins, seems to be largely attributable to the conduct of the project as such, rather than to the passage of the amendments to the articles in September or December 2006 which made provision for shares to be issued to which other rights of usage than as a home might be granted (and which may or may not ever have been invoked). Nevertheless, insofar as the alteration to the articles permitted the company to allow use of the ground floor area other than for use as a home by shareholders that alteration does seem to me to have relevantly affected the McLaughlins' rights under article 3 (by materially altering the characteristics of the McLaughlins' unit within the building as a whole, in the sense in which such an alteration was recognized in Wilson v Meudon). 349 In the present case, the amendments to article 3(a) and (b) were designed to permit the allocation of shares in respect of eight new units, increasing the total units in the building from 22 to 30 with 14 new car parking spaces. 350 Mr Burchett emphasises that this doubled the size of the building (or perhaps, more accurately at that stage, the amendments increased the potential number of shareholders in the company); substantially diluted the ability of members to influence management (though it would seem that the McLaughlins had had no practical success in that regard even before the relevant amendments); and "severely weakened" the covenant against disturbance, annoyance and the like. 351 Relevantly, by reference to what was said in Wilson v Meudon, the amendments contemplated the conversion of the two ground floor units (previously designated for use as a home) to areas for use as a car park and a mechanical stacker on the floor immediately beneath that of the McLaughlins' unit. 352 As to the loss of amenity of the building, Mr Burchett also points to the "modern" character of the additional floors. 353 Much of the focus during the hearing and in the submissions was on the affectation of the McLaughlins' rights said to have been occasioned by their exclusion from the unit during construction and by the reconstruction of their unit and loss of use of certain areas of the building in common with others (at least the first two of which I do not accept involved any alteration to rights under article 3). 354 It was submitted by Mr Burchett that the project involved the affectation of the McLaughlins' rights under article 3 by: (a) the exclusion of the McLaughlins from the building during the construction period; (b) the reconstruction of the internal wall in their unit dividing the living from the enclosed balcony dining area; (c) the removal of their balcony wooden flooring, which had levelled the previously open-plan living and dining areas; (d) removal of their bathtub, shower and original tiles; (e) replacement of original opening wooden windows with sealed, metal or ill-fitted windows and doors; (f) change in en-suite configuration and ventilation; and (g) removal of their carpeting and replacement of plaster walls with less sound-proof Gyprock. 355 Little attention was paid during the hearing to the impact of the car stacker on the floor beneath the McLaughlins' unit, perhaps because it was obvious that the replacement of a home unit with a mechanical car stacker was a change to the character of that unit and those surrounding it. The very first of the particulars to paragraph 5(a) of the Further Amended Statement of Claim (which appeared in at least one earlier iteration of the pleadings) was the creation of "parking spaces in place of two former flats". It was thus squarely put that the McLaughlins were relying, as a factual matter for the allegation that their rights or the obligations of others had been abridged, varied, restricted or released, on the creation of the parking spaces on the ground floor – that having been done by way of a mechanical car stacker. 356 Mr Garratt, in his evidence, explained how it was that the ground floor space came to be required for that purpose and emphasis was placed by the company in its submissions on the fact that it was essential, to meet Council's requirements, that the car stacker be put in place for the project to proceed (that being in part the justification for the compensation paid for the loss of the two ground floor units) (T 516.31). 357 It seems to me difficult to argue that the replacement of a ground floor unit with a mechanical car stacker is something which would not alter the amenity and character of a unit on the floor immediately above that car stacker (just as the addition of a penthouse unit in place of a roof garden was said to affect the amenity and character of a unit which would otherwise be on the top floor of a building) and no such argument was pressed before me. 358 Insofar as Mr Priestley submits that the McLaughlins had no rights under the articles to use the roof space or space above the building, (nor do the articles confer rights in respect of the contents or internal configuration of a unit), I agree. Nor do I consider any of the matters in (b) – (g) above to be a relevant affectation on the McLaughlins' rights under article 3. 359 As to article 3(a), it is submitted by Mr Priestley that what article 3(f) protects against are permanent effects on rights (not a temporary interruption to the enjoyment of rights). It is said that if the McLaughlins had some "interest" in the building not changing, this was not a right attaching to their shares (Smith v Permanent Trustee Australia Limited (1992) 10 ACLC 906 per Young J, 913-914, Seabrook, Re Takeovers Panel and the Corporations Act [2002] FCA 1219, (2003) 21 ACLC 82). The impairment, dilution or interruption of rights, it is said, is not sufficient (White v Bristol Aeroplane Co Limited [1953] Ch 65; Re John Smith's Tadcaster Brewery Co Limited [1953] Ch 308). 360 I accept that a temporary exclusion from occupation of a unit (during the course, say, of necessary repairs) would not be an affectation of rights for the purposes of article 3(f). 361 In Wilson v Meudon, Bryson JA considered the relevance of the temporal nature of an interruption or affectation of rights, in contrast with the right to be free of substantial interference with use and occupation. As to the latter, his Honour said: [68] A grant of a right, including a contractual right, of use and occupation carries with it a right to be free from substantial interference with use and occupation. An observation generally of this kind was made in O'Keefe & McKenna v Williams (1910) 11 CLR 171; (1911) 17 ALR 113; (1910) 11 SR (NSW) 29; [1910] HCA 40 in relation to an occupation license granted under Crown lands legislation; that is, an implied agreement by the Crown not to derogate from rights under the occupation license. (However in O'Keefe v Williams a high view was taken of the right conferred by the occupation licences; see Wik Peoples v State of Queensland (1996) 141 ALR 129; (1996) 71 ALJR 173; [1997] 1 Leg Rep 2; [1996] HCA 40; (1996) 187 CLR 1 at 150 (Gaudron J)). Counsel referred to a holding to similar effect, in relation to an occupation license, in Smith v Nottingham County Council (Court of Appeal of England 13 November 1981) cited in Hill & Redman Law of Landlord and Tenant (1982) Vol 1 at 200. 362 As to the former, his Honour said: 72 …The exclusive enjoyment of which Article 6 speaks does not give an entitlement to the complete exclusion of disturbance. Although the rights of the holder of shares should not be equated with a covenant for quiet enjoyment such as the standard covenant for leases in Sched.4, para.21 to the Conveyancing Act 1919, the exercise by all shareholders of rights in Article 6, and the exercise by directors and the company of powers affecting such rights are subject to the need to enable shareholders to live together in the building which is an underlying purpose of the articles as a whole. People who live in a home unit with home units adjacent horizontally and vertically must expect some degree of interference from the normal activities of the occupants of other units. Use of a roof garden is not inconsistent with all structures; hot houses may be part of a garden. The measure of give and take necessary to permit living together in a reasonable way involves tolerant acceptance of noises and other inconveniences associated with exercise by other shareholders of their rights, including from time to time noise and inconvenience arising from carrying out renovations and alterations in a reasonable way. Time passes and sooner or later everyone in the building will carry out some alteration or renovation, and tolerating noise and other conveniences connected with the work is part of the give and take in which other shareholders must participate. No right associated with their shares entitles the appellants to prevent or restrain alterations within the existing Penthouse area, subject to limits of reasonableness. 363 Complaint was also made by Mr Burchett that the project further involved the abrogation of rights under articles 3 and 8(a) of the McLaughlins to have the other shareholders comply with the conditions of their shareholdings. It was said to be the responsibility of share group holders to maintain their individual flat(s) at their own expense and not at the expense of the company. Insofar as the project involved substantial work renovating all existing flats, including their fixtures, fittings and decorating, as well as significant expenditure on additional work sought by individual shareholders, such as Mr Brown, Mr Burchett contended that the articles provided only limited power to the company to enter and perform work on the flats of shareholders as a condition of their rights of use pursuant to article 8(b). In that regard, Mr Priestley submits, and I accept, that it is no part of the McLaughlins' pleaded case that the amendments of article 3 "impermissibly trenched upon the obligation of a member under article 8(a) to maintain the interior of his or her flat at his or her own expense". 364 The more cogent argument raised by Mr Burchett seems to be that there is a diminution of the obligations of other shareholders by reason of the deletion of particular share groups (perhaps so argued to meet the difficulty to which Barrett J had adverted, that the resolution to amend article 3(a) did nothing to diminish or alter the rights attaching to any group of shares, merely adding references to additional groups of shares and allocating parts of the building not then in existence to them). 365 In that regard, however, the import of his Honour's observation would, I think, remain, namely that the mere passage of a resolution altering articles to make a course of action possible does not of itself bring about any alteration to rights – it simply presages that such an alteration might take place in the future. (I note that shares in the share groups which were deleted in relation to the roof space/office had not in fact ever been acquired by any shareholder so there was no actual release of any particular shareholder's obligations in that regard.) 366 It is submitted by Mr Priestley that reliance on Wilson v Meudon is misconceived because, fundamental to the court's consideration in that case, was the restriction created by the Articles as to the use of certain areas "except as provided by Article 6, the property of the company cannot be made available for the exclusive use of any shareholder" [47]. It is said that there is no corresponding prohibition in this case. However, article 6 in the Articles of Association in that case, as set out in Bryson JA's judgment in Wilson contained no express prohibition of the kind which Mr Priestley seems to suggest. Reproduced by Bryson JA in his judgment, article 6 relevantly said: 6. The owner or owners for the time being of each group of shares whose serial numbers appear in the third column hereunder shall be entitled to the exclusive right subject to these Articles to use and enjoy the home unit the number of which appears opposite such serial numbers respectively in the fourth column hereunder and such home unit shall be available subject to t hese Articles for his or her or their exclusive use and enjoyment within the area shown by such number on the plan hereunto attached and marked "A" … together with the right to use in common with all others similarly entitled to pathways entrance halls elevators stairs and passageways in the building and in rooms in common use. (emphasis in original) 367 It then listed particular groups of share numbers with the corresponding home unit number and continued: The respective rights to the exclusive use and occupation conferred by this Article may be exercised by the respective owner or owners for the time being of the respective groups of shares or subject to the approval of the directors by his or their tenants. Where two or more persons hold shares jointly the only person recognised as having the right to occupy conferred by these Articles shall be the person whose name appears first upon the company's share register. 368 His Honour noted that articles conferring exclusive rights to use a particular unit on the holders of shares (such as the above article 6) are: altogether central to the functioning of Home Unit Companies" and that the primary motivation of purchasers of shares is use of the home unit, and the shares would have relatively less value and would be valuable to a different array of persons if those rights were not effectually annexed. 369 I do not see any relevant difference in the article to hand. Article 3(a) confers a right to occupy a particular unit as a home. Although not stated as a right of exclusive occupation it is one which must encompass, in the notion of a home, the ordinary exclusivity of occupation one has in one's own home. True it is, that no plans seems to be attached to the articles of the present company (so that the emphasis is placed in Wilson v Meudon on the configuration appearing on the plan finds no counterpart in the articles presently under consideration) but the configuration of the building is not in dispute and it is clear that, prior to the amendments, the owners of the share groups relating to unit 22 and 23 had the right to occupy those units as a home, not a car park or car stacker. 370 The inference from clause 3(a) is that, except as provided in the articles, the areas designated for use as a home are not to be made available for any other use. 371 Of the complaints made by the McLaughlins, it therefore seems to me that the only relevant affectation of the McLaughlins' rights under article 3 caused by the redevelopment is the alteration of the building such that the amenity of the McLaughlins' unit has been affected by the construction of a car stacker on the floor immediately below their unit. I do not consider that Wilson v Meudon can be distinguished on this point. There, it was significant that the amenity of the building had changed, such that the right to use the apartment as a home with a roof top garden above it (not another unit) was altered. Here, though the change is to the area beneath the McLaughlins' unit there is in my view a corresponding change to the amenity of the building and to their rights in relation thereto. 372 I accept that the introduction of new classes of shares and the doubling of size of the building will necessarily have a potential effect on the amenity of the building. However, the company's objects expressly permit alteration and, further, require the company to maintain the building as a first class building, which would in my view encompass the alteration of the building by the addition of a small number of floors in order to permit the renovation of the building to meet that objective. 373 Therefore, but for the construction and location of the car stacker underneath the McLaughlins' unit I would have found no alteration to rights requiring the McLaughlins' consent (whether as part of the unanimous consent of all share group holders or as a particular share group affected by the change). 374 I have concluded that the project, insofar as it involved an alteration of the kind noted above to the amenity of the McLaughlins' unit, was a relevant alteration to their rights under article 3 and thus that the decision to pursue such project required their consent. The resolution to amend article 3, insofar as it was ancillary to or provided for the affectation of the McLaughlins' rights in this regard, therefore required unanimous shareholder consent. No such consent was obtained for obvious reasons. (b)/(c) Resolution to approve construction/finance agreements; Resolution to approve "Buy back" amount 375 Barrett J expressed the view that both these resolutions involved no more than an expression of shareholders' wishes as to these aspects of the project, noting that he could not see the need for a resolution of shareholders nor what force or effect such a resolution would have "except as something in the nature of an expression of wishes which might give directors greater confidence to move forward" [at 15], and referring to article 74 of the company's constitution which provided that all powers of the company not required by the constitution or the Act to be exercised by the company in general meeting reposed in the board of directors. 376 His Honour noted, in effect, that implementation of the proposed buy-back arrangement contemplated in the third resolution (to approve a buy-back amount) would require either two selective buy-backs under Division 2 Part 2J.1 of the Corporations Act or a selective reduction of capital under Division 1 Part 2J.1 and would need, at a minimum a special resolution with no vote cast by the holder of the shares. 377 His Honour said: There is no apparent reason why decisions with respect to the extension and refurbishment of the building are not within what, under an article such as this, has been recognised for at least a century as the exclusive preserve of the directors which may not be usurped by the shareholders in general meeting: see, for example, Automatic Self-Cleansing Filter Syndicate Co Limited v Cunninghame [1906] Ch 34; Quin & Axtens Limited v Salmon [1909] AC 442." [at 16] It was challenged in final submissions by Mr Burchett broadly on the ground of non-disclosure or material misrepresentation. 378 Barrett J observed that commencement and undertaking of the redevelopment was not something that is dependent on the validity of any of the resolutions (and that the validity of alterations to article 3 would become a live issue only if and when the company was about to issue new groups of shares to which it relates). 379 I agree that these resolutions appear to have no operative legal consequence and therefore their effectiveness per se is of no import. Nevertheless, I apprehend that reliance is now sought to be placed on the fact that they were approved (and on the manner in which they were approved) as part of the overall oppressive conduct of which the complaint is made. I consider their validity in the context of the general complaints made as to notice/adequacy of information and the like. 380 In due course, the Buy-Back agreements were the subject of further resolutions by the company and I consider them further below. (d) Allowance of $250,000 to Mr Garratt. 381 As noted by Barrett J, as a director, Mr Garratt cannot receive any benefit or remuneration from the company except as provided under its constitution or as approved by members (Re George Newman & Co [1895] 1 Ch 674). There was no provision in the articles for this payment. His Honour observed that it was not apparent that shareholder approval was required to be given by way of a special resolution. Nor was this suggested when the matter was before me. 382 This resolution is largely attacked on the basis that it was uncertain as to what work Mr Garratt had done (for which he was to be compensated) and had been procured by misrepresentation as to various matters, such as that funding arrangements had been finalized in principle and were reasonably acceptable to the company. I consider the complaints made in this regard in the context of the overall complaint as to disclosure/misrepresentation. 383 Turning then to each of the bases on which the September Resolutions were challenged, I note as follows: Bases on which September 2006 Resolutions were challenged Paragraph 5(a) Further Amended Statement of Claim – requirement for unanimous consent 384 I have considered above the issue as to the requirement for unanimous consent for the amendments to article 3. I consider that the proper construction of article 3(f) was that for which Mr Burchett has contended, and that unanimous consent was necessary for the particular amendments to article 3, insofar as they deleted the designation of the ground floor units as being for the purpose of occupation as a home. 385 The remaining complaints made in 5(b) – (e) of the Further Amended Statement of Claim seem equally to be made in respect of each of the four resolutions. Paragraph 5(b) Further Amended Statement of Claim – Fraud on the power 386 It is a fraud on the minority of shareholders for the majority to exercise power under the articles for the purpose of infringing rights and obligations under those articles (Ngurli Ltd v McCann (1953) 90 CLR 425 at 438 & 447; Whitehouse v Carlton Hotel Pty Limited (1987) 162 CLR 285; Permanent Building Society v Wheeler (1994) 14 ACSR 109 at 137; Gambotto v WCP Ltd (1995) 182 CLR 432). (Mr Burchett also contends, referring to the later December 2006 Resolution and/or January 2008 Resolution, that ratification is not available, where it would constitute a fraud on the minority, was contrary to a member's personal rights or oppressive or for an improper purpose (citing Forge v ASIC [2004] NSWCA 448, at [372]-[376]; (2004) 213 ALR 574); Ngurli v McCann; Residues Treatment & Trading Co Ltd v Southern Resources Ltd (No 2) (1988) 51 SASR 177 (at 204); (1988) 14 ACLR 396).) 387 A finding of abuse of power will follow if the impermissible purpose (whether a dominant purpose or one of a number of significantly contributing causes) was "causative in the sense that, but for its presence, the power would not have been exercised" (Whitehouse v Carlton Hotel Pty Limited, at 294). Barrett J noted in his September 2006 judgment that a permissible purpose is to be distinguished from an impermissible purposes by reference to "the nature of the power, the reason for its existence, the reason it is entrusted to the directors and the compatibility of the particular purpose with the interests directors are bound to serve." 388 The impermissible purpose for which all of the September 2006 Resolutions are said by the McLaughlins to have been passed (according to the pleadings) is that of facilitation of a redevelopment by the construction of units and the replacement of ground floor units with parking areas without the McLaughlins' consent. 389 Mr Priestley, quite rightly, says that this is not the purpose alleged in paragraph 28 of Mr Burchett's submissions. There, Mr Burchett submits that the project involved, and the amendments were purportedly passed for, the improper purpose of overriding the McLaughlins' rights and the majority members' obligations under the articles. Accepting that Mr Burchett's submissions may simply have been drafted so as to emphasise the effect of the amendments in question, the issue before me remains, as pleaded, one which gives rise to the enquiry as to the "purpose" of the amendments (not that the amendments might have been achieved by so doing or the fact that they may have had that effect). 390 Mr Priestley submits that the members' purpose was to facilitate the company funding the necessary renovation works; not to override the McLaughlins' rights or members' obligations. I agree. On the evidence this was not the members' purpose. I consider there is a relevant difference here between the purpose and the ultimate effect of the resolutions in question. I am satisfied that the overriding or motivating factor in the directors' decision to promote the development (and, I would infer, in the meeting's decision to approve it) was the perceived need urgently to address necessary building repairs and to do so in as cost effective manner as possible for shareholders. 391 The McLaughlins did not agree with the course the directors chose to adopt in this regard. That was, of course, a matter for them. They had no obligation to concur in such a course and it cannot reasonably be said that they were 'selfish' in so doing. They were entitled to take into account their own personal situation and their views (whether they be informed or otherwise) as to the repairs which were necessary. They differed from the remaining shareholders in their willingness to approve the course recommended by the directors. However, there is nothing in my view to suggest that what the directors (and shareholders when the matter came before them) did was done in order to override or for the purpose of overriding the McLaughlins' rights. Indeed, Mr Garratt's correspondence on behalf of the board, made it clear that he considered, as a legal matter, that the McLaughlins had no "rights" to stop the project proceeding, so the question of overriding them (as opposed to acting contrary to their expressed wishes) does not arise. To put it another way, but for the existence of the McLaughlins' rights would any different decision have been made? I think not. The decision made by the board and the company was one made in the light of the structural problems facing the building, was not a decision designed to upset the McLaughlins (though it clearly had that effect). 