Supreme Court New South Wales Medium Neutral Citation: In the matter of ICB Medical Distributors Pty Ltd and The International College of Biomechanics Pty Ltd; ICB Gait and Posture Clinic Pty Ltd; Foot Steps Orthotics Pty Limited [2018] NSWSC 1315 Hearing dates: 21 – 22 February; 10 – 13, 17 – 20, 26 April 2018; 20, 27 – 28 June 2018, 10, 12 – 13 July 2018 Decision date: 29 August 2018 Jurisdiction: Equity - Corporations List Before: Black J Decision: Directions to be made as to preparation of valuation evidence as to basis on which Mr Kielt is to buy out Dr Najjarine's shares in the companies in the ICB group of companies. Parties to bring in short minutes of order to give effect to this judgment within 14 days. Catchwords: CORPORATIONS – oppression – one party seeks winding up order – other party seeks order for the purchase of shares by a member of a company under s 233(1)(d) of the Corporations Act 2001 (Cth) – where amounts improperly recorded as debts owed to director or his associated companies or family members in favour of one party – where diversion of business from company to competing businesses by another party – where both parties have engaged in oppressive conduct – whether to grant order for buy-out of one party's share by the other. CORPORATIONS – winding up – application to wind up company on just and equitable ground under s 461(1)(k) of the Corporations Act – where deadlock in the management of the company's affairs – where winding up order would advance director's associated entities' adverse interests as trade competitors of company – where alternative remedy can appropriately address the oppression – whether company should be wound up. Legislation Cited: - Corporations Act 2001 (Cth) ss 232, 233, 286, 461, 467 - Evidence Act 1995 (NSW) ss 128,136 Cases Cited: - Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] QCA 48; (2018) 125 ACSR 227 - Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd [2016] NSWCA 347; (2016) 116 ACSR 566 - Australian Securities & Investments Commission v Healey [2011] FCA 717; (2011) 83 ACSR 484 - Boyd v Feeney [2017] NSWSC 1595 - Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55; (2014) 314 ALR 62 - Cook v Deeks [1916] 1 AC 554; [1916-17] All ER Rep 285 - Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524 - Dick v Alan Powell Holdings Pty Ltd [2009] QSC 184 - Green v Bestobell Industries Pty Ltd [1982] WAR 1; (1982) 1 ACLC 1 - Edmonds v Donovan [2005] VSCA 27; (2005) 12 VR 513 - Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 - Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 - Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336 - Howard v Commissioner of Taxation [2014] HCA 2 ; (2