392 I accept that the purpose for which the September 2006 Resolutions were passed was to facilitate the redevelopment of the building in circumstances where the board considered that this was necessary in order to address the structural problems of the building in as cost effective manner as possible. I do not consider that any of the resolutions passed at the September 2006 meeting amounted to a fraud on the power to pass such a resolution. Paragraphs 5(c) - (e) Further Amended Statement of Claim 393 A variety of complaints are made as to formal matters relating to the particular resolutions: as to the timing of the notice given (5(c)(iv)); as to whether they were put forward with the proper notification as special resolutions (5(c)); as to the adequacy or accuracy of information provided (5(c)(iii), 5(d), 5(g)); and as to the alleged uncertainty of what was proposed in relation to certain of the resolutions (5(e)). 394 It is conceded by Mr Burchett that notice was given to the McLaughlins of the September 2006 Annual General Meeting, as of 18 August 2006, by way of an agenda dated 15 August 2006 (TB1018), but it is said that such notice failed, as required by ss 249H and 249L Corporations Act, 2001, to: a) give 21 days' notice, b) state that either a unanimous or special resolution was sought (as required for the resolutions affecting the McLaughlins' rights), c) state the terms of the development project to be endorsed, or, d) state that any resolution was sought to compensate the directors either for the buy-back of their shares or for work performed on the project. (a) Timing of notice 395 As to the timing of the notice of the 2006 Annual General Meeting, on my calculations, the requirement for 21 days' notice was satisfied, despite the contention by the McLaughlins that only 20 days' notice was in fact given. 396 Section 249H requires that 21 days' notice be given, unless the articles require otherwise. The articles in this case do not stipulate a specific time period for notice, nor do they indicate how the time period is to be calculated other than that article 110 deems notice to be received 24 hours after posted. (I should note that page 32 of the articles is missing from the various copies of articles in evidence - TB103 and Exhibit MB3 - so I am assuming in this regard that page 32 does not contain articles concerning the length of notice or how time is calculated). 397 In counting the 21 days, the day of the meeting cannot be counted, but the day that notice is given can be counted (s 105). Section 249H does not require 21 clear days of notice (Howard v Mechtler, at [31], per Austin J). 398 It is conceded that notice was received by the McLaughlins on 18 August 2006. The Annual General Meeting was held on 9 September 2006. 399 Counting the day of 18 August 2006 (as allowed by s 105, and assuming this was not otherwise prohibited by the articles) to the day of 8 September 2006 (as 9 September cannot be counted - s 105) 22 days have elapsed, so the requirement of 21 days' notice will have been complied with, irrespective of whether the day of 18 August is counted. 400 Mr Priestley submits that there was no defect in relation to the timing of the notice. I agree. 401 Mr Priestley goes on to submit that, even if slightly less than 21 days' notice was given, this would not invalidate the notice, relying on Re Tantalex Limited (1986) 8 NSWLR 8. There, a notice of meeting to pass a special resolution served only 20 days before the meeting was held valid (applying a similar section to s 1322 to address the invalidity of a meeting convened to consider resolutions for reduction of capital). Young J, as his Honour then was, said: The notice of meeting was thus served on the 11th and there were only twenty clear days before the meeting. However, in view of the vast majority in favour and the non-response to the advertisement, it seems to me that the Court should dispense, under the Companies (New South Wales) Code , s 539, with that problem. Otherwise there would be an invalid meeting. 402 Mr Priestley submits that there is no injustice (substantial or otherwise) in remedying any procedural irregularity in relation to the timing of the notice for the 2006 annual general meeting (invoking s 1322(3) of the Corporations Act). Mr Priestley referred to the decision of Street J (as his Honour then was) in Corporations Act; Homes v Life Funds of Australia Limited [1971] 1 NSWLR 860, where his Honour applied the equivalent provision to 1322(3) of the relevant legislation (section 366 of the Companies Act 1961) to validate the convening of an extraordinary general meeting to consider the appointment of directors (in view of the unlikelihood of prejudice to any individual by reason of an omission to give notice to 6 of 1600 members). In that regard, Mr Priestley points to the fact that the McLaughlins were legally represented and had received legal advice prior to the meeting. 403 Mr Priestley submits that s 1322(3) can cure any defect in the failure to give notice within the required time. That subsection applies in circumstances where there is an accidental omission to give notice of the meeting or the non-receipt by any person of notice of the meeting. I note that sub-section 1322(2) applies more generally than subsection (3) to situations where there is a procedural irregularity and provides that a proceeding (which includes a company meeting (Australian Hydrocarbons NL v Green (1985) 10 ACLR 72 at 81; 3 ACLC 779; Re Broadway Motors Holdings Pty Ltd (in liq) (1986) 6 NSWLR 45; 11 ACLR 495; 4 ACLC 598)) is not invalidated because of any such irregularity unless the court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the court. 404 In determining whether the procedural irregularity has or may cause substantial injustice that cannot be remedied by the court, a relevant consideration is whether there would have been a different result at a shareholders meeting had the procedural irregularity not occurred (Cordiant Communications (Aust) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005, at [98]; (2005) 55 ACSR 185; 194 FLR 322). In that regard, I note that Hodgson J (as his Honour then was said in Mamouney v Soliman (1992) 9 ACSR 63 (at p 72): …the more significant the resolutions passed at the meeting, and the greater the procedural defects, the more ready the Court will be to say that they have caused or may cause substantial injustice; and correspondingly, the less is the need for direct evidence of what would actually have happened if proper notice had been given 405 The onus of showing substantial injustice rests on the person who seeks a declaration of invalidity (Re Waldcourt Investment Co Pty Ltd [1988] WAR 1; (1986) 11 ACLR 7; 4 ACLC 589) or opposes application of the section (Australian Hydrocarbons NL v Green, at 83). Thus it is for the McLaughlins to establish substantial injustice which cannot be remedied. 406 Here, for the reasons set out earlier, there is no defect in the timing of the notice. Had there been, I would not have held that such a defect had invalidated the resolution. The reasons for such a conclusion are, in essence, those that I consider in relation to what was an apparent timing defect in respect of the December 2006 meeting (which I consider below). (b) Failure to specify resolution(s) to be proposed as special resolution 407 Section 249L(c) requires that an intention to propose a special resolution be stated in the notice, as well as setting out the special resolution itself. The August 2006 notice does not state that a special resolution was proposed for the amendment to the articles (as was necessary for the amendment resolution and any resolution for the buy-back of shares – though no resolution of the latter kind was in fact being put to the meeting, as Barrett J had noted), and nor does it set out the text of the special resolution proposed to be considered (MB Exhibit3). The notice clearly failed to comply with the requirements for passage of a special resolution. 408 Mr Burchett suggests that this is now conceded by reference to Mr Priestley's submissions. Mr Priestley, to the contrary, seems to suggest that this complaint was no longer relied upon as a defect in Mr Burchett's final submissions. 409 As noted, an amendment to the company's articles of the kind put to the meeting in September 2006, and any resolution to approve the buy-back of the company's shares, required the passage of a special resolution. No notice of any such special resolution was given. Nor is there evidence to suggest that either resolution was put to the meeting as a special resolution. 410 In his September 2006 judgment, Barrett J observed that in light of paragraph (a) of the s 9 definition of 'special resolution', with the reference to notice 'as set out in s 249L(c)' (which required a statement in the notice of 'an intention to propose the special resolution'), it seemed likely that the notice of meeting must make it clear that the proposed resolution is a special resolution. (His Honour considered the position to be less clear as to the need for any similar statement at the time the proposed resolution is put before the meeting and at the time of declaration of the result of voting.) 411 Insofar as the failure of the company (or its legal representatives) to adhere to the requisite procedure for the passage at this meeting of any resolution required to be put as a special resolution is said to be an instance of the alleged oppressive conduct, I consider that below in the context of the allegations as to oppressive conduct below. 412 What seems to me to be apparent is that no substantial injustice can be said to have been caused by a defect in the notice caused by the failure to specify any of the resolutions as intended to be put as special resolutions, since the relevant matters were put again before the members of the company for ratification at the December 2006 meeting (and the buy-back resolutions were put before the meeting in January 2008). 413 Accordingly, any procedural irregularity affecting the passage of resolutions required to be put as special resolutions at this meeting seems to me to be immaterial other than insofar as this forms part of any oppressive conduct. (In that regard, considering this in isolation of any other acts of which complaint is made, I cannot see that the defects in the notice in this respect were unfairly prejudicial or discriminatory of the McLaughlins. All members (or at least all members who were not directors and had not been privy to the discussions by board members as to the matters the subject of the proposed resolutions) were subject to the same difficulty occasioned by the defect in the notice.) (c)/(d) Content of notice 414 The third and fourth complaints as to the notice relate to the content of the notice – the failure to state the terms of the development proposal to be endorsed and the failure to state that any resolution was sought to compensate the directors for the buy-back of their shares or for the work performed on the project. Complaint is also made that 'whatever material information was purportedly provided' by Mr Bartrop's letter of 4 September 2006, this was provided only two clear days before the meeting. 415 Certainly, the notice of meeting did not make specific reference to either matter. However, this is only material in relation to the resolution to approve the payment of $250,000 to Mr Garratt. The resolution as to the buy-back amount (even apart from the fact that it had no operative effect) was superseded by the subsequent resolutions in relation to the share buy-backs in January 2008 (which are themselves challenged by the McLaughlins) and I consider those in due course. It is the resolution to approve a payment to Mr Garratt that seems to stand or fall on the validity of what occurred at this meeting. 416 Mr Burchett submits that in the absence of any other members' resolution authorising payment to Mr Garratt of the sum of $250,000 (described by him as a "gratuity" although put to the members as compensation for the work he had performed or was going to perform in relation to the project), he is not entitled to any such payment under the articles or otherwise. 417 The statutory requirements (s 249L) for the content of a notice of meeting require that certain minimum information be given, such as the place, date and time for the meeting and the general nature of the meeting's business. They also include the requirement to notify of an intention to propose any special resolution and to state the resolution, if one is proposed. The information included in the notice of meeting must be worded and presented in a clear, concise and effective manner (s 249L(3)). 418 The notice does not give notice of any resolution concerning a remuneration or compensation payment to Mr Garrett for his efforts in relation to the project (as opposed to any compensation for the loss of his ground floor unit (MB Exhibit 3)). 419 Therefore, while the general nature of the business of the meeting was apparent from the notice, and while it is not apparent to me that the resolution in relation to Mr Garratt's compensation was required to be put as a special resolution, nevertheless there was no notice given at the time the meeting was convened as to the intention to put before shareholders a motion to approve the payment of a sum to Mr Garratt as compensation for his efforts in relation to the project. The subject matter was raised only by way of the recommendation contained in Mr Bartrop's letter of 4 September which was provided only just before the meeting (and not all recommendations in that letter seem to have been pursued so it would not necessarily be apparent to a reader of the letter what precisely was to be put in this regard. 420 Mr Burchett submits that, as a meeting called by notice may consider only that which is fairly within the ambit of the notice, the meeting was not competent to consider and resolve to make the $250,000 payment. 421 A meeting's competence is limited by the business proposed to be dealt with at the meeting (McLure v Mitchell (1974) 6 ALR 471, at 494; 24 FLR 115) and a notice that a matter is to be discussed without indicating that a resolution will be proposed may be inadequate to enable the meeting to pass a resolution (Stanham v National Trust of Australia (NSW) (1989) 15 ACLR 87; 7 ACLC 628, at 92). 422 Thus it has been said that no business can be validly conducted at a meeting if a person entitled to notice has not been properly notified (Re Merchants and Shippers' SS Co Ltd (1916) 17 SR (NSW) 21 at 26–27) and that the meeting cannot proceed to matters beyond the scope of the purpose for which it was summoned unless all members are present and agree (HG Royal Park Pty Ltd v Strata Corp 7176 Inc [2007] SASC 348, at [74] – [75]; (2007) 251 LSJS 124; and see generally Henderson v Bank of Australasia (1890) 45 Ch D 330 at 337; Ex parte MacNamara [1893] 10 WN (NSW) 83 at 84; Ryan v Edna May Junction Gold Mining Co No Liability (1916) 21 CLR 487 at 495–497 and 500–501; Colhoun v Green [1919] VLR 196 at 203–204; McLure v Mitchell, at 494; Stanham v The National Trust of Australia (NSW), at 92; Efstathis v Greek Orthodox Community of St George [1989] 1 Qd R 146 at 149–150). 423 While the notice need not set out the terms of every resolution proposed to be considered at a general meeting, nor is it necessary that it include minute or precise detail of the business to be transacted, what is required at common law is that there be fair and adequate notice of the business to be transacted (Southern Resources Ltd v Residues Treatment and Trading Co Ltd (1988) 6 ACLC 913 at 917 (White J); Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956 at 959; HG Royal Park Pty Ltd v Strata Corp 7176 Inc, at [74] – [75]). Given the nature of the resolution passed for Mr Garratt's compensation, and the lack of any unanimous agreement to the pass the resolution, in my view it cannot be said that the meeting was competent to pass such a resolution, as there was not fair and adequate notice given of the business to be transacted. 424 In that regard, it cannot be said that the resolution to compensate Mr Garrett concerned a routine matter with which members could have been expected to have been familiar. (There is no suggestion that there was a history of arrangements for remuneration of directors of this kind.) This is unlike the position in HG Royal Park Pty Ltd v Strata Corp 7176 Inc [2007] SASC 348; (2007) 251 LSJS 124, where it was found that failure to give precise notice of specific resolutions regarding strata levies and contributions did not result in an invalidity where, having regard to the way in which the Strata Corporation conducted its business, unit holders, on receipt of the notice of meeting and associated papers, would clearly have understood what was proposed to be discussed and the subject of decision at the meeting. 425 For s 1322 to apply in relation to this defect, the irregularity must be a 'procedural irregularity'. In the absence of any specific legislative definition, this has been interpreted as requiring a distinction to be drawn primarily according to the degree of injustice or inconvenience caused, rather than according to the nature of the irregularity itself. Consequently, a wrongful denial of a shareholder's statutory right to vote at a meeting is a denial of a substantive right and is not a procedural irregularity (Cordiant Communications Group Holdings Pty Ltd, at [97]). 426 The failure to give notice of the resolution concerning Mr Garratt's remuneration is not in my view one which is validated by the operation of s 1322(2), as I do not see this as a procedural irregularity. Rather, I consider that the failure to give notice of the intention to put this resolution to the meeting involves a substantive irregularity (involving as it does the injustice that shareholders might become bound to pay a not inconsiderable amount as a project expense and irrespective of any profit of the project), thus preventing application of s 1322 (Cordiant Communications Pty Ltd, at [87], [97]). As noted above [at 197], where a director has a personal interest in the matter the subject of the resolution, as is the case here, there must be full disclosure (Chequepoint Securities v Claremont Petroleum). 427 Further, it is not possible to make an order under s 1322(4), as this section applies to allow a court to make an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under the Corporations Act or in relation to a corporation is not invalid by reason of any contravention of a provision of the Corporations Act or a provision of the constitution of a corporation. As the irregularity in this case relates to a failure to comply with common law requirements for notices, and not a contravention of the Corporations Act, then it is not open to the court to make an order under s 1322(4). 428 I accept that the notice itself was defective in relation to the information provided with respect to the intention to approve a payment to Mr Garratt and I do not think that was cured by the 4 September letter from Mr Bartrop which Mr Garratt circulated to members. I also consider that this was a matter which may well have impacted on the ability of members to consider the proposal to make payment of a not insubstantial sum to Mr Garratt for whatever work he had performed in relation to the project. Accordingly, I consider that the resolution to approve the payment to Mr Garratt was not one which could properly be brought before the meeting in September 2006 and that the resolution approving such a payment is invalid. Paragraph 5(e) and (f) – uncertainty of resolutions/buy-back 429 As to the uncertainty of the resolutions in relation to entry into particular agreements was concerned, this complaint might have some force if the resolutions themselves had any operative effect, but they do not. Similarly, the purported buy-back resolution affected nothing, so that the McLaughlins' complaint as to compliance with the procedure under the Corporations Act for selective buy-back at this meeting takes the matter no further. Paragraph 5(d) and (e) – quality of information to members 430 Much complaint was made as to the quality of the information provided to members at this and subsequent meetings. Mr Priestley submits that this is misconceived and flows from the brief comments made by Barrett J in his September 2006 judgment as to those matters; in particular, the comment that there was some substance in the criticism made as to adequacy of information in relation to the $950,000 buy-back figure, as to the attractiveness of St George package and as to Mr Garratt's allowance (the brief discussion as to which his Honour described as qualitative rather than quantitative). His Honour noted that there was a serious question to be tried about adequacy of disclosure to shareholders. 431 In the proceedings before me, much emphasis was placed by the company on the information which had been provided by the board to shareholders over the years as to the project (from which it is said that the work Mr Garratt had performed over the years was well known to them). Again, much of that information was qualitative, perhaps necessarily so. The complaint with regard to the particular buy-back/compensation resolutions is not wholly addressed by the information which was provided to the shareholders over the period from 2000-2006, since the striking of a figure for both the buy-back amount and the amount for Mr Garratt was not (so far as can be seen from Mr Bartrop's letter) the product of any reasoned mathematical analysis. 432 There is no doubt that directors have a duty (sometimes called "the Bulfin v Bebarfald's duty", recognising the judgment by Long Innes CJ in Eq, in Bulfin v Bebarfalds Limited (1938) 38 SR (NSW) 423) to provide such material as will fully and fairly inform the shareholders of what is to be considered at a meeting and enable them to make a properly informed judgment on the matters in question, including (where this arises) an assessment of the financial effect of proposals made and the effect of such proposals on their interest in the company. 433 The duty to inform requires directors to give information in fair detail as to what is actually proposed to be done at the meeting, and this must be done in a manner that is not misleading (Ryan v Edna May Junction Gold-Mining Co NL (1916) 21 CLR 487; 22 ALR 222; Bain & Co Nominees Pty Ltd v Grace Bros Holdings Ltd (1983) 7 ACLR 777; Bancorp Investments Ltd v Primac Holdings Ltd (1984) 9 ACLR 263; 3 ACLC 69; Fraser v NRMA Holdings Ltd (1995) 55 FCR 452; 127 ALR 543; 15 ACSR 590; 13 ACLC 132; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2005) 55 ACSR 583; [2005] FCA 1426). 434 The information provided to shareholders must be intelligible to shareholders who are not versed in matters of business (Devereaux Holdings Pty Ltd v Pelsart Resources NL; Residues Treatment & Trading Co Ltd v Southern Resources Ltd). In Devereaux Holdings Pty Ltd v Pelsart Resources NL, Young J stated: … there is an equitable principle that it is the fiduciary duty of directors not to mislead the corporators who are to consider whether to pass a resolution by providing them with material that is other than substantially full and true and this is especially so where the directors themselves may benefit from the passing of a resolution. In considering the equitable rule … one asks what effect will the information provided have on the ordinary shareholder who scans or reads the document quickly, not as a lawyer, but as an ordinary man or woman in commerce or as an ordinary investor. One asks, viewed in such a way, will the information fully and fairly inform and instruct the shareholder about the matter upon which he or she will have to vote? 435 In Chequepoint Securities Ltd v Claremont Petroleum NL, McClelland J, after finding that the directors of the company had complied with the company's constitution by giving a notice that disclosed the general nature of the business of the meeting, turned to consider the fiduciary obligation of the directors, and said (at 96): "Where directors take it upon themselves to urge or recommend or advise members to exercise their powers in general meeting in a particular way, they are in general required to make a full and fair disclosure of all matters within their knowledge which would enable the members to make a properly informed judgment on the matters in question" (citing Bulfin v Bebarfald's and Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956). 436 The obligation to make full and fair disclosure does not, however, oblige the directors to give shareholders every piece of information that might conceivably affect their voting (ENT v Sunraysia Pty Ltd, at [19]). 437 The adequacy of the information provided in documentation is to be assessed in a practical, realistic way having regard to the complexity of the proposal (Fraser v NRMA Holdings Ltd, at 468). The duty is to provide the information which the directors think the members should have, as well as information "which it would be obvious to the average commercial man in the street that they should have" (Buttonwood Nominees Pty Ltd v Sundowner Minerals NL (1986) 10 ACLR 360, at 362). 438 Speaking of the statutory obligation to avoid misleading or deceptive conduct, while relying on cases concerning the directors' duty of disclosure, the Full Federal Court said in Fraser v NRMA Holdings, at 468: "The need for an applicant to establish materiality is of particular importance in a case like the present one where the proposal is complex, and involves difficult questions of commercial judgment and matters of degree and conjecture as to the future about which there is room for a range of honestly and reasonably held opinions. If every possible formulation of the commercial objective of the proposal, and arguments for and against every theoretical possibility, were set forth in the total package of information to members would be likely to confuse rather than to illuminate the issue for decision, even for people having a familiarity with corporate law and commerce. The need to make full and fair disclosure must be tempered by the need to present a document that is intelligible to reasonable members of the class to whom it is directed and is likely to assist rather than to confuse: Devereaux Holdings Pty Ltd v Pelsart Resources NL (No 2) (1985) 9 ACLR 956 at 959; Re Dorman Long & Co Ltd [1934] 1 Ch 635 at 665-666." 439 The issue is not whether the explanatory documents provided to the shareholders could have been drafted differently, but what effect the documents would have on "the ordinary shareholder who scans or reads the document quickly, not as a lawyer, but as an ordinary man or woman in commerce or as an ordinary investor" (Devereaux Holdings, at 958; ENT Pty Ltd v Sunraysia, at [20]). 440 The nature of the decision that shareholders are required to make will influence the level of disclosure to be provided by directors to the shareholders (ENT Pty Ltd v Sunraysia). The emphasis on the "ordinary investor" who scans the document quickly was considered further by the Full Federal Court in Fraser v NRMA Holdings, there it was noted that the membership was a wide cross-section of the community, many of whom would be inexperienced in corporate matters and some of whom would be less astute, intelligent or well-informed than the average member of the community. These matters should be taken into account in determining whether the notice of meeting was adequate. It was noted that the need to present a document that is intelligible to reasonable members of the class to whom it is directed might mean that, in complex cases, "it may be necessary to be selective in the information provided, confining it to that which is realistically useful" (at 144). 441 A broad statement of the purposes of the resolution so that shareholders can make reasonably informed judgments whether to attend is useful (Residues Treatment & Trading Co Ltd v Southern Resources Ltd (1988) 14 ACLR 375; 6 ACLC 1160; Westchester Financial Services Pty Ltd v Acclaim Exploration NL (1999) 32 ACSR 499). 442 Where the directors have a personal interest in a matter to be approved by a general meeting the notice must clearly bring the nature and extent of the interest to the attention of the members with full disclosure (Chequepoint Securities Ltd v Claremont Petroleum; Devereaux Holdings). 443 Whether there was adequate information provided to the shareholders of the matters to be considered at the September 2006 meeting depends on the level of disclosure prior to that date. From the factual history set out in some detail above, it can be seen that shareholders had been provided with a considerable amount of information in relation to the problems associated with the building and the need for repair and had been provided, in my view, with sufficient information to assess whether they wished to indicate a view as to the directors' proposal to carry out the project itself. 444 The area in which I consider the information was inadequate was in relation to the approval of the amount to be paid in order to buy-back the ground floor units or by way of compensation to Mr Garratt. 445 As to the former, shareholders might well have been assisted by advice from appropriately qualified real estate agents as to market values for the units in their proposed redeveloped state and/or as to alternative means by which compensation for the loss of the units might be measured and made available to the owners of the ground floor units without necessarily treating those costs as project costs (such as an option agreement of some kind in relation to the acquisition of shares in relation to the new units in the future). The force of at least part of Mr McLaughlin's complaint as to the project was that the owners of the ground floor units obtained a premium price for those units, and were removed from the need to share any loss ultimately sustained by the project, by the manner in which this arrangement was struck – the parties directly benefiting therefrom seemingly being two of the directors of the company. 446 As to the payment to Mr Garratt, true it is that shareholders were aware that Mr Garratt had taken on the responsibility of communicating with them (and others) in relation to the project but it was not made known to them precisely what "efforts" were being compensated or, which seems to me to be more significant, Mr Garratt's own (not inconsiderable) interest in the building (he conceding that he was the largest shareholder of the company). The latter was, in my view, something capable of influencing the decision of members in relation to the level of compensation, if any, which should be paid to him (particularly given the broad brush way in which that compensation seems to have been assessed by Mr Bartrop and the fact that Mr Bartrop himself was unaware of the extent of Mr Garratt's interest in the building). Mr Priestley submits that since no other members have since raised an issue it should be accepted that this is not a matter which would have influenced the vote on this matter back in September 2006. However, I do not accept that an apparent acceptance of the status quo since that meeting means that the outcome would necessarily have been the same had all the potentially relevant or material information been to hand at the meeting (it may, for example, simply reflect an unwillingness to enter into the litigious fray, so to speak). 447 As to the alleged misrepresentation, there are broadly two matters upon which the McLaughlins rely: as to the terms of the funding and as to Mr Bartrop's "independence" to assess that compensation figure. Mr Priestley submits that such a finding of inadequate or misleading information is untenable. As to the latter, he says that extensive communications with shareholders had made plain the work Mr Garratt had undertaken (a matter which I have commented upon above). 448 As to the former, reliance is placed on the assurances said to have been given at the September meeting (and attributed to Mr Garratt) that the "finance agreement would be in place by end of September". Mr Bonanno took notes of the meeting and has recorded that statement. The company's minutes note, with somewhat different emphasis, that "loan documentation should in place be [sic] end of September 2006". Mr Priestley points to the lack of a challenge to the correctness of company minutes in this regard. 449 Mr Priestley submits that the court cannot reasonably conclude that it was (mis)represented at the September meeting that the terms of the funding or construction agreements had been finalized in principle "and were acceptable to" or that they were reasonably acceptable to the company. I agree. I think the evidence supports the view that all the meeting was being told was that the expectation of the board (or Mr Garratt, as the case may be) was that the relevant documentation would be in place by the end of September not that there was any assurance given that this would in fact be so (that being something dependent in part on what stance other parties might take in relation to the documentation). 450 If a deficiency in the information provided in this regard had been identified, then the question would be whether there was any reasonable ground to suppose that the deficiency would cause or have caused shareholders to vote, or abstain from voting, under a serious misapprehension of the position (Devereux Holdings at 958-9 per Young J, citing Re Imperial Chemical Industries Ltd [1936] Ch 587 at 618 per Clauson J). (I note that most cases which have considered a breach of the directors' duty to inform arise in the context of an application for an injunction restraining the holding of the meeting until the notice and explanatory materials are corrected. There seem to be few examples of remedies being sought consequent upon a breach of a duty to inform where the meeting has already been held.) 451 I do not accept that there was a misrepresentation in the description of Mr Bartrop as being "independent" simply because he was the development manager. Although his expertise was challenged (mainly by reference to his association with a large number of companies which had been placed into liquidation over the years – something which seems at least partly explained by the fact that he said many of these companies were special purpose vehicles), I think broadly it was fair to describe him as someone with project management experience who was in a position to comment on the "compensation package" and there was no basis for any suggestion that he was not independent by reason of any association with Mr Garratt otherwise than in connection with the project. Conclusion as to September Resolutions 452 I do not accept that there was any defect in the timing of the notification of the September 2006 Resolutions. There was a defect in relation to the notification of any resolutions required to be passed as special resolutions (those being limited to the article amendment resolution. That was in due course ratified. For the reasons adverted to by Barrett J in his September judgment, nothing in relation to the development was actually effected by means of any of the resolutions passed in September 2006. The McLaughlins at all relevant times had the benefit of legal advice and were accompanied at the relevant meetings by their legal adviser. Any technical procedural irregularity in those circumstances would not invalidate the passage of the resolutions at that meeting. 453 In my opinion, of the September 2006 Resolutions, only the first and last (the amendment resolution and the compensation for Mr Garratt) can be said to have been invalid or ineffective (the first, because of failure to comply with the procedure for amendment to the articles requiring the passage of a special resolution, the last for inadequacy of information and failure to notify in advance of the particular issue to be considered). As will be seen, the first was cured by ratification in December 2006. The resolution to approve payment of the sum of $250,000, as compensation for Mr Garratt, was not so ratified and in my view remains invalid. (ii) December Resolutions 454 At the meeting on 17 December 2006, resolutions were put to the meeting as special resolutions (and passed with dissent from the McLaughlins) that: (a) the amendments made to the Articles of Association of the company on 9 September 2006 be ratified (to which I will refer as the December ratification resolution); (b) Article 4 of the Articles of Association be amended to add a provision to the effect that the power to levy shareholders for expenses and outgoings of the company include all money which the company is or may become liable to or for the account of St George Bank Limited (to which I will refer as the December amendment resolution). December Ratification Resolution 455 In paragraph 7 of the Further Amended Statement of Claim, it is alleged that the December ratification resolution was invalid, void and of no effect. This allegation was again put on a number of bases, broadly that: (a) no amendments had been made at the September 2006 annual general meeting (as the amendments purportedly made were invalid, void and of no force or effect for the reasons set out in paragraph 5 of the Further Amended Statement of Claim); (b) each of the grounds on which the September Resolutions were challenged applied equally to the December ratification resolution; (c) the notice convening the extraordinary general meeting failed to specify what the amendments purportedly passed at the Annual General Meeting were, so as to render the resolution uncertain; (d) the company had refused to provide material and reasonable information to members, by its agents' letter of 13 December 2006 in response to the McLaughlins' request of 11 December 2006. 456 I consider each ground in turn. (a) No September amendments 457 As to the first ground of challenge, I have some difficulty in seeing the basis for a complaint (in respect of a resolution seeking to ratify something assumed to have been, or recognised as arguably having been, ineffectively done at an earlier meeting) that the very resolution requiring ratification was not in fact "passed". Had there been no room for doubt as to the validity of the passage of the September amendment resolution, then presumably it would not have been put before the meeting again. Therefore, whatever the validity of the amendment resolutions considered (and recorded as having been passed) at the September meeting, I fail to see how that invalidates a subsequent consideration of them at the December meeting. (b) September challenges 458 As to the various bases for complaint comprised within the second ground of challenge, other than as already dealt with above I note as follows. 459 The extraordinary general meeting held on 17 December 2006 was called by notice dated 23 November 2006. The McLaughlins say that they received it on 28 November 2006. Insofar as the timing of the notice is concerned, any defect is a procedural irregularity and one which in my view has not been shown to have caused substantial injustice (the McLaughlins being in receipt of legal advice as to their rights, being represented at the meeting by their lawyer and having at least 19 days' notice of a meeting to consider resolutions of some of which they were already well aware and the remaining (amendment) resolution hardly being a complex matter). 460 Apart from the timing issue, the reiterated complaints as to the September meeting can only relate to the complaint as to whether the resolutions were properly put and notified as special resolutions (a matter addressed at least in the form of the notice issue on this occasion and, according to the company, made clear at the meeting), and the content of the notice or adequacy of information in relation to the subject matter of the resolutions proposed to be put to the meeting (those matters being considered by me in relation to the third and fourth grounds on which the resolutions are challenged). 461 There was a factual dispute as to whether the McLaughlins' representative, Mr Bonanno, had voted against the December ratification resolution at the Extraordinary General Meeting. Mr Priestley submits that as Mr Garratt was not challenged as to the accuracy of the draft minutes of the meeting in that regard, the court should not lightly conclude that the directors and company secretary all erred in the preparation of the minutes in this respect, particularly when Mr Bonanno's dissent is recorded elsewhere in the minutes and when Mr Bonanno's own file note of the meeting is silent as to the manner in which the McLaughlins voted (TB 1410) and makes no reference to the passage of this resolution at all. Mr Priestley suggests that it is more likely that Mr Bonanno was concentrating on the challenges which he was shortly to make at the meeting, and overlooked objecting to what he expected would be a routine ratification of the article 3 amendments. In the end, I think nothing turns on this and it is not necessary to make any finding on this issue. (It does not seem to be suggested that the McLaughlins consented to the passage of the resolution.) 462 Had it been necessary, I would have been inclined to place weight on the recorded minutes (even though these are criticized as having been no more than 'unsigned' minutes) since there seems no reason to have recorded dissent by Mr Bonanno on one matter but not others. Mr Bonanno's dissent would not, of course, have prevented the carriage of a special resolution to ratify the amendments in question. It is not, as I apprehend it, suggested that the lack of an expression of dissent meant that the McLaughlins had positively consented to the amendment article resolution. 463 Insofar as the ratification of the amendments to article 3 required the unanimous consent of shareholders, which I have considered above, and thus were passed in breach of the contract between the company and its members, this gives rise to a claim for damages for breach of contract. However, in circumstances where third parties have since obtained rights in respect of shares allocated in accordance with the amended articles, no other relief would seem to me to be appropriate. (c) Text of amendments to articles 464 The third ground of challenge to the December ratification resolution is that the notice of meeting did not reproduce the text of the amendments to the articles said to have been made in September and which were sought to be ratified, so as to render the resolution uncertain. 465 Mr Burchett submits that it is not for members, particularly those who did not attend the first meeting, to make enquiries of what was passed and what was then now sought to be ratified. Mr Priestley submits that the submissions made by Mr Burchett in this regard (at [35] of Mr Burchett's submissions) attacking the ratification resolution do not reflect the pleaded case. What was pleaded (as I have set out above) was, relevantly, that the notice of the ratification resolution did not reproduce the text of the amendment resolution. Mr Priestley asserts that no shareholder was capable of being misled in this regard, the earlier resolutions clearly being incorporated by reference into the notice (relying on Ryan v Edna May Junction Gold Mining Co, at 501; Browne v Panga Pty Limited (1995) 14 WAR 393; (1995) 17 ACSR 75). 466 In circumstances where the December meeting followed not long after the meeting at which the amendment resolutions were passed, and shareholders had been provided with the text of the amendments in the notice to the previous meeting, I cannot see that any procedural irregularity in this regard was likely to cause or has caused any substantial injustice. It was open to any shareholder, on receipt of the notice of meeting, to raise with the company a query as to what precisely was the text of the resolutions to be ratified. There is no evidence that any shareholder did so. As for the McLaughlins, they and their lawyers were well aware of the amendments to the articles which were the subject of the ratification resolution (having already gone to the trouble of seeking interlocutory relief to restrain reliance on them). It defies belief that there was any uncertainty on their part in relation to what was being considered by the meeting. (It should also be remembered that of the 22 units then comprising the building, those who held a beneficial or other entitlement to shares in respect of a significant number of those units were represented on the board of the company and all too aware, presumably, of the amendments to the articles of which ratification was being sought and the reason why such ratification was necessary.) I can see no practical uncertainty and no substantial injustice arising as a result of the fact that the text of the amendment resolutions was not included in the notice of meeting. (d) Adequacy of information/misrepresentation 467 As to the fourth ground on which the December ratification resolution is challenged, this is put in the submissions variously as a complaint that the resolution suffers from "the same lack of provision of material information, as the original resolutions" and that there was no explanation for the resolutions. Complaint is made as to the adequacy of the response to the McLaughlins' request for information. Mr Burchett points out that ratification by a general meeting requires the full and frank disclosure of the nature of the breach, the dispensation sought and all material facts (Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666). 468 It is said that Mr Garratt's letter to shareholders of 8 December 2006 (with 'whatever material information' was therein provided) was not received by the McLaughlins (or proven as having been sent) earlier than 12 December 2006, three working days before the meeting on Sunday, 17 December 2006. 469 In this regard, the complaint made by the McLaughlins (and pleaded in paragraph 7(d) of the Further Amended Statement of Claim) seems to merge into the complaints made as to misrepresentation (contained in paragraph 9 of the Further Amended Statement of Claim in relation to each of the December special resolutions, ie both the December ratification resolution and the December amendment resolution). 470 Mr Priestley submits that paragraph 38 of the final Outline of Submissions relied upon by the McLaughlins advances a case of non-disclosure and misrepresentation which is 'essentially unpleaded' and cannot be considered. 471 However, while paragraph 7 of the Further Amended Statement of Claim does not plead misrepresentation in relation to the December ratification resolution (and only inferentially raises the issue of non-disclosure insofar as it comes within a plea of failure to provide material and reasonable information to members, there referring in terms to a letter of 13 December 2006 not Mr Garratt's earlier letter of 8 December 2006), the assertion made in paragraph 38 of Mr Burchett's submissions (that the September and December resolutions "to proceed with the project and amend the articles for that purpose …[were] procured by material misrepresentation" as to particular matters) seems directly to pick up the allegations made in paragraph 9 of the Further Amended Statement of Claim. I therefore do not accept that this is an impermissible attempt to raise matters in submissions which have not been squarely pleaded against the company (though I note that at least one of those matters - (c) - cannot possibly have procured the passage of the September resolutions since it postdated them). 472 I address later the misrepresentation allegations but for present purposes simply note that there has been an issue raised as to the procuring of the December ratification resolution by material misrepresentation. 473 As to the adequacy of the information provided to members in relation to the ratification resolution, it seems to me that nothing further was required on one view than an explanation as to why the resolution was again being put to shareholders. That explanation was given in Mr Garratt's 8 December 2006 letter. I think there is therefore no basis to the complaint made by the McLaughlins in this regard. 474 I therefore do not consider that the December ratification resolution was invalid, void or of no effect by reason of any of the matters pleaded in paragraph 7 of the Further Amended Statement of Claim. December amendment resolution 475 In paragraph 8 of the Further Amended Statement of Claim, it is alleged that the December amendment resolution was invalid, void and of no effect, and not binding on the McLaughlins, in that it: (a) purported to increase the liability of members beyond the amount uncalled on any shares contrary to ss 140 and 516 of the Corporations Act; and (b) purported to increase the liability of the McLaughlins to the company without their assent and/or beyond any reasonable contemplation of the McLaughlins at the time of their acquisition of shares in the company. 476 I have set out earlier the text of article 4 with the amendments made thereto highlighted. Mr Priestley submits that the variation of article 4 did not increase the McLaughlins' liability in a manner contrary to the Corporations Act, or the general law, or otherwise; but did no more than confirm that members could be further levied to get in a shortfall of funds resulting from a member's default and could be levied for money due to St George bank. At all times each member's liability remained the same proportion (as its shares bore to total issued shares) that it had always been. I consider this issue later in these reasons. 477 Mr Priestley further submits that no shareholder has ever been or is likely to be levied under the new article 4(m) (something which does not seem to me to go to the validity of the resolution as such). 478 It is submitted by Mr Priestley that, even without the amendment to article 4, the company had power to levy for development debts under one or more of articles 4(d), (f), (h), (j), (k) and (l) and that, consequently, it cannot be said the new sub-article increased the members' liability at all. I agree for the reasons set out later in these reasons. Both December resolutions 479 In paragraph 9 of the Further Amended Statement of Claim, it is alleged that each of the December special resolutions was invalid, void and of no effect in that it was procured by material misrepresentations (particularized by reference to Mr Garratt's letter to shareholders of 8 December 2006 and statements made by him to the December 2006 meeting) by the company to the members that: (a) the amendments were required and had been accepted as sufficient to finalize the funding of the development by St George Bank Limited; (b) it was reasonably expected by the company's directors that the only shortfall in funding of the development would be slightly more than $1 million to be levied against shareholders at the end of 2007 after completion of construction; (c) these proceedings challenging the September resolutions had been dismissed by this Court and this Court had found that the only arguable deficiency in the resolutions was the failure to refer to them in the notice of meeting as 'special' and that the December ratification resolution would put beyond argument the validity of the resolutions; (d) the company had no practical choice but to make the amendments sought by the bank. 480 It is necessary to consider carefully just what was said in the 8 December 2006 letter (and at the meeting, insofar as that is in evidence) as to the circumstances in which the respective resolutions were put to the members. Mr Priestley submits that this letter, in its terms, indicates the requirements of the bank at that stage and I think that the evidence supports such a conclusion. 481 As to the representation particularized in paragraph 9(a), Mr Burchett asserts that the letter dated 8 December 2006 represented the following: the amendments were required by St George Bank for it to lend to the Company for the project, such that the first drawdown of funds would occur 'directly after the amendments have been made' 482 Mr Burchett submits that this was untrue – that the bank had not required the amendments to article 3 and there remained several other unsatisfied conditions for funding; that nine requirements were identified by the bank on 30 November 2006 and that at least five were accepted by the company's lawyers to be outstanding as at 4 December 2006 (referring to Exhibit F in this regard). 483 There is no doubt that the amendment to article 4 was something required by the bank. The company's position to the bank that such an amendment was not necessary was not accepted by the bank (as made clear in the correspondence in evidence before me) and the bank went so far as to specify the terms of the amendment to the articles which it required in order to be satisfied that there was power to impose any necessary levies to meet the liability to the bank. I cannot see any misrepresentation in this regard. As far as the ratification of the amendments to article 3 was concerned, I do not think that on a fair reading of the letter there was any representation that the bank's requirements extended beyond the amendments to article 4. 484 Insofar as it is asserted that the members were told that the article amendments had been accepted 'as sufficient to finalize the funding of the development', I do not read the letter as going further than an expectation that the amendment would satisfy an outstanding requirement of the bank in relation to the funding but in any event that would not have been an unreasonable conclusion to have drawn from what the bank officers had said to Mr Garratt at the 20 November 2006 meeting. (What is not pleaded, and in any event is not represented in the letter, is that the first draw down would occur directly after the amendments were made). 485 As to the representation particularized in paragraph 9(b), Mr Burchett submits that the letter dated 8 December 2006 represented that: … 6 of the 8 new units had been sold for $12.75m and total sales proceeds were expected to exceed $20m, leaving a shortfall of $lm to be paid by existing shareholders at the end of the project. 486 In fact, Mr Burchett says that no contracts had been exchanged at that time, only one had been exchanged by the end of the year, the remainder of the new units were held for, and only in April 2007 were contracts exchanged with, directors or their companies for the minimum pre-sale value required by the bank. Accordingly, he says that there was no proper basis for claiming that 'pre-sale prices confirm the values of all existing units will rise by much more than will need to be contributed'. 487 The first matter to note is that the submissions seem to point to a different misrepresentation than that which was particularized. Mr Priestley submits that no such statement in the terms pleaded is contained in the letter nor does it seem to have been asserted that a statement in those terms was made at the meeting. None is recorded in the minutes and Mr McLaughlin's affidavit of 28 July 2009 does not contain such an assertion. At most it seems to me that the letter conveyed the board's then expectation of the outcome of the project and I am not satisfied that there was any misrepresentation in that regard. 488 As to the representation particularized in paragraph 9(c) of the Further Amended Statement of Claim (which, as noted earlier, cannot possibly have procured the passage of the September resolutions and which is not relevant to any consideration of the December amendment resolution), Mr Burchett asserts that it was plainly misleading to suggest that in the interlocutory application in these proceedings, the court had only found 'arguable' the contention that the amendment resolution at the September annual general meeting ought to have been described as special. 489 Mr Burchett notes that Barrett J had in fact found a serious question to be tried 'at least' in relation to the failure to describe the resolution as special (at [19]) and had then found a serious question to be tried as to the adequacy of disclosure (at [22]). Mr Burchett submitted that the statement was a significant inducement to pass the December ratification resolution, in that it suggested that the court had approved all but the formality of the amendment resolution. 490 The 8 December letter seems to me to contain a fair report of the judgment of Barrett J on that aspect of the matter relating to the ratification resolutions. I accept Mr Priestley's submission that the letter does not, in its terms, purport to give an exhaustive statement of the arguments put by the McLaughlins before his Honour. That much is evident from the text of the letter insofar as it referred to "another complaint" (in relation to the resolutions not having been put as special resolutions), which logically indicates that it was not the only complaint. 491 It seems to me that what was relevant for the members to know was that his Honour had accepted that there was a doubt as to the validity of the relevant resolution now sought to be ratified. The omission to notify the intention to pass this as a special resolution was, as I read it, the basis on which his Honour had expressed the view that there was a serious question to be tried in relation to the validity of the resolution, though I accept that his Honour had also commented on the complaint as to adequacy of the information put before the meeting. 492 I am not satisfied that the ratification of the article 3 amendments was likely materially to have been influenced by a suggestion that this was the 'only' arguable deficiency in the resolutions – that it was an arguable deficiency would surely be enough to give the meeting cause to decide it should be ratified. 493 Finally, as to the representation particularized in paragraph 9(d) of the Further Amended Statement of Claim, Mr Burchett contends that it was misleading to assert that the company had no practical choice but to make the amendments to finalize the funding. Apart from what he says was the further misleading assurance that this would procure the funding, Mr Burchett submits that this statement relied on the directors' 'misconduct in handing over the company's only asset to be gutted without funding'. 494 Mr Burchett says that there was a choice in that the company could have withdrawn from the project, sued its directors for compensation, sold the building, or sought alternative finance, "preferably for a less ambitious and risky project". At the very least, he submits that the circumstances whereby the company had been placed in a position of allegedly having no practical choice but submit to the "allegedly unreasonable" demands of the bank were required to be frankly disclosed. 495 It is said by Mr Priestley that a fair reading of the letter indicates that the statement as to there being 'no practical choice' but to make the amendments sought by the bank related to the amendments required by the bank to article 4 (and not to the ratification of the earlier article 3 amendment resolution). I agree. Further, it seems to me that insofar as this can only have been a statement of the board's opinion as to the matter (ie whether the board considered there to be any other practical option open to the company at that point) I am satisfied that that was the opinion of Mr Garratt and there is nothing to suggest that that was not an opinion shared by the rest of the board. It was therefore not a misrepresentation of the position to the shareholders that this was the board's belief (whether, as the McLaughlins consider, there were other practical options open to the board, the fact remains that the board clearly did not believe that to be the case). Further, the suggestion that there was an obligation on the board in this context to assume responsibility for wrongdoing of the kind which is hotly disputed, even if this were a valid point, was not pleaded. 496 I do not accept that the December 2006 resolutions were procured by any material misrepresentation as alleged. (iii) January 2008 Buy-Back Resolutions 497 At the annual general meeting on 24 January 2008, resolutions were put to the meeting as special resolutions (and passed, again, with dissent from the McLaughlins) (the Buy-Back Resolutions) that: (a) the shareholders authorise and approve the company buying back the shares in respect of unit 22 in terms of a draft agreement circulated with the notice of annual general meeting (that being for the sum of $950,000); (b) the shareholders authorise and approve the company buying back the shares in respect of unit 23 in terms of a draft agreement circulated with the notice of annual general meeting (that also being for the sum of $950,000). 498 In paragraph 9B of the Further Amended Statement of Claim, it is alleged that the Buy-Back resolutions are invalid, void and of no effect, in that: (a) by Article 14 it was expressly provided that no part of the funds of the company were to be directly or indirectly employed in the purchase of the company's shares; (b) the resolutions were for the purpose of a selective buy-back of the company's shares without compliance with s 259A of the Corporations Act; 499 A selective buy-back of the company's shares under s 259A requires, relevantly, compliance with the procedure set out in s 257A. Approval of the terms of the buy-back agreement must be by either a special resolution with no votes being cast by the vendor or his associates or a unanimous resolution; the agreement being made subject to or after such approval s 257D(1). The notice of meeting must include a statement setting out all information known to the Company that is material to the decision (s 257D(2)). At least 14 days before the resolution or agreement is made, a copy of it (and any accompanying documents) must be lodged with ASIC (ss 257E & 257F). All material information known to the company must be included in the offer to buy-back (s 257G). 500 In respect of these requirements it is submitted by Mr Burchett that: a) at none of the meetings to consider the issue has there been a unanimous resolution in favour; b) Mr Garratt's associates have voted in favour on each occasion, particularly at the meeting relied upon by the company of 24 January 2008; c) Mr Heyworth appears to have voted in favour at the January 2008 AGM and there was no restraint by either interested party (or Mr Garratt's undisclosed agents) in voting on it, as is required by the procedure under s 257A; d) no notice of meeting included a statement of information material to the decision; e) only in respect of the meeting concerning Mr Garratt's shares on 28 June 2007 was a notice lodged with ASIC, but that notice concerned a different proposed agreement from that which was in fact made and no other notice of a proposed share buy-back has been lodged; and that f) no offer to either director has been disclosed, so that it cannot be said, whether a statement of all material information was included with any such offer. 501 Mr Burchett concedes that breach of these requirements does not, of itself, invalidate a completed share buy-back and connected agreements (s 259F). Nevertheless, he notes that such a breach would render the resolution and agreement invalid and liable to be set aside, so that completion could be restrained to prevent a contravention. 502 Mr Priestley submits that: (a) the resolutions passed in September 2006 and January 2008 were necessarily anterior to compliance with the procedure so no contravention of the procedure could invalidate the resolutions; (b) no contravention of the Act is conceded or proven; (c) any contravention does not affect the validity of the buy- back transactions, as the McLaughlins concede; and (d) no right of action lies in favour of the McLaughlins in the circumstances. 503 Further, (if the above submissions are not accepted), Mr Priestley says that an order is sought under s l322(4)(a) declaring the share buy-backs valid on the basis that the court would be easily satisfied that the buy-backs are essentially procedural, that the company acted honestly, that it is just and equitable to make such an order, and that no substantial injustice has been caused by the contravention. 504 Somewhat provocatively (in circumstances where the McLaughlins have already brought no fewer than three interlocutory applications seeking to restrain matters relating to the implementation of the redevelopment project), Mr Priestley says it was for the plaintiffs to apply to restrain the implementation of the buy-back transactions; that they did not seek injunctive relief; and that none should be granted. 505 It is submitted by Mr Priestley that the surrender of one, and then both, rear ground floor units was a necessary component of the renovation project (as it permitted the construction of the roof units which have funded most of the restoration works); that it was a condition of the development application that car parks be provided as part of the works; and that the McLaughlins and all other shareholders have benefited from the renovation works very substantially (a matter with which the McLaughlins take issue). It is submitted that the McLaughlins' stance is one which they seek to take the benefit from the project but oppose recognition of the basis upon which they have obtained that benefit (namely, that payment be made in an amount to be agreed between the company and the two owners for the surrender of their units) and that there is a fundamental inconsistency and injustice in the McLaughlins' position, which would debar any grant of injunctive relief to them. 506 As to the matters of which complaint is made, the issues broadly go to procedural defaults (ie the lodgment of notices), the capacity in which Mr Garratt's associates or perhaps Mr Heyworth voted at the meetings and as to the adequacy of information provided in relation to the resolutions. 507 I am satisfied that to the extent that there was any procedural irregularity in the passage of the Buy-Back Resolutions there has been no substantial injustice caused which could not otherwise be remedied by an order granting leave for the McLaughlins to commence derivative proceedings in relation to the conduct of the directors in relation to the entry into of the buy-back agreements and that, in circumstances where third parties have now obtained rights in relation to the new units (and the position is not one in which the parties can readily be put back into the position in which they would have been had the buy-back agreements not been entered into), it is not appropriate for injunctive relief now to be granted to restrain completion of the buy-back agreements. (iv) Levy Resolution 24 January 2007 508 On 24 January 2007, documents were signed by certain directors of the company resolving to strike a special levy in the amount of $2.8million payable by the shareholders on 12 February 2007 and the company's managing agents were instructed to serve levy notices and a default notice upon any shareholder who opposed payment of the levy. 509 In paragraph 11 of the Further Amended Statement of Claim, it is alleged that the Levy Resolution was invalid, void and of no force or effect in that: (a) there is no authority under the articles for the directors to strike a special levy but only to make periodic levies at six monthly intervals or such lesser intervals as may be determined by the directors, and no such determination was made; (b) no meeting of directors occurred on 24 January or any other occasion at which the levy resolution was passed, and not all directors signed the documents purporting to constitute the said resolution; (c) the resolution was purportedly struck for the collateral and improper purpose of meeting the demands of St George Bank Limited to procure the forfeiture of the McLaughlins' shares or their acknowledgment of personal liability for the development works and to settle these proceedings; (d) alternatively, the resolution was purportedly struck for the purpose of meeting an actual or anticipated liability to St George Bank Limited pursuant to the purported amendment of Article 4 and as such cannot apply to the McLaughlins; (e) alternatively, the resolution was purportedly struck for the purpose of the redevelopment of Dungowan Flats without the requisite unanimous consent of members and hence amounted to a fraud on any power to pass it and on the minority members, the McLaughlins; (f) the resolution was purportedly struck for an amount exceeding the amount of expenses, charges or outgoings authorised by the articles to be incurred or to be the subject of a levy; (g) the resolution was "expressly purported to be struck" on the basis that the company as at 24 January 2007 had incurred debts totalling $2.8million on the renovation and construction works, when that was untrue; (h) the resolution purported, in advance of any default in payment of the levy, to authorise the issue of a default notice when no power to issue such a notice existed under the articles until after default; (i) the resolution purported to authorise the issue of a default notice in circumstances not authorised by the articles, namely opposition by a shareholder to payment of the levy rather than default. 510 The challenges made to the Levy Resolution thus fall into three broad categories – whether it was within power (for one or more of the reasons in (a), (d), (f), (g) (h) or (i)); whether it was procedurally in order (for the reason in (b)); and whether it was for an improper purpose or a fraud on the power (for one or both of the reasons in (c) and (e)). (a) Was the Levy Resolution within power? 511 The first complaint made was that article 4 only permitted levies to be made at less than six monthly intervals if there had been a determination to that effect by the directors and that no determination had been made of any lesser interval within which such a levy could in this case be struck. 512 If such an argument were to be correct (and it seems to me that it is artificial in the extreme) it would not be possible for directors to strike a one-off levy for, say, emergency repairs within a six month period without first having formally determined that the six monthly periodic interval be reduced (and, on one view, this might set a new interval for periodic levies in the future). Such a construction seems to me to be unworkable from a practical perspective. I note that Barrett J similarly did not accept the submission that article 4 did not permit 'one-off' levies, his Honour expressing the view that the word "oftener" 'seems to me to indicate that any particular levy may be made outside the normal cycle or sequence". His Honour considered that, given that some financial needs might arise unexpectedly and on an isolated basis, it could not have been intended "that action to meet such a special need should necessitate some reprogramming of a cycle or sequence of levies as distinct from allowing a special levy to be struck". 513 In any event, it seems to me that the very act of striking a levy within the six month period constitutes a determination by the directors that there should be a levy "oftener" than the six month period within the opening words of article 4 and therefore the Levy Resolution would not fail for this reason. 514 The second basis on which it is suggested that there was no power to make the Levy Resolution was that it was struck for the purpose of meeting an actual or anticipated liability for the bank and thus that, if the amendment to article 4 was invalid, this would be beyond power. 515 I have already formed the view that the amendment to article 4 was valid. However, in any event it seems to me that the company does not need to bring the levy within 4(m) in order to source it within a power under article 4. In particular, and even apart from any component of the levy which was struck for repairs strictly so-called (which was clearly empowered under article 4(d) or perhaps (e) depending on the location of the repairs), it seems to me that the costs of the redevelopment (which I consider to have been undertaken in order to provide a means for funding otherwise necessary repairs to ensure the structural integrity of the building and to maintain the building as a first class residential home unit building) would fall within the heads of power in article 4(j) and (l). 516 Mr Burchett submits that the expenses which may be levied in respect of work on 'the building' (defined in article 2 as 'the property known as Dungowan Flats' are those which relate to 'contributions to the general upkeep and maintenance of the building as well as to the running expenses' of the company. It is submitted that that this was 'the obvious intention' found by Cohen J in respect of an almost identical article in Ghabrial v Romolly Pty Limited (1991) ACSR 611, at 613, where his Honour commented on the inappropriateness of such an article being used for 'substantial expenditure of a capital nature'. 517 Mr Burchett submits that it is inappropriate, in the context of a limited liability company, to construe an article such as article 4 so as to extend the liability of members beyond the face value of their shares and to encompass the cost of any speculative venture using property of the company (relying upon Ding v Sylvania Waterways Ltd [1999] NSWSC 58 and s 140(2) Corporations Act). It is suggested that the amendment to article 4 was in effect tantamount to a recognition that there was "no power to levy for repayment of borrowings for speculative investment activity or borrowing for any other purpose". 518 It seems to me that there is an argument that the amendments to insert article 4(m) could be regarded as extending the liability of members in a way that is contrary to s 140(2)(b). A member is not liable, solely by virtue of his or her membership to make pecuniary contributions beyond the amount unpaid on the shares taken up or guaranteed as the case may be (s 40). So, it is not possible for the company to simply pass amendments to its constitution to allow it to strike additional levies requiring further contribution (s 140(2)(b)). Consequently, it is possible to regard the amendments to article 4 as extending the liability of members contrary to s 140(2). 519 However, as discussed by Austin J in Ding v Sylvania Waterways (at 313), the principles of limited liability do not prevent the company and its members from entering into an agreement (the terms of which may be contained in the articles of association) under which the members agree to pay to the company levies, in accordance with whatever terms are agreed between the company and the members, in this case, articles 4 and 5 of the articles of association. The nature of these obligations to pay the levies are contractual and not contributory, and are not an extension of members' liability contrary to s 140(2) (Ding v Sylvania Waterways). 520 In Ding v Sylvania Waterways, Austin J went on to consider that, whilst amendments to articles which required members to pay additional moneys to the company could constitute an extension of liability infringing s 140(2)(b), it was nevertheless possible for the company and its members to agree to a variation of the agreement between them, just as any contractual obligations may be varied with the consent of both parties. 521 In the absence of an express or implied ability of one or more parties to bind another to an amendment of their agreement (such as the agreement contained in a company's articles of association), this agreement can be varied only with the consent of all parties on an individual basis in writing. His Honour noted that it was therefore not possible for the company simply to rely on the ability to amend the constitution by way of special resolution (s 136(2) CA), at least in the absence of some further contractual agreement between the parties which allowed for the contract to be varied by special resolution, which was not the case there (Ding v Sylvania Waterways, at 313). 522 Applying the reasoning of Austin J in Ding v Sylvania Waterways, it could only be possible to amend the obligation to pay the levies to something beyond the scope of the obligation to which members had under the articles originally agreed by way of an agreement between the company and each of its members. Such an agreement would have required each member's consent in writing to such changes, including that of the McLaughlins. 523 However, as I do not consider it necessary for the company to rely on the power in article 4(m), as amended, to sustain the validity of the levy which was struck in January 2007, the question whether the amendment to article 4 offended any principle of limited liability is not determinative of the issues in this case. This turns on the proper construction of article as it was prior to the amendments made to it in December 2006. 524 Insofar as article 4 (j) permits the directors to raise a levy to recover 'charges and outgoings...to maintain or enhance the value of the property', Mr Burchett places weight on the omission in that sub-article of the word 'expenses' (in contrast with the inclusion of that word in the phrase 'expenses, charges and outgoings', which appears as the introduction to the sub-articles in article 4. Mr Burchett then contends that there is a distinction between expenses (which are with third parties), charges (made by the company for services rendered) and outgoings (which he says are recurrent expenditure). He dismisses the amounts for which the levy was raised (or so it would seem from his submissions) as debts which the directors have "simply … chosen to incur". I see no basis for that contention. If the directors have (as they have in this case) entered into a contract for the provision of building and construction services, then amounts for which the company may become liable under that contract cannot simply be dismissed as "debts the directors have chosen to incur". They are liabilities for the payment of which the directors must make provision in some way and, while not (hopefully, from the point of view of the company) recurrent expenses, they are debts or expenses (in the sense of expenditure) which the company must meet. 525 The objects specified in the company's Memorandum of Association include the management of the building as "first class homes " – cl 3(2); and "to develop and turn to account any land acquired by the Company or in which it is interested…and …constructing altering pulling down decorating maintaining fitting up and improving buildings by advancing money to and entering into contracts and arrangements of all kinds with builders and others" (clause 3(5)). 526 Mr Burchett submits that even though the Memorandum of Association provides for extensive objects of acquisition and development, including to: 'reconstruct and adapt any lands houses flats buildings plant machinery and other appliances and things found necessary or convenient for any of the purposes of the company'. no such specific provision is made for the reconstruction or expansion of the building in the expenses able to be levied under article 4 and, therefore, such activity cannot have been intended by the vague term 'enhance the value of the property'. 527 I note that this issue was considered by Barrett J when the interlocutory application was before him. When considering the question whether it was or would have been open to board to regard the expediency of expenditure as related to maintaining or enhancing the "value of the property", his Honour expressed the view that "As a matter of logic, any enlargement or extension of a building forming part of a property which causes the enlarged building to contain more flats available for occupation entails enhancement of the value of the property of which the building forms part or on which it is situated." That must, with respect, be correct. 528 It was therefore his Honour's opinion that article 4 (j) supported those aspects of the expenditure for which the levy had been struck which went to the extension of the building (even if those aspects did not otherwise fall within articles 4(d), (f) or (l). His Honour noted the observation by Cohen J in Ghabrial v Romolly that a levy provision such as article 4 does not seem very appropriate for raising funds for substantial expenditure of a capital nature but commented that there it was not suggested by Cohen J that the levy provision was incapable as a matter of construction of covering an extension in that case constituted by the addition of garages. Barrett J was satisfied that para (j) covered the expenditure related to the extension. I agree with that conclusion. (I note that his Honour also observed that expenses such as marketing expenses might be regarded as within article 4 on the basis that payment of such expenses would in the ordinary course lead to a situation where flats otherwise empty will become occupied and that "may well be conducive to the enhancement (or, at least, the maintenance) of the value of the property".) 529 As to the matters complained of in (f) and (g), they turn on whether debts were actually owing at the time the levies were struck. Mr Burchett points to the evidence given by Mr Bartrop to the effect that the terms of engagement of the builder (and pre-funding consultants) was that until funding was available no amounts would be paid and that there is no proof of any debts immediately due and payable at the date of the levy. 530 In that regard, I was not taken to particular terms of the contractual arrangements as to the postponement of payments otherwise due. It does not seem to be disputed that the sum of $2.8million (for which the special levy was struck) was not due and payable as at 24 January 2007. However, I do not read article 4 as limited to debts already due and payable. Article 4 (e) itself permits the board to levy shareholders for such amounts as are considered desirable for the provision of future repairs of other contingencies. In circumstances where the builder had ceased work, the building was vacant, the bank's conditions for draw down had not been satisfied and the company was committed to a building contract under which certain sums were or would become payable, I consider that a combination of articles 4(d), (j) (k) and (l) authorised this levy (even without the need to rely on article 4(m). 531 As to the balance of the complaints made as to the power of the board to pass the levy resolution, it is said that the Articles did not authorise the issue of a default notice prior to any default by the shareholder and did not authorise the issue of a default notice for opposition. It seems to me that there is nothing in the company's constituent documents to prevent a board determining in advance that if shareholders default in payment of a levy then certain action will be taken (although I accept that a supplementary notice would then be required under the articles). (There might be an argument that, in so doing, the directors were not considering the possibility that events in the interim might cause them to re-consider such a decision and hence that before implementing the decision to take action against defaulting shareholders it would be necessary for them to consider again the question of forfeiture, but it does not seem to me that this invalidates the resolution to issue a levy notice in the first place. (b) Procedural matters 532 As to the matters pleaded in this regard, article 92 of the company's articles permits a resolution to be in writing and signed by all the directors. There is no need for a meeting of directors physically to be held. The Special Levy Resolution was made in writing. Identical copies were signed by all the directors (TB 1627-1628). While it is unclear on the face of the documents when these resolutions were actually signed, Mr Garratt gave evidence that this had occurred at the relevant time. Article 92 provides that a resolution in writing signed by all the directors shall be treated as valid and effectual as if it had been passed at a meeting of the directors duly called and constituted. 533 Mr Burchett drew attention to the exchange of communications between Mr Garratt and Ms Frith of Robinsons on 24 January 2007 in which instructions were given as to the issue of the levy and, in particular, the email from Mr Garratt directing Ms Frith to make the levy payable on 12 February 2007 and to "treat the levy as struck today" and "send the notices for the shareholders other than McLaughlin to me" (TB 1629). It seemed to be suggested that there was some element of backdating the levy notice or otherwise that the levy had not in fact been struck as at the time the notice was issued. It does not seem to me that there is sufficient evidence to sustain those suggestions. The wording of Mr Garratt's email on its face may well be infelicitous but it is consistent with the directors having resolved to issue the levy notice but Mr Garratt being given some discretion as to whether and when to issue any such notice (depending on the outcome of negotiations which were taking place around that time with the McLaughlins which might have obviated the need for the levy to be issued at all). 534 Mr Priestley relies on the fact that all directors signed one or other of the two identical pages setting out the resolutions. That is sufficient for the purposes of the articles. (He also submits, by reference to the submissions made, that the allegation in paragraph 11(b) of the Further Amended Statement of Claim has been abandoned. Such a conclusion seems to me possibly unduly optimistic.) Suffice it to say that I am not satisfied that there is a difficulty with the Levy Resolution in this regard. (c) Improper purpose/fraud on a power 535 In the context of the submission that the passage of the relevant resolution had been a fraud on the power, Barrett J noted [at para 68] that the power to impose levies was akin in a sense to the power to issue shares, though it did not of itself entail a change to the configuration of ownership of shares. His Honour noted that the power of directors to issue shares will be abused by them if exercised for a purpose of benefiting some shareholders at expense of others (Nguirli Limited v McCann, at 440) or of maintaining control in hands of directors (Harlowe's Nominees Pty Limited v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483, at 493) or defeating wishes of majority of shareholders and maintaining directors control of company (Ashburton Oil v Alpha Mining NL (1971) 123 CLR 614, at 640) or for purpose of a new majority (Howard Smith, at 837). 536 Mr Burchett submits that it should be inferred that the levy was struck, not for the purposes of paying authorised expenses under the articles, but to procure the forfeiture of the McLaughlins' shares or to intimidate them into complying with the unreasonable demands of the bank regarding their shares. 537 For the company, it is said that there was no demand by the bank to procure forfeiture of the McLaughlins' shares, nor was there any demand by the bank for the McLaughlins to acknowledge personal liability for the development works and to settle these proceedings but, rather, the bank had simply taken the position that absent an acknowledgment of personal liability from the McLaughlins, or an arrangement pursuant to which their shares were sold or forfeited, the bank would not permit a draw down of funds under the facility. 538 It is also submitted by Mr Burchett that it should be inferred that the levy was struck to provide security for the bank by way of a standing liability in the members for it to draw upon at the end the project, if required (for which purpose the amendment to article 4 was procured by the bank). However, as Mr Priestley points out, until draw down, there was no liability as such to the bank so it cannot logically be asserted that the purpose was to provide security for any actual liability to the bank. Further, Mr Priestley notes that such a claim is unpleaded and was not put to Mr Garratt. 539 The relevant question raised by the allegation in paragraph 11(c) is whether the exercise of the power to strike the levy was fair, in good faith and for the proper purposes of the power (Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459). 540 Mr Burchett relies in this regard on matters such as the short time frame from Mr Garratt's letter of 10 January (seeking a response two days' later), the asserted lack of evidence of any attempt by the company to obtain finance from any other source or to negotiate terms with its creditors, the alleged 'depredation' of the value of the McLaughlins' shares, and the circumstances (outlined briefly in the chronology of events above) in which the levy notices were issued to members of the company for the submission that the company's conduct "could thus be seen for its true character, blackmail, as it had in truth been from the striking of the levy". 541 As such it is contended that the striking of the levy amounted to a fraud on the power (citing Re Agriculturalist Cattle Insurance Co (Stanhope's Case) (1866) LR 1 Ch App 161 at 169). 542 Reliance was also placed in this regard on the suggestion that the board resolution indicated an intention to discriminate in the enforcement of the levy in question. Mr Burchett submitted that the directors had a duty to enforce a levy against all 'defaulting' shareholders under article 5, once struck (Spackman v Evans (1868) LR 3 HL 171, at 186; Goldsmith v Colonial Finance Mortgage Investment & Guarantee Corporation Ltd (1909) 8 CLR 241) and the fact that the directors themselves, not having complied with the levy, chose to enforce the levy only against the McLaughlins, "speaks volumes as to their purposes in striking the levy". In this regard, Barrett J has noted the difference between differentiation and discrimination in relation to enforcement of levies. 543 It seems to me that the circumstances in which the company found itself in January 2007 (whether of its own making) were such that it is not surprising that the company sought to put itself in the position where it could pay its creditors in the event that the bank might not permit the draw down of funds. It did so by striking the special levy. That does not seem to me to indicate any improper purpose on the company's part, nor does the fact that the directors may have anticipated both that the McLaughlins might resist payment of the levy and that it might be necessary to enforce the levy against them in those circumstances. 544 As to the combined nature of the resolution, it is submitted by Mr Burchett that directors had no power to make a combined resolution to issue both a notice of levy and notice of default. However, there is nothing in the articles which prevents the board considering in advance what course of action should be taken if there is a default in the payment of the levy. (As noted above, there may well be an argument that before actually implementing the further step contemplated at the time of the initial resolution the directors had a duty to consider the circumstances at that stage but that is a different issue.) Mr Burchett relies upon the requirement in the articles that a second notice be forwarded (and not complied with) before the procedure for forfeiture of shares can be invoked, noting that in Ghabrial v Romolly, Cohen J found that the power to issue a second notice only arose after default in compliance with the first and that the procedures under the articles must be strictly followed given the serious consequences of forfeiture. I do not, however, see this as precluding the directors from considering at the time the first notice is issued what procedure should be followed if there is a default and, in the circumstances pertaining to the company in January 2007, there may well be seen to be a need for the directors to consider the options which would be open to them to procure compliance with the levy if there were to be default in payment, given that the funding draw down was at that stage not assured and the redevelopment project had stalled.) 545 Mr Priestley argues that the complaint in relation to the levy resolution, in substance, is no more than a complaint that because the striking of the special levy could have facilitated the forfeiture of the McLaughlins' shares (if they did not pay the levy) then it should be inferred or assumed that that was the purpose for which the levy being struck (treating the possible consequence of an action as its reason). If that were to be correct then logically any levy would fall for a similar reason (since non payment of any levy could result in forfeiture of shares). 546 The fact that the company (placed as it was said in very difficult circumstances in January 2007) offered an inducement to the McLaughlins (in the form of an offer to waive existing costs order in its favour if they took certain action to satisfy the bank insofar as its conditions for draw down of the facility were concerned) does not to my mind mean that the purpose of the levy was to engineer the forfeiture of the McLaughlins' shares (a matter wholly within the McLaughlins' control). Nor does the fact (which the chairman candidly acknowledged) that the directors would be delighted if the McLaughlins were to cease to be shareholders take the matter any further. 547 Mr Priestley submits that the court should find that the board struck the special levy in order to secure the company's financial position. I so find. I am not satisfied that the McLaughlins have proved any improper or collateral purpose for the Levy Resolution. (v) Notice of Levy dated 25 January 2007 548 In paragraph 12 of the Further Amended Statement of Claim, it is alleged (in summary) that on 24 January 2007 the company (by its chairman, with the authority of the board of directors) directed its managing agents to send notice of the levy resolution only to the McLaughlins and to send notices for all other shareholders to himself; that the agents issued the notice of levy on 25 January 2007 to the McLaughlins; and that the company by its chairman retained all other notices of the levy resolution until on or after the due date of the notice of levy sent to the McLaughlins. 549 In paragraph 13 of the Further Amended Statement of Claim, it is alleged that the Notice of Levy is invalid, void and of no force or effect in that: (a) it does not give notice of any determination by the directors jointly of the company as to various matters; (b) it claimed payment was due earlier than after 14 days from service; (c) it was served for the collateral, improper or unauthorised purposes of the Levy Resolution (set out in paragraph 11 of the Further Amended Statement of Claim); (d) it was issued to the McLaughlins alone, at least for the period of the Notice of Levy, rather than to the holder of each group of shares or alone was addressed to them at their registered address or in care of the flat which they have a right to occupy; (e) it was so issued so that the McLaughlins would alone be required to contribute to the proposed levy and in default be exposed to forfeiture of their shares before any other shareholder might otherwise become liable to contribute. 550 As to (a), what the Levy Notice was required to do was to notify shareholders of the levy which had been raised (its amount, due date and the like) and shareholders would be entitled to be told the purpose for which the levy was struck. I see no basis for the suggestion that the levy notice itself should have contained a summary of any underlying determination of the directors in relation to the striking of that levy beyond notification that it had been so struck. In any event, as previously discussed, I do not consider that a formal and separate determination to shorten the time period within which periodic levies could be made was necessary (it being encompassed in the determination itself). Therefore, I do not consider that there is any basis to the complaint raised in (a). 551 As to (b), I do not understand the basis on which the timing of the notice is challenged. 552 Article 5 indicates that a levy is to be payable within 14 days after "notice in writing has be given", unless the directors otherwise determine. Absent some other determination by the directors, it was therefore necessary for there to be 14 days from the date of service of the notice before it could be said that there had been default in compliance with the notice. The Levy Notice specified the due date for payment as 12 February 2007. 553 Article 110 deems notice to be given "at the time at which the letter would be delivered in the ordinary course of post" but does not indicate whether for that purpose "days" is inclusive of weekends or public holidays. It is unclear from the evidence when the notice was posted and hence what time it could be considered to have been received in the "ordinary course of post". Assuming the letter was sent on its issue date of Thursday 25 January, then the earliest the letter would presumably have been received in the ordinary course would be 29 January 2007 (Friday 26 being Australia Day and the weekend then following). However, it is not necessary to make use of any deeming provision because it is apparent that the notice was in fact received by the McLaughlins at least by 29 January (as indicated by the fact that on that date Mr McLaughlin forwarded it by facsimile transmission to his solicitors - TB 1631). The 14th day after 29 January (and not including that date) was 12 February 2007. Mr Burchett contends that the levy was not payable until 13 February 2007, in effect contending that for the purpose of calculation of the 14 day period both the date of receipt of the notice (assuming that to be 29 January) and the 14th day (12 February) should be excluded. I accept that for calculation of notices to complete which are expressed by reference to a period within a particular time from a date, the whole of that period must be allowed to expire before any notice to complete may be issued (see for example, Robinson v Waddington (1949) 18 LJ QB 250, especially Regina v The Justices of Shropshire (1838) 9 Ad & E 173; Young v Higgon (1840) 6 M & W 49; Mitchell v Foster (1840) 12 Ad & E 472; Proctor v Chahl [2008] NSWSC 1252, at [39]) (and hence, adopting that analogy here, it could not be said that there was default in compliance with the Levy Notice until 13 February 2007). However, the Levy Notice itself seems to have validly specified a period of 14 days from service within which the payment was due and, in any event, despite the issue of a default notice on 13 February 2007, nothing now turns on the late payment of the levy (whether that payment was due on 12 February or the following day). Therefore, other than in relation to the oppression claim, I cannot see that anything turns on this complaint. 554 As to the matters raised in (c) and (d), Mr Priestley disputes the assertion that all other levy notices were retained by Mr Garratt until after the due date of the levy notice. Mr Garratt's evidence was that the other shareholders' notices were sent to him so that he could forward them with a covering letter. His evidence was that he sent them early in the week after the Australia Day holiday. This is consistent with his letter to shareholders dated 6 February 2007, which referred to the levy notice as having been 'recently received' by shareholders. 555 There is evidence of correspondence from some other members (specifically from Ms Nicola Marshall Roth, Director of Beacon Properties, on 9 February 2007 (TB 1645) and from Mr John Page on 12 February 2007 (TB 1646)) acknowledging receipt of the notice of the special levy and informing Mr Garratt of their means to pay the levy before the due date of 12 February 2007, which further supports Mr Garratt's evidence that the other members' levy notices were issued prior to the due date for payment of the levy. 556 The fact that the notices to other members were not issued by the managing agent cannot, in my view, support the assertion that it was not intended that those members be required to make payments due under the levy and, indeed, all members have been required to do so (albeit with some accommodation in terms of the time within which the amounts were to be paid and with the benefit of the board's subsequent resolution not to require the full amount of the levy at that stage). I do not consider that the different mode of forwarding the notice amounts to any relevant discrimination in the treatment of the McLaughlins in relation to the levy. 557 As far as the alleged improper or collateral purpose is concerned, the same reasoning applies as applied in relation to the Levy Resolution. I do not consider that the evidence establishes an improper or collateral purpose for the Levy Notice. The company was in a difficult financial position, whether (as the McLaughlins contend) that be of its own making or not. The directors cannot be said to have acted improperly in taking steps to ensure that, if necessary, funds would be in place in order to enable the company to meet its obligations as they fell due. (vi) Forfeiture Notice dated 13 February 2007 558 By letter dated 13 February 2007 (TB 1651), Mr Garratt wrote to the McLaughlins notifying them on behalf of the company under articles 5, 17 and 32, that payment of the levy was required by 28 February 2007, failing which the shares of the McLaughlins would be immediately liable to forfeiture and sale without further notice (referred to in the pleadings as the Forfeiture Notice). 559 In paragraph 15 of the Further Amended Statement of Claim, it is alleged that the Forfeiture Notice is invalid, void and of no force or effect in that: (a) the directors had not resolved and had no power until after default in payment of the Levy, if it were valid, to issue any such Forfeiture Notice; (b) Mr Garratt had no authority to serve the Forfeiture Notice (in that the Levy Resolution had expressly authorised only the managing agent to serve such a notice; the Levy Resolution only authorised service in the circumstance that a relevant shareholder opposes payment of the levy, which determination it was said was contrary to the articles; the articles did not authorise the discriminatory issue of such notices (all other shareholders including Mr Garratt and the directors having failed to comply with the levy notices); it was served on the basis of default in payment of the levy on 12 February when the levy was not due and payable under the articles until 13 February 2007; and it was served for the collateral, improper and unauthorised purposes of the Levy Resolution). 560 Article 32 permits such a notice to be sent once the time for payment of a levy has passed. The notice complied with the requirement in article 33 to stipulate a date not earlier than the expiration of 14 days from the date of the notice, 28 January 2007, by which the special levy was to be paid before the shares were liable to be forfeited (15 days was in fact given before final demand was made) (TB 1651). 561 It is the case that there was no further resolution of directors resolving to issue the default notice of 13 February 2007, reliance presumably being placed by Mr Garratt on the earlier resolution of 24 January 2007. Articles 32 and 33, which deal with the giving of a default notice in these circumstances, do not in terms require that the directors specifically resolve to issue such a default notice (although article 34 does require that there be a resolution of directors in order to effect the forfeiture of the shares). The complaint that the notice was issued by Mr Garratt and not the managing agent seems to me to be technical in the extreme. In any event no forfeiture action was taken by the board, so the validity of the Forfeiture Notice is a moot point. 562 Mr Priestley contends that there is no foundation for the complaints about the forfeiture notice, since the resolutions of 24 January 2007 authorised its issue and in any event, the McLaughlins' shares were not forfeited and there was no action taken pursuant to the notice. Other than if the issue of this notice can operate as an element of the oppressive conduct claim, I agree. 2 Oppressive Conduct 563 The McLaughlins allege (in paragraph 17 of the Further Amended Statement of Claim) that the following conduct of the affairs and acts of the company is contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to or unfairly discriminatory against them as members of the company or in their personal capacity in breach of s 232 of the Corporations Act: (a) requiring the McLaughlins to vacate their home unit; (b) purporting to pass the various resolutions referred to above and/or providing the benefits to other shareholders to which those resolutions relate; (c) requiring the McLaughlins to sell their shares or execute an acknowledgement of personal liability for the costs of the company's refurbishment and extension of Dungowan Flats and settle their litigation against the company; (d) purporting to strike the Levy, issue the Levy Notice and serve the Forfeiture Notice; (e) unequal treatment of the McLaughlins concerning payment of their proportion of the purported levy; and/or (f) proceeding with the development and marketing of the extra units of Dungowan Flats. 564 During argument on the application brought on behalf of the McLaughlins during the hearing to amend paragraph 17 of the Further Amended Statement of Claim to include in sub-paragraph (b) the words "and/or providing the benefits to other shareholders to which those resolutions relate", Mr Burchett confirmed, as I understood it, that those additional words were intended to do no more than encompass an allegation that, by providing to other shareholders the benefits contemplated by or the subject of the resolutions, the company had engaged in the oppressive conduct alleged (in order to meet a perceived argument that the resolutions of themselves did nothing and therefore the mere passage of the resolutions could not be oppressive). 565 Mr Priestley points out that paragraphs (a) to (e) are not - with one exception - the matters relied upon as oppressive conduct in Mr Burchett's submissions in [71] to [82] under the heading 'Oppression or other conduct under s.232'. (The exception concerns the matter alleged in paragraph (b) insofar as it encompasses the amount of $950,000 to be allowed to Mr Heyworth and Mr Garratt in respect of their surrender of shares in relation to units 23 and 22). 566 Mr Burchett submits that the conduct by the board or the members in the meeting was for the purpose of interfering with a member's rights, with which there is no power to interfere under the articles (citing Whitehouse v Carlton Hotel; Permanent Building Society v Wheeler, at 137; Gambotto v WCP Ltd) and amounts to oppression (citing Dunn v ASCPA (1998) 29 ACSR 1). 567 Conduct by the majority members, or by directors taking a benefit at the expense of the company, may also constitute oppression (Martin v Australian Squash Club Pty Limited (1996) 14 ACLC 452; Fexuto Pty Limited v Bosnjak Holdings [2001] NSWCA 97; (2001) 37 ACSR 672). 568 In particular, Mr Burchett contends that the motivation or bona fides of the company or its officers will not deny the availability of the remedy (Campbell and Another v BackOffice Investments Pty Limited (2009) 257 ALR 610 at (176)ff; Belgiorno-Zegna v Exben Pty Limited and Ors (2000) 35 ACSR 305 at (150-1) and (162)). 569 In essence, what Mr Burchett contends amounts to oppression is the course of conduct in which it is said the board engaged in of ignoring the option for minimal expenditure on repair and "relentlessly" pursuing what is said to have been the most expensive option available to the company for repair of the building. It seems to me that, seen in the context of the chronology of events, the principal complaint of the McLaughlins is that the board did not accept the method they saw as best suited to the problems confronted by the company arising from the structural condition of the building. To suggest that this amounts to oppression raises the difficulty which courts have consistently raised, namely that it is not for the court to intrude on the managerial functions of the company's directors. 570 Mr Priestley contends that, to establish oppression, unfair prejudice, or unfair discrimination, the McLaughlins need to demonstrate bad faith on the part of the board or that no board acting reasonably could have made the relevant decisions (Wayde v NSW Rugby League). 571 In Wayde v New South Wales Rugby League, Mason ACJ, Wilson, Deane and Dawson JJ considered a claim of oppression where what was there done by the board was something within the power expressly conferred on the board: It is a point of great importance that the decisions were made in the exercise of a power that is expressly conferred on the Board, a power to determine the nature and extent of the competition that was to take place in 1985 and the clubs that were to be permitted to participate in it. It is not a case where the directors of a company, in the exercise of the general powers of management of the company, might bona fide adopt a policy or decide upon a course of action which is alleged to be unfairly prejudicial to a minority of the members of the company. In that kind of case it may well be appropriate for the court, on an application for relief under s 320, to examine the policy which has been pursued or the proposed course of action in order to determine the fairness or unfairness of the course which has been taken by those in control of the company. The court may be required in such circumstances to undertake a balancing exercise between the competing considerations disclosed by the evidence. 572 In dismissing the appeal, their Honours noted that, while the effect of the decision may have been very harsh, it had not been shown to be oppressive or unfairly prejudicial or discriminatory: In truth, the Board was confronted with a conflict of immediate interest between Wests on the one hand and the League as a whole on the other and the exercise of the power conferred by Art 76 must necessarily be prejudicial to one or the other. Given the special expertise and experience of the Board, the bona fide and proper exercise of the power in pursuit of the purpose for which it was conferred and the caution which a court must exercise in determining an application under s 320 of the Code in order to avoid an unwarranted assumption of the responsibility for management of the company, the appellants faced a difficult task in seeking to prove that the decisions in question were unfairly prejudicial to Wests and therefore not in the overall interests of the members as a whole. It has not been shown that those decisions of the Board were such that no Board acting reasonably could have made them. The effect of those decisions on Wests was harsh indeed. It has not, however, been shown that they were oppressive or unfairly prejudicial or discriminatory or that their effect was such as to warrant the conclusion that the affairs of the League were or are being conducted in a manner that was or is oppressive or unfairly prejudicial . (my emphasis) 573 Brennan J in Wayde v New South Wales Rugby League, in separate reasons, stated: In the present case, the relevant expressions are "oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member". Where the directors of a company are empowered to discriminate among its members and to prejudice the interests of one of them, the adoption of a resolution which has that effect and which is made in good faith and for a purpose within the power is not, without more, "oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member". Section 320 requires proof of oppression or proof of unfairness: proof of mere prejudice to or discrimination against a member is insufficient to attract the court's jurisdiction to intervene. In the case of some discretionary powers, any prejudice to a member or any discrimination against him may be a badge of unfairness in the exercise of the power, but not when the discretionary power contemplates the effecting of prejudice or discrimination. It is not necessary now to decide whether "oppressive" carries in the context of s 320 the meaning which it carried in the context of the statutory precursors of s 320. At a minimum, oppression imports unfairness and that is the critical question in the present case. It is not necessarily unfair for directors in good faith to advance one of the objects of the company to the prejudice of a member where the advancement of the object necessarily entails prejudice to that member or discrimination against him. Prima facie, it is for the directors and not for the court to decide whether the furthering of a corporate object which is inimical to a member's interests should prevail over those interests or whether some balance should be struck between them. The directors' view is not conclusive, but an element in assessing unfairness to a member is the agreement of all members to repose the power to affect their interests in the directors (see s 78 of the Code). Nevertheless, if the directors exercise a power -- albeit in good faith and for a purpose within the power -- so as to impose a disadvantage, disability or burden on a member that, according to ordinary standards of reasonableness and fair dealing is unfair, the court may intervene under s 320. The question of unfairness is one of fact and degree which s 320 requires the court to determine, but not without regard to the view which the directors themselves have formed and not without allowing for any special skill, knowledge and acumen possessed by the directors. The operation of s 320 may be attracted to a decision made by directors which is made in good faith for a purpose within the directors' power but which reasonable directors would think to be unfair. The test of unfairness is objective and it is necessary, though difficult, to postulate a standard of reasonable directors possessed of any special skill, knowledge or acumen possessed by the directors. The test assumes (whether it be the fact or not) that reasonable directors weigh the furthering of the corporate object against the disadvantage, disability or burden which their decision will impose, and address their minds to the question whether a proposed decision is unfair. The court must determine whether reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision will impose on a member on the other, would have decided that it was unfair to make that decision. (my emphasis). 574 Similarly, Young CJ in Eq, as his Honour then was, in Lucy v Lomas [2002] NSWSC 448 said: [38] The plaintiff points to what was said by the New Zealand Court of Appeal in Thomas v H W Thomas Ltd (1984) 2 ACLC 610, 617 (endorsed by Brennan J in Wayde v NSW Rugby League Ltd (1985) 180 CLR 459, 471) that it was: "... not necessary for a complainant to point to any actual irregularity or to an invasion of his legal rights or to a lack of probity or want of good faith towards him on the part of those in control of the company". [39] However, it must be remembered that these words were said in the context of a discussion of the leading cases, all of which point to the plaintiff having to demonstrate a course of conduct amounting to an unjust detriment to the plaintiff. That conduct needed to be conduct involving "at least an element of lack of probity or fair dealing": Elder v Elder & Watson Ltd [1952] SC 49, 60. [40] There have, of course, been cases, of which Roberts v Walter Developments Pty Ltd (1992) 10 ACLC 804 is an example, where discriminatory payments in favour of directors has been held to be oppressive. [41] However, at the other end of the scale, it has been held that the mere subordination of wishes of the minority by exercise of the voting power of the majority is not itself oppressive: Re H R Harmer Ltd [1959] 1 WLR 62, 84. Nor is it oppressive for the majority to adopt a particular policy, which the majority could reasonably adopt: Re Broadcasting Station 2GB Pty Ltd [1964-5] NSWR 1648. Mere proof of prejudice or discrimination against a member again is itself insufficient: Wayde's case at 472. [42] It must always be remembered that investment of capital in a company is a long-term investment. The corporators expect that the capital will remain for the company's purposes until those purposes are complete or some frustrating event occurs, such as the failure of the substratum of the company. Only then can the company be dissolved and the capital returned. [43] Thus the mere fact a person is unable to regain capital or dispose of his or her shares is not a matter of oppression: Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193; McWilliam v LJR McWilliam Estates Pty Ltd (1990) 2 ACSR 757. [44] The mere disadvantages of being in a minority, no matter how "galling and even financially damaging these may be ... they do not in themselves constitute oppression": Re M Dalley & Co Pty Ltd (1968) 1 ACLR 489, 492. [45] One must take all the matters alleged together and remember that each case must be decided on its own facts because there is no such thing as oppression in a vacuum: Thomas' case at 618; Fexuto at 740. (my emphasis) 575 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. [24] The onus of establishing unfairness rests on the applicant asserting the conduct that is contrary to the interests of the members as a whole, or that is oppressive, unfairly prejudicial or discriminatory. An applicant must actually prove oppression before obtaining relief. It is not established simply by showing that the majority are in control of the company, or that the applicant is consistently out-voted, or that the majority have made some questionable decisions from a business point of view. The mere disadvantage of being in a minority does not in itself constitute oppression. It is necessary for each single allegation in an oppression case to be pleaded clearly in order to assess whether the totality may amount to oppression: see Weatherall v Satellite Receiving Systems (Australia) Pty Ltd (1999) 92 FCR 873. Disagreement with the decision by a majority of shareholders and directors on the part of a minority shareholder does not entitle that shareholder to relief under the section: Re Bountiful Pty Ltd (1994) 12 ACLC 902. (my emphasis) 576 Whether the company's conduct was contrary to the interests of the members as a whole or oppressive is based on the objective facts. However in some cases evidence of a subjective intent or purpose may inform the conduct of those controlling the company. In Duke Group Limited (in liq) v Pilmer (1998) 27 ACSR 1, it was said that evidence of a director's secret shareholding in a takeover target could assist in determining the secret motives of those controlling the company in recommending the takeover to shareholders. 577 In Doyle v ASIC (2005) 227 CLR 18; [2005] HCA 78, 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. It was on this basis that I permitted a subpoena to issue in relation to the arrangements between Mr Garratt and any other shareholder. In the event, it does not seem to me that any evidence has emerged to show that there was an impermissible collateral purpose for any or the resolutions or a subjective intent which might have informed the decisions made by the board which are now said to have been oppressive to the McLaughlins. 578 What the McLaughlins rely on as oppressive is a course of conduct over a considerable period but, broadly summarised, it was the decision of the board to take a particular course with which the McLaughlins did not agree. That course was one which I am satisfied it was open to a board, acting properly, to adopt. There may have been elements of the redevelopment project in respect of which judgment might differ (and, as I have found, the manner in which the redevelopment was implemented put the company in breach of its contractual obligations to the McLaughlins). However, of itself, the decision to fund what were clearly necessary repairs to the building in a manner designed to minimise the cost to shareholders could not in my view amount to oppression. I am satisfied that the board acted in good faith in what it believed to be the best interests of the company and its members as a whole when deciding to engage in the project. It did so under a misapprehension as to the requirements for consent to a project which, in my view, affected the McLaughlins' rights under Article 3. However, I do not accept that the conduct in so doing was oppressive. 579 Had the board deprived the McLaughlins of necessary and available information to enable them to sell their shares, I might well have formed a different view of the company's conduct but I am not satisfied that it did so. The redevelopment, it is submitted infringes on the plaintiffs' rights under the articles, under article 3 and to receive all material information necessary to make an informed decision about the project. With rhetorical flourish, Mr Burchett asserts that "Bedazzled with promises of free repair of the building after years of neglect, refurbishing of their own units, individualising them with loans of company funds and even of profits, the majority have been led by the directors to override the legitimate concerns and rights of the plaintiffs." I do not consider that this has been made out on the evidence before me. Rather, I think the company directors proceeded in good faith on an incorrect understanding of what the company was entitled to do vis a vis the infringement or affectation of the McLaughlins' rights under the Articles of Association to the use of their unit as a home, with the amenity provided for under the then existing articles (which did not permit the use of the level below them for a car stacker). 580 It cannot be disputed that the company was faced in 2006/2007 with a difficult situation. The building (whether or not due to breach of any duty by the directors – now suggested by the McLaughlins) required extensive repairs. Even a one storey addition, of the kind the McLaughlins now say they might have supported, would have cost a not inconsiderable sum of money. 581 Whether or not, with hindsight, the shareholders would have been in a better position had the company been wound up or had a buyer been sought for the building back in 2006 (or for that matter even as early as 2001) is not to the point. I accept that the decision of the board was one which exposed members to considerable financial risk (and was in breach, in one respect, of the articles) but I am not satisfied that no board acting reasonably could have undertaken the course of pursuing such a development (assuming, as the evidence shows, that the board was not aware that the course being adopted was in breach of the articles). Nor do I consider that bad faith on the part of the board has been shown. 582 The development has affected all shareholders equally and has not in the circumstances been "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" the McLaughlins. 583 Insofar as it is alleged that certain directors (Mr Garratt and Mr Heyworth) 'profited' from the situation where their units were bought back in order to facilitate the project (a matter which I accept was precipitated by the relevant parking considerations to be taken into account), and did not accede to the suggestion that they 'swap' their unit entitlements with the McLaughlins (who, unlike Messrs Garratt and Heyworth did not wish to be part of the redevelopment project), it seems to me that this goes not to any oppressive conduct per se (though in terms of the directors' duties this may be an issue). 584 I consider that there may be an issue as to whether there was adequate consideration given by the directors to the terms of the 'compensation' for those directors who were surrendering their units for the greater good, so to speak, particularly in light of the adequacy of the information provided to the members who were asked to approve such an arrangement. However, that goes not in my view to the question of oppression but to the claim for relief by way of leave to commence a derivative suit against the directors. 585 As to the levy, it is submitted by Mr Priestley that it was equally in the interests of the members as a whole that the special levy be struck to get in the funds needed to cover the company's debts, and that this was not oppressive to the McLaughlins, since the alternative was to expose the shareholders to the winding up of the company and the risk of loss of their building. 586 It is said that the McLaughlins' past refusals to pay general levy contributions and special levies, and the consequent need to take enforcement action against them, in light of the time which such action would take, meant that it was only "fair" to all shareholders that the board make plain to the McLaughlins that if they opposed payment of their part of the special levy enforcement action would be promptly taken. This warning was not oppressive of the McLaughlins, rather it was to ensure that they shared the burden that all shareholders were bearing. I have no difficulty with that as a general proposition. 587 Where I have difficulty is in the stance the company took after the levy was struck – and after the board had determined that it was not, in fact, necessary for the whole amount of the levy to be paid at that stage. I consider there has been oppressive conduct in relation to the refusal of the board (in a manner unfairly discriminatory of the McLaughlins in my view) to treat the McLaughlins equally with other shareholders in relation to the reduction in the amount required under the January 2007 special levy, which they had paid under protest. 588 The company's letter of 12 March 2007 set out the resolution which the board had passed deferring payment of 50% of the levy for the time being. The McLaughlins were therefore on notice of this resolution prior to making payment of the levy in full. Mr Priestley contends that the company did not require the McLaughlins to pay the special levy in full when they did; rather that they did so on legal advice. That seems to me to be a somewhat disingenuous response having regard to the circumstances in which the McLaughlins through their lawyers had sought (and been unable to obtain) an assurance that the arrangement to accept 50% of the levy was one which was applicable to the McLaughlins and where, in the absence of such an assurance there remained the implicit threat of forfeiture action if the levy was not paid in full. 589 In this regard, I should note that Mr Priestley contends that it is not pleaded that the company's decision to decline repayment of the second half of the special levy was oppressive of the McLaughlins (and that had such a plea been made, then evidence would have been directed to why this was not so, including evidence as to the McLaughlins' claimed impecuniosity, the difficulties with which the company and its solicitors (and unidentified others) had been confronted in the past in enforcing payment from the McLaughlins, the likelihood that payment of all or part of the balance of the levy would be required (as has happened), and that the debts owed by the McLaughlins to the company which would need to be settled in due course). 590 In fact, however, not only was this pleaded broadly as being oppressive conduct, but there was evidence generally as to the belief of Mr Garratt as to the financial position of the McLaughlins referable to the payment of the levies and, in particular, as to their default in payment of previous levies (including evidence of the aggressive stance Mr McLaughlin seems to have adopted when enforcement action was previously taken). 591 While Mr Priestley says that as, by resolution of July 2009, all shareholders were required to pay the balance of the special levy by 30 September 2009, an alternative plea would have been made that any conduct in declining repayment had ceased to be oppressive in any event, that does not address the loss of interest on the moneys in the meantime. 592 Paragraph 16(b)(iii)(B) of the Further Amended Statement of Claim, however, pleaded that the company, by its solicitor's letters of 14, 15, 16 and 19 March 2007, failed or refused to consider the McLaughlins' request for the extension to them of the same payment terms as had been extended to other shareholders in relation to the January 2007 levy. Paragraph 17 of the Further Amended Statement of Claim, when pleading the conduct of the affairs and acts of the company alleged to be in breach of s 232, included in paragraph (e) the "unequal treatment of the Plaintiffs concerning payment of their proportion of the purported levy". The amendments to introduce those allegations were made pursuant to orders made on 26 March 2007. The company has therefore been on notice of those amendments for a considerable time. In its Defence to Further Amended Statement of Claim filed in court on 28 September 2009, the company specifically denied paragraph 16(b)(iii) and, without specifically pleading to the matter alleged in paragraph 17(e), denied paragraph 17. 593 Mr Priestley contends that the evidence before Barrett J in February 2007 was that the McLaughlins did not have the means to pay the special levy and that, in the absence of fresh evidence (contrary to what Mr McLaughlin had sworn in those interlocutory proceedings) of 'new found means' and a changed intention on the part of the McLaughlins about payment, there was no basis for a dealing between the board and the McLaughlins about extended terms of payment. 594 It is somewhat disingenuous of the company to rely upon the fact that the McLaughlins saw fit to make payment in full, immediately upon leave to appeal Barrett J's judgment being refused, despite earlier evidence in those proceedings apparently to the effect that they could not afford to do so, when the solicitors for the company were not prepared to give any assurance to the McLaughlins that forfeiture action would not be taken if the levy was not paid in full. However the McLaughlins had managed to fund the levy, the fact was that they had. (Further, notwithstanding the history of past non-compliance with levies by the McLaughlins, the fact also remains that whenever there was a threat of forfeiture or steps were taken in that regard the McLaughlins paid the outstanding levies. Therefore, while I accept that the company might have been concerned that it would be necessary to take formal steps towards forfeiture in order to compel the McLaughlins to pay in the future, the taking of those steps does not seem likely to have been at significant cost to the company which could not otherwise be met if the shares ultimately were sold. Nor does the concern as to delay in enforcement seem sufficient to warrant discriminatory treatment, when it would have been within the company's hands as to the time at which the balance of the levy was to be called from the members.) 595 The company's submissions seem to proceed on the basis that the ongoing litigation was a factor which warranted the unequal treatment of the McLaughlins in this regard (referring, as they do, to the financial position of the company having already been adversely affected by years of disputation, legal correspondence and litigation generated by the McLaughlins). If this was a factor in the decision, then I do not see that it is an appropriate basis for discriminatory treatment in this regard that the McLaughlins had had the temerity to challenge the company's decisions in the past and were continuing to do so. The McLaughlins were entitled to have the court determine their claims. If those claims were unsuccessful (as some had already been) the appropriate means of recognizing that fact was by way of costs orders as appropriate. There was no basis, in my view, for a decision not to treat the McLaughlins equally in relation to the levy because of the fact that they were in an adversarial position in ongoing litigation with the company. 596 The fact is that the payment of the levy was made "under protest". Mr Garratt, as a barrister with considerable experience, was well aware what such a payment ordinarily means – namely that there was no admission of liability by the making of the payment. To describe it as 'voluntary' in those circumstances is bordering on the farcical. It was clearly paid to avoid a situation where it was apprehended that there might otherwise be action taken for forfeiture of the McLaughlins' shares and in circumstances where the company's lawyers had refused to confirm that if only half the levy was paid (as had been the accommodation made available to all other shareholders) this would be accepted by the company as meeting the McLaughlins' then obligations in relation to the levy. 597 Mr Priestley contends that making a payment under protest does not mean, as he suggests the McLaughlins contend, that the payer is entitled to repayment before successfully impugning the obligation to repay. That is not in my view the issue. Yes, the McLaughlins contended that there was no obligation on them to pay the special levy. They contended this before Barrett J and they have contended it in the present proceedings. They have been wholly unsuccessful in that contention. However, at the time they sought the refund, no other shareholder was required to pay the full amount of the special levy and, indeed, not only was there at least one other shareholder in default of payment of any of the levy at that stage, there is no evidence that any steps were taken by the company to satisfy itself as to the ability of that or other shareholders to pay the levy (or indeed as to whether all other shareholders accepted liability to pay the levy). It is difficult to avoid the conclusion that, having in effect forced the McLaughlins to pay the levy under the implicit threat of forfeiture of their shares, the company was not prepared to give up what it saw as a tactical advantage in the whole sorry saga of the disputes between the parties. 598 It is submitted by Mr Priestley that what the McLaughlins were claiming was an "entitlement" as such to a refund. The correspondence does not, in my view, make out such a contention, but in any event there was no real attempt by the company to afford the McLaughlins the benefit offered to all other shareholders of an accommodation in relation to the payment of the special levy in full in early 2007 (even when the company was on notice that release of the funds was requested to enable the McLaughlins to visit a sick relative in the UK). 599 The company's primary submission on the 'refund' issue is that the company at no time came under any legal or equitable obligation to repay any part of any shareholder's levy payment, and on no view can it have been considered in the company's interest as a whole to do so in the interim. That seems to me to beg the question. Whether or not the McLaughlins had an entitlement to a refund, it was an accommodation made available to all other shareholders. I do not accept that the many and varied explanations for the company's refusal to accord such an accommodation to them results in a conclusion that the admittedly unequal treatment accorded to them was not also unfairly discriminatory of them. 600 As a final submission the company points out that the balance of the special levy has now become due from all shareholders. That wholly fails to take into account the interest foregone on the money in the interim. 601 Accordingly, I find that there has been (in this respect alone) conduct by the company in breach of s 232 of the Act. 3 Relief 602 By reason of the company's conduct, as pleaded, it is alleged that the McLaughlins have suffered loss and damage (quantified as set out earlier in these reasons), that particularized as being their exclusion from occupation of their home unit, common property and other areas previously available for general use, including roof and grounds; the loss of amenity of use of their home unit pursuant to the right granted them by the articles and their shareholding; loss of rent; loss of value of their shares; and exposure to the risk of significant loss in value of their shares. 603 Mr Burchett frankly conceded that the area of remedy had been a difficult one. Mr Priestley contended, for the company, that there was no loss. The starting position of the McLaughlins is that the redevelopment, as pursued, was something more than that which was required to repair the building, rather that this was speculative development of the purpose of the members making a profit on the redevelopment. 604 As to the first proposition (that the redevelopment went beyond what was required for repair alone), it does not seem that this is disputed. On no reasonable view of the scope of "repair" would the construction of additional floors on the building be seen as repair. However, I am by no means satisfied that the purpose of the redevelopment was for the members (or some of them) to make a profit therefrom or that this was purely and simply a speculative development. I accept that the evidence establishes that the genesis of the redevelopment project was the desire of the board to find a means by which the repairs could be effected at minimum cost to the shareholders. The fact that this objective may not have been achieved does not mean that it was not a proper objective in the first place. 605 Mr Priestley notes that if oppression is established, the court must consider whether to make any, and if so what, order from those available. He submits that, of central importance in this case, is the fact that the McLaughlins have repeatedly refused to accept offers to sell their shares to the company at a price based on independent valuation (and have instead, he says, sought to extract a price above market, using opposition to the development as leverage). It is noted that fairness under s 232 must not be assessed in a vacuum (Thomas v HW Thomas Ltd [1984] 1 NZLR 686). 606 It is submitted that the McLaughlins' attempts to extract unfair advantage at the expense of fellow shareholders from their common predicament must tell against them in the exercise of any discretion under s 233. Mr Priestley contends that their refusal to deal with the bank on the same equal footing as other shareholders, and their determination to continue a proceeding in which they had sought to stop the renovation works and failed, had the effect of causing the burden on all shareholders to be increased (by 'unsettling' the bank, prolonging the period before funds could be drawn down, and leading to the stoppage of work by the builder for the period in early 2007). Further, Mr Priestley submits that the McLaughlins "refused throughout to bear the burdens of the project, and strove to extract not only the value of their shares with the benefit of the project, but a bonus at the cost of all others". He points to an election by the McLaughlins not to sell their shares (and to both the alleged increase in the capital value of their shares and the actual increase in the rental income from their unit, which, but for the redevelopment they would not otherwise have received). In his supplementary submissions, Mr Priestley accuses the McLaughlins of unprincipled opposition to the restoration of their building and of greed, which he says has 'kept them in a relationship with the company which they always had as much capacity to sever at any other shareholder, by selling their shares for a fair price' (para 8(g)). 607 In considering the relief available, I note that the McLaughlins have succeeded, relevantly, in establishing two of the myriad of claims made in these proceedings – first that there was a breach of contract in the undertaking of the project, insofar as it affected the rights of the McLaughlins in relation to the use of their unit as a home, which gives rise to a claim for damages, and, secondly, that there has been oppressive conduct in relation to the refusal to refund 50% of the January 2007 levy. I have not otherwise found any oppressive conduct and hence the wide relief available under s 233 (and particularly the availability of a compulsory purchase order as sought in the amended pleadings) is not apposite in this case. The appropriate remedy for oppression is no more than that which has the effect of removing the oppression (Campbell v BackOffice Investments Pty Limited [2007] NSWSC 161, per Bergin J at [135]; and on appeal, Campbell and Another v BackOffice Investments Pty Limited, at 178). 608 Had I found that a compulsory purchase order was appropriate (say because the company, by its conduct, had deprived the McLaughlins of an opportunity to divest themselves of their shares in the company at the then market value for those shares), I would have considered that the appropriate time to value the shares was towards the end of September 2006 when the company committed to its decision to pursue the project by entering into agreements with the builder in relation thereto (what might be seen, in effect, as the point of no return – and was certainly treated as such by the company given the number of times since then at which the company informed members that there was no practical choice but to continue to take steps to facilitate the project). It was submitted, and I accept, that the value apparently attributed to their shares at that stage by the McLaughlins (and for which they were prepared to sell to the potential purchaser) would have been the appropriate starting point ($680,000). Account would then have to be taken of benefits (and liabilities) since that time. In any event, the issue does not arise on the findings as to liability which I have made. 609 I turn then to the appropriate relief. Damages for breach of contract 610 As noted by Mr Burchett, the McLaughlins' rights under article 3 are personal and may be enforced pursuant to the statutory contract with the company under s 140, entitling them to damages for breach (Wilson v Meudon Pty Limited, at (18); Crumpton v Morraine Hall Pty Limited, at 245-6). Although the usual remedy for a member who complains of a breach of the statutory contract is a declaration or injunction, the fact that the McLaughlins would be left to a remedy in damages was a matter to which Barrett J expressly adverted when considering the balance of convenience on the interlocutory application before him. 611 Further, Mr Burchett notes that where an injunction to restrain a threatened contravention or remedy a past contravention of the Act may be awarded under s 1324, damages may instead be awarded under s 1324(10). 612 The loss claimed to have been suffered by the McLaughlins by reason of the conduct of the company was outlined in the schedules provided to me, the starting point of which being said to be the value of the McLaughlins' unit before the company chose to pursue the project (rather than adopting the alternative options of no more than patchwork or reactive maintenance of the building or of a more 'minimal' repair of the kind recommended in the initial Bonacci Rickard report). 613 The McLaughlins' unit was valued 'as is' on the behalf of the company in July 2003 at $650,000. Mr Burchett notes that that value was relied on by the company at the Land and Environment Court hearing in mid 2004. It is said that in 2005 Mr Murphy was able to obtain prices in the $700,000s for his 2 bedroom units, including $740,000 from Mr Heyworth for unit 23 (which he subsequently surrendered for the compensation payment of $950,000 to which the McLaughlins took great exception). 614 In July 2006 their unit was valued on an 'as renovated' basis for the purposes of the project at $770,000. In July 2006, the McLaughlins were prepared to accept a sum of $680,000 for their shares. 615 Evidence was before me from a real estate valuer (Mr Brook) (Exhibit A3) expressing the opinion that the value of unit 4 as at the start of construction in October 2006 was between $550,000 and $570,000. (Mr Brook, however, was quick to emphasise the hypothetical nature and difficulty of such a task - T 177). 616 The McLaughlins emphasise that in September and December 2006, the members were prepared to approve a payment of $950,000 for the acquisition of the shares in respect of units 22 and 23. 617 Mr Burchett submits that the preferable course is to take the company's own value for the unit, ascribed to it soon after the commencement of the project, of $650,000 and to assess the gross gain from the redevelopment at $170,000, that being based on Mr Brook's estimate of what the unit is now worth $820,000 (Exhibit A3). 618 As at the conclusion of the hearing, Mr Burchett submitted that the McLaughlins had lost a net $150,000 from the pursuit of the project, less their loss of rent for the period the unit was unable to be occupied (assessed at $69,626.17 plus interest on the lost rent calculated in the schedule as an additional $14,707.02). Since then, as I noted at the outset of these reasons, a further levy has been imposed which increases the overall costs by another $250,000 odd. 619 The McLaughlins also claim the wasted cost of the moneys paid by them to alter the configuration of the unit in November 1997 (put at $10,000), although it seems to me that this does not take into account the benefit obtained from those works for the period through to the time at which they were rendered otiose. 620 As at the conclusion of the hearing, the total direct loss claimed to have been suffered from the project was assessed as follows: increased value $ 170,000.00 less levies $ (320,000.00) less rent foregone $ (69,626.17) less wasted alterations $ (10,000.00) Total: $ (229,626.17) to which would need to be added the import of the latest levy ($263,000 approximately). 621 Alternatively, the claim was based on an assessment of capital loss, said to have been calculated by reference to the comparative position in which the McLaughlins would have been in the event that: (i) the so-called minimal maintenance option had been adopted; and (ii) the Bonacci Rickard proposal of a one story addition had been adopted. In each case the capital loss is said to be greater, reflecting the lesser cost relative to benefit of the work with the Bonacci Rickard proposal including the offsetting sales of the one extra floor. The McLaughlins claim reimbursement of the special levy of $119,771.86 paid under protest, subject to any allowance in the capital loss figures produced to the court. Alternatively, they claim interest on 50% of the special levy, being $59,885.93, from the date of their demand for its return (21 March 2007) until it was required to be paid by all other members on 30 September 2009. 622 In addition, because the articles take effect as a contract and promise to provide the McLaughlins with a 'home', general damages are claimed for loss of amenity (relying on Baltic Shipping v Dillon (1993) 176 CLR 344 at 362; Farley v Skinner [2002] 2 AC 732 at 750 & 755). 623 The company's position is that the evidence is incapable of establishing loss because only one half of the comparative equation can be assessed. In other words, there is evidence to establish what the position of the McLaughlins now is (updated by reference to the additional evidence tendered on the application in February this year) but no evidence to establish what would have been the position had the project not gone ahead. 624 It is submitted by Mr Priestley that the evidence shows that had the project not gone ahead the McLaughlins would in all probability have had shares dramatically reduced in value as the shares would have related to a unit in a building which was, and was known to be, "dangerous and unoccupied". It is said that there is no basis for the assumption that unit 4 would have remained tenantable in a building which remained insured and habitable. As to these submissions, while the evidence was that there were anticipated to be difficulties in obtaining insurance for the lift (unless replaced) and the engineering evidence certainly establishes that without any repair the building was nearing the end of its serviceable life, I do not think it can be assumed that but for the project the building would have been uninsured and uninhabited as at the end of 2006. That said, I accept that the evidence is that without at least the minimum level of repair, the outlook was not a positive one for the building (Dr Facioni was particularly negative as to its structural condition, having regard to the level of corrosion in the concrete slabs and there was nothing to gainsay this). 625 Mr Priestley notes that there were a number of options canvassed in the proceedings as to what might have occurred but for the project which was in fact pursued by the company. The first was what I have referred to as the 'patchwork' maintenance option, as to which the evidence was that the building would in due course become uninhabitable and would require either major works or closure or a sale at what would presumably be a much lesser value than now achievable. The second option was that put forward by Mr McLaughlin that the building be sold. The evidence as to potential purchasers was not conclusive but assuming a sale at the price which it was suggested might have been achievable in around 2001, it is said that this would have netted the McLaughlins something in the order of $400,000. The third option was that of a one-storey addition, which it was said, on Dr Facioni's estimates would have produced a far greater loss than the actual project. 626 In this regard, Mr Priestley submitted that the McLaughlins should be confined to the loss notified by them prior to trial in response to a direction to provide particulars of loss (rather than the compulsory purchase order sought in the Further Amended Statement of Claim). 627 Nevertheless, addressing the way in which the capital loss claim is put, the company says, first, that any proposition that the company would have embarked on a course of minimal maintenance or repair should be rejected for various reasons including that it was contrary to the expert advice obtained by the company at the time; it had not been favoured by any of the consultants who were advising the company prior to the development nor has it since been put forward by any expert as a feasible option and there was no evidence as to how the cost of such repairs would have been funded if there were no new capital assets available for that purpose. 628 It is also said that the evidence suggests that such an option would probably have resulted in far greater ongoing maintenance costs (in the order of $50,000 per annum as opposed to $20,000). Further it is said that there is no evidence upon which the court can infer that the value of the McLaughlins' shares (or the rental income now able to be earned from the redeveloped unit) would now be as much as the value following the redevelopment which did in fact occur. 629 As to the Bonacci Rickard proposal, it is said that this cannot reasonably be put forward as an option which the board should have pursued because, among other things, it was never accurately costed and there is doubt on the engineering evidence of Dr Facioni as to the construction feasibility of the proposal considering the true condition of the building. Dr Facioni estimated a construction cost of some $13 million had this proposal proceeded in any event. Again, there would be a question as to the value of the renovated units under such a proposal instead of their present value. 630 In relation to the general damages claim, Mr Priestley says it is not maintainable as a matter of principle. As to the loss of rent claim, he points out that no cause or right of action is pleaded relating to the conduct of the company before 2006 and, in any event, the claim assumes that the building would have remained tenantable without the work which was in fact carried out on the building. 631 I think there is much force in the submission that it is impossible on the evidence to form a concluded view as to the difference between the position in which the McLaughlins now find themselves and the position in which they would have been had the project not been pursued and a different option been adopted for the repair or sale of the building. However, it does not seem to me that that is a complete answer to the claim for damages. 632 What must be assessed is the position in which the McLaughlins would now have been had the company honoured the contract constituted by the articles and not proceeded to undertake a project of the kind it did without the McLaughlins' consent (namely a project which, as I have found, impermissibly affected the McLaughlins' rights under article 3 by reference to the conversion of the units on the floor beneath their unit to a car stacker). 633 I accept that it is unlikely that the company in that event would have taken the option of doing nothing or of doing no more than minimal repair. As at 2006, the company's directors clearly considered that the structural problems of the building were acute and were in possession of expert advice to that effect. 634 Nor do I think it likely that the directors would readily have pursued the option of finding a buyer for the building in its then state. That option was canvassed by Mr McLaughlin both in company meetings and in correspondence with the board and Mr Garratt seemed to have a firm view that any buyer for less than the valuation ascribed to the building at the time of the Land and Environment Court proceedings was not worth considering. 635 What the evidence does suggest, in my view, is that if the board had been advised back in 2006 that it was not possible to undertake this project without the McLaughlins consent, then the most likely course it would have taken would have been to seek to buy out the McLaughlins (as it did, indeed, offer on various occasions to do) and would be likely to have done so at a price to reflect the bargaining power which the McLaughlins would then have been recognised as having had (being in a position to prevent the only redevelopment which the board apparently considered could feasibly be carried out – a matter which seems to be conceded in the submissions by the company insofar as they emphasise the imperative for the conversion of the ground floor units in order for the redevelopment to proceed). 636 I have formed this view having regard to the apparently ready acceptance which the directors (and indeed the general meeting) had of the proposition that a premium of around $250,000 was appropriate for the 'compensation' to be paid for the ground floor units (though that recommendation was hardly accompanied by any precise analysis from Mr Bartrop) or that a figure of $250,000 was seemingly plucked out of the air by Mr Bartrop as remuneration for Mr Garratt's efforts in relation to the project. 637 I also note that it seems that whenever there was a real risk that the McLaughlins might be in a position to prevent the project from proceeding (as in late 2006, when the initial injunction application was brought, and in early 2007, when their opposition was causing difficulties for the draw down of funding from the bank), the company seemed prepared seriously to entertain the prospect of purchasing or arranging a purchase of their shares (albeit at the price which Mr Garratt then considered reflected the value of the building but without taking into account any 'veto' which the McLaughlins might effectively have been in a position to exercise over the project if their consent were necessary for it to proceed). I think it significant that steps were taken in 2007 to obtain an increase in the facility available from the bank to permit a payment of up to one million dollars for the McLaughlins' shares and that the company's legal representatives were seemingly instructed to press for executed contracts from the McLaughlins in relation to the sale of the shares in an amount of around $950,000 in January 2007. 638 Therefore, when comparing the position in which the McLaughlins now find themselves with that in which they would have been had the company realised that their consent was necessary for the project to proceed, I think it should be accepted that what they have lost was a realistic opportunity to have their shares in the company bought out for around the price offered to the owners of the shares for units 22 and 23. Had a buy-back of their shares taken place at that time then the McLaughlins would not have been levied for the January 2007 special levy nor would they have incurred the further liability under the special levy raised earlier this year in relation to the project and they would have had the use of part or all of the purchase moneys so obtained over the period from around the end of 2006. 639 Any such assessment of the McLaughlins' position would of course have to take into account the benefit they have had of increased rent since the end of 2008 from the renovated unit and the fact that they now have the ability to sell the renovated unit for whatever may ultimately be its current market value. It must also be discounted for the possibility that, for whatever reason, such a sale would not have eventuated. 640 In addition, I think it relevant to take into account that the McLaughlins have chosen not to mitigate their loss, when faced with offers from the company to buy-back their shares over the period from at least 2006 at a figure to be determined by an independent valuation or otherwise. Mr Priestley contends that there is evidence from which one could conclude that the McLaughlins considered that they held the upper hand in negotiations for a buy-out (by reason of their firmly asserted view that the development could not proceed without their consent) (referring to the letter dated 6 September 2006 from their solicitors (TB 1108) offering to sell their shares for $880,000). I accept Mr McLaughlin's evidence that he regarded the approved buy-back arrangements for the ground floor shares as setting a market price, in effect, and hence his attitude to the offers made to him in 2007. 641 That said, the company's offers to buy the shares at an independent valuation were dismissed seemingly out of hand in circumstances which I consider supports the conclusion that the McLaughlins were not prepared to sell at anything other than what they regarded as the market price and were not prepared to commit to accepting an independent valuation of that price, thus the continued incurring of costs in relation to the project was in part due to their failure to take steps to mitigate their loss. 642 Although it was said that the McLaughlins had no confidence in what instructions might be given to an independent valuer, and that was apparently also their legal advice, had this been the overriding concern I see no reason why it could not have been adequately dealt with by an agreed set of assumptions or by alternate valuations based on differing assumptions or some mechanism for an independent determination of the basis on which such instructions should be given. I think that the evidence shows that from around 2006, the McLaughlins were seeking to be bought out at a price which reflected their view of the market price of the unit referable to the price Mr Garratt and Mr Heyworth had achieved for their units, and not that which the market might sustain. 643 As to the calculation of the damages for breach of contract, therefore, I do not consider that in this case it is capable of scientific calculation, beset as the calculation is by a number of assumptions. However, it seems to me that where there has been a loss which needs to be compensated, I am required to do the best I can on the evidence before me. I note that Walsh J (at 466) in Wenham cautioned that there was: Error … in treating rules which constitute useful guidance in the ascertainment of damages as rigid rules of universal application – instead of treating them as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation for breach of contract (at 466). and the acknowledgement by Toohey J in Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64 at 138; that the assessment of damages does sometimes, of necessity, involve what is "guess work rather than estimation", quoting Menzies J in Jones v Schiffmann (1971) 124 CLR 303 at 308. The explanation for there being no hard and fast rules, according to Deane J in Amann, is founded on the fact that assessment of common law damages for breach of contract was traditionally seen as a matter for the good sense of the jury (at 119-120). 644 Mason CJ and Dawson J in Amann said (at 80): The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as "expectation damages". The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation. 645 The expectation of the McLaughlins was that the company would honour its contract with them and would not abrogate or vary their rights under the Articles without their consent. They should be put in the position which reflects what would be likely to have been the case had that expectation been met. 646 An assessment of the likelihood that the particular plaintiff would have acted in a particular way is necessary in order to establish causation (Sellars v Adelaide Petroleum (1994) 179 CLR 332, at 365 per Brennan J; Bak v Glenleigh [2006] NSWCA 10; State of New South Wales v Burton [2008] NSWCA 319 at [25]; Olympic Holdings v Lochel [2004] WASC 61 (at [123]); G W Sinclair & Co v Cocks [2001] VSCA 41 at [29]). Here, it seems to me that there is no doubt that the McLaughlins would have taken up the opportunity to sell their shares for an amount commensurate with that to be paid to Messrs Garratt and Heyworth for their shares (and perhaps less given the offers made on their behalf). That was what they were prepared to accept in early 2007. That also seems to have been the amount which the company would ultimately have been prepared to pay in order to resolve the impasse with the bank funding had it come to that point. 647 Taking into account the above matters, I have calculated the recoverable damages at $200,000 – that being the difference in the amount that might potentially have been achieved on the sale of their shares in late 2006 ($950,000) and the value of their shares as now estimated ($820,000), plus the costs incurred since 2006 by way of special levies ($383,129.45 on the figures put before me in the schedule of loss calculations) and have discounted that by roughly two thirds to take into account the possibility that such a sale might not have eventuated and to reflect the fact that they seem to have chosen not to mitigate their loss in the interim. 648 I have treated any lost rent for the two year period since September 2006 as roughly offset by the increased rent since then. I do not allow any amount for the so-called wasted expenditure in relation to the 1997 unit reconfiguration or for the general damages claimed. (I suspect that the pain and distress, which I accept has been genuinely suffered by the McLaughlins, has nevertheless in large measure been contributed to or caused by the manner in which they have raised their complaints and conducted the litigation.) 649 I appreciate that there is an element of guesswork in the above calculation but I believe it reflects the best assessment I can make on the evidence before me as to the loss suffered by reason of the company's determination to proceed with the project regardless of the McLaughlins' contractual rights. Oppression 650 The remedy for the oppressive conduct is much simpler to calculate. In my view the appropriate remedy is that the McLaughlins be awarded a sum to reflect the interest they could have earned on half of the January special levy for the period from 21 March 2007 to 30 September 2009, as quantified by the McLaughlins. 4 Derivative Suit 651 In paragraph 19 of the Further Amended Statement of Claim the McLaughlins allege that the company is entitled to bring proceedings against its directors for breach of their duties as officers of the company by reason of their conduct in: (a) pursuing the refurbishment by means of the extension of Dungowan Flats; (b) requiring the vacation of Dungowan Flats to permit the building works; (c) presenting the September resolutions to the membership of the company; (d) handing over Dungowan Flats to the builder and authorising the commencement of the demolition and construction work; (e) agreeing to provide compensation to Mr Garratt "ostensibly" for his work on the project; (f) accepting terms of finance for the project; (g) causing the company to act against the McLaughlins as pleaded. 652 It is further alleged that there is a serious question to be tried in the derivative proceedings; that it is probable that the company will not itself bring the derivative proceedings; that (as is said by Mr Burchett to have been conceded in the company's submissions) the McLaughlins are acting in good faith in seeking to being those proceedings; that it is in the best interests of the company that they be granted leave to bring those proceedings and that it is appropriate to do so. 653 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 the McLaughlins, as members of the company are entitled to seek leave to bring a derivative suit (s 236). 654 The McLaughlins rely upon the statutory duties owed by the directors to the company to exercise their powers with a reasonable degree of care (s 180), 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). 655 The conduct identified in (a) – (g) is described is in very broad terms (some of which could hardly be denied as a matter of fact – such as that the directors accepted terms of finance for project). The company's defence to the relevant allegation is a bare denial, pleading in paragraph 67 that "Without specifically pleading to any of the matters in sub-paragraphs (a) to (g), paragraph 19 is denied." 656 It is submitted by Mr Burchett (going beyond what seems to be pleaded in this regard) that the conduct of the directors recited above was in breach of those duties in: (a) pursuing and committing the Company to the development without funding in place and coercing the members to endorse it by misrepresentation and then on the basis, that they had placed them in a position of 'no practical choice', (b) obtaining for themselves by misrepresentation and non-disclosure of material facts the benefits: i) of a premium price for their units without the risk of loss from the project, to which they subjected all other members, ii) for Mr Garratt of his gratuity. iii) for Mr Brown and Mr Garratt of new units in the development on uncommercial terms, exposing the company to the loss of both 'pre-sales' and funding, the opportunity to market and sell over the 6 months prior to exchange for a potentially higher arm's length price, loss of interest on the deposits payable on exchange, and enabling Mr Brown to make at least a $lm profit at the Company's expense. c) abusing their powers to quell dissent by the plaintiffs and cause the company to override their rights under the Articles and thereby expose itself to loss to them. 657 Mr Priestley contends that the fundamental premises of the relief claimed, as per the plaintiffs' final submissions, are: (a) that the directors have all been involved in "coercing" the members to support the development, "by misrepresentation"; (b) that the directors have obtained benefits for themselves, including units on uncommercial terms, by misrepresentation and non-disclosure of material facts; and (c) that the directors have 'abused their powers to quell dissent by the plaintiffs' must be rejected for the reasons that there are no allegations of coercion, misrepresentation, non-disclosure or abuse of power in the pleaded case. He submits that this is not the case on which the parties came to trial; that the company has had no opportunity to defend such a case and that no such case was squarely put to Mr Garratt. 658 With respect, the allegations made of the company and its directors in relation to the oppression suit seem to me squarely to raise the matters of which complaint is made in relation to breach of directors' duties and Mr Garratt (and the other directors) had every opportunity to respond to them. The proceedings for breach of duty the subject of the proposed derivative suit are for breach of directors' duties by reason of the directors conduct in, inter alia, presenting the September 2006 Resolutions to the members, handing over the property to the builder and authorising commencement of the building works and agreeing to provide compensation to Mr Garratt. As particularized, this allegation includes the asserted fact that, by reason of their actions the company neglected its duty of maintenance of Dungowan to enable use of the home units as such by its members. 659 As to the position of joinder of the other directors to any such derivative suit, I note that in the witness box Mr Garratt did not accept that his was the guiding mind of the company and stressed that the directors were in accord in their view (or, to use his words, "generally pointed in the same direction" – T 409) as to the project proceeding. In those circumstances, I cannot see that a distinction should be drawn as between the respective directors. 660 It is submitted by Mr Priestley that it is extremely unlikely that such a derivative action is in the best interests of the company, given that the development is virtually complete, and there is no basis to think any other member (together owners of roughly 95% of the issued shares), would support such an action and that in any event, if the McLaughlins' primary contentions are accepted, the available oppression remedies are so broad as to render a derivative action otiose as far as the McLaughlins' are concerned. Such proceedings, he submits, would weigh heavily on the company in terms of costs, "and seem, in truth, to be motivated not by a desire to recoup to the company loss which it has sustained, but to punish the other shareholders for having rejected the plaintiffs' grasping claims and having required the plaintiffs to participate equally with them in the restoration project if the plaintiffs were not prepared to sell their shares at an independent valuation". 661 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). 662 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: o 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 o it is appropriate for the court to grant leave even though notice was not given to the company: s 237(2). 663 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 then to the respective criteria I note as follows. 664 Inaction by the company - The court must be satisfied that it is probable the company will not itself bring the proceedings, or properly take responsibility for the proceedings. Here, the company (by paragraph 72 of its Defence) admits that it is probable that the company will not itself bring proceedings against the directors (the company denying that it is in the best interests of the company to do so and that there is a serious question to be tried in the derivative proceedings). Therefore, the first of the criteria is clearly satisfied. 665 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). 666 Relevantly to the facts in this case, in Swansson it was said (ACSR 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. 667 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 [2002] NSWSC 640; (2002) 42 ACSR 534; 20 ACLC 1502. 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. 668 Here, Mr Burchett suggests that the fact that the McLaughlins are acting in good faith in seeking to bring the proceedings is not denied by reference to paragraph 69 of the Defence to Further Amended Statement of Claim. That paragraph is not necessarily clear, in that the plea is accompanied by the comment that the McLaughlins had never before sought to bring derivative proceedings against the company, which might give rise to a doubt as to what precisely is the material fact being denied by the company. 669 In any event, I am satisfied that the McLaughlins honestly believe that they have a good cause of action with reasonable prospects of success. They have asserted their rights over a number of years and they have done so with the benefit of legal advice. Their lawyers have certified that the claim as brought in their view has reasonable prospects of success. I do not consider that it can be said that the McLaughlins are seeking to bring such a claim for a collateral purpose. The fact that they were prepared to contemplate a settlement of the proceedings at one or more stages (as indeed also was the company) does not permit a conclusion that these proceedings or the derivative claim sought to be pursued is being pursued for a collateral purpose. 670 Best interests of the company – It is for the McLaughlins to establish that it is in the best interests of the company that they be granted leave. I am satisfied that the substance of the redress which the McLaughlins seek to achieve is not available by other means. Insofar as it was submitted by Mr Priestley that the McLaughlins would obtain any relevant relief in these proceedings, thus rendering a derivative suit otiose, the fact is that they have not established the claim for oppressive conduct which might have had that effect. (As I observed during the hearing, the outcome in the best interests of all parties would seem to be that the McLaughlins cease to be members of the company – hence the attraction of a compulsory purchase order if the claims of oppression were made out. However, on the findings I have made such an order is not appropriate.) 671 Unfortunately, therefore, in terms of the prolongation of litigation, it seems to me that the genuine complaints which I accept that the McLaughlins have as to the perceived breach of directors' duties can now only be addressed in a derivative suit. Such claims will be to the benefit of all shareholders, if successful, in that they would presumably sound in damages which would then be available to offset some of the project losses or costs. As to the ability of the prospective defendants to meet at least a substantial part of any judgment in favour of the company in the proposed derivative action, so that the court may ascertain whether the action would be of any practical benefit to the company, the directors are (or were at the time of the hearing) shareholders of the company with assets at least represented by the units in respect of which they have a right of occupation and to which they will shortly obtain or have already obtained title. Some at least of the directors have an interest in a number of units within the building. (In addition, there may well be insurance in place which may be available to respond to such a claim.) 672 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). 673 In circumstances where the result of a claim of the kind contemplated may offset for shareholders losses otherwise incurred on the redevelopment project, I am of the view that this criterion is satisfied. 674 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 ACSR 46). There is the same relatively low threshold to surmount as in the case of an application for an interlocutory injunction (Swansson v RA Pratt Properties Pty Ltd). 675 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, above, ACSR at 542 and Ragless v IPA Holdings Pty Ltd (in liq) [2008] SASC 90, at [40]; (2008) 65 ACSR 700; 254 LSJS 225). 676 It seems to me that there are sufficient aspects of the matter which raise concerns as to the disclosure to members and as to the prudence of committing the company to significant exposure at a time when bank funding was not secured (and/or the company's ability to satisfy the conditions precedent to draw down had not been established) to warrant the conclusion that there is a serious question to be tried as to whether the directors or some of them have breached their duties to the company. I have set out above the chronology of events which makes clear (as ultimately accepted by Mr Garratt) that when the steps were taken which (whether together with other factors or of themselves) left the company with no practical choice but to proceed with the project (the vacation of the building and commencement of work by the builder) the company was in the position that there was no assurance that the conditions for draw down of the necessary funds would be satisfied. 677 I think there is also a serious question to be tried as to the conduct of the directors in putting before the members the compensation proposals in relation to both the buy-back amount for the ground floor units and Mr Garratt's remuneration, without (it would seem) more than a broad brush assessment of what would be the proper amounts to pay in all the circumstances and without disclosure of the extent of Mr Garratt's interest in the company, matters which may have had a material effect on shareholders' consideration of those resolutions at the relevant meeting(s). (In that regard, Mr Garratt's assertion that his interest in the building was well known (T 424) is to be understood in light of his acknowledgement that there was no disclosure in terms of that interest at shareholder meetings and the fact that there is no disclosure on the corporate records of any beneficial interest.) 678 Notice of proceedings to company – Finally, 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. In these circumstances, where the company has been on notice of the McLaughlins' intention to seek relief of this kind since the commencement of the proceedings, and they were brought in the first instance on an urgent basis for the grant of interlocutory relief, I consider that the failure to notify of an intention to make such an application strictly within the section should not preclude the grant of leave. 679 Accordingly, I consider it appropriate to grant leave to bring the derivative proceedings. I think it appropriate that such leave be granted to the McLaughlins and not to a receiver, since it is a matter for the McLaughlins to determine whether the pursuit of the proceedings at this stage (and bearing in mind their partial success of the proceedings before me) is worth incurring the further costs and stress of litigation. Conclusion 680 For the reasons set out above, I have concluded that: 1. In general, the complaints made in relation to the passage of resolutions by the company and/or its directors have either not been established or give rise to no ultimate remedy in particular because the earlier resolutions of which complaint is made had no operative effect in relation to the development or have since been ratified or ought to be the subject of orders under s 1332 of the Corporations Act . 2. In respect of the resolution purportedly approving a compensation payment to the chairman for his efforts in relation to the project, I am of the view that this was ineffective by reason of the inadequacy of notice of that resolution and the failure to disclose all relevant information in relation to that resolution. 3. I find the conduct of the company in pursuing the development was in breach of the contract constituted by the Articles of Association between the company and the McLaughlins insofar as it affected the amenity of the McLaughlins' right of occupation of the unit then numbered 4 in the building by the creation of a car stacker under their unit. For this breach of contract a remedy in damages will lie and I have assessed the McLaughlins' damages on the evidence before me at $200,000. 4. I find that the affairs of the company have been conducted oppressively within the meaning of s 232 of the Corporations Act in relation only to the refusal by the company to entertain or accede to the McLaughlins' request for a refund of half of the January 2007 levy. The appropriate remedy for this is an order for the payment of interest on that portion of the January 2007 levy from the date on which requests for its return were made until the date on which other unit holders were required to pay the levy and that has been quantified by the McLaughlins at $59,885.93. 5. I consider that leave should be granted to the McLaughlins to bring a proceeding on behalf of the company in relation to the alleged breach of directors' statutory and fiduciary duties in circumstances where: (i) It is probable that the company will not itself bring proceedings; (ii) I am satisfied that the McLaughlins are acting in good faith in seeking to bring such an application (and the defendant concedes as much); (iii) There is a serious question to be tried as to whether, in committing the company to arrangements with Southern Cross Constructions in relation to the development project, before satisfying itself that it would be in a position to meet the conditions precedent to approval of the finance for the project, it put the company at great risk and/or in entering into arrangements for the buy-back of units 22 and 23 and the payment to Mr Garratt personally of a $250,000 gratuity, one or more of the directors have been in breach of their fiduciary and statutory duties to the company; and (iv) It is in the best interests of the company that leave be granted and appropriate for that purpose for that leave to be granted. 681 On 26 February 2010, I made (and now confirm) the following declarations and orders: 1. I declare that the September 2006 resolution approving the payment of a $250,000 fee to Mr Garratt is ineffective and of no effect. 2. I order the defendant to pay to the plaintiffs the sum of $200,000 by way of damages for breach of the contract constituted by the Articles of Association (such breach constituted by the pursuit of the redevelopment insofar as it abrogated, varied or restricted rights of the plaintiffs in relation to the their occupation of their home unit). 3. I order the defendant to pay to the plaintiffs the sum of $59,885.93 by way of interest on 50% of the January 2000 special levy from the date on which demand was first made for its return (21 March 2007) to 30 September 2009. 4. I give leave for the plaintiffs to commence a derivative suit in the name of the company against the directors for breach of statutory duties in relation to the redevelopment. 682 I will arrange for the matter to be listed at a convenient time to consider any submissions as to the costs orders which should be made. ********** 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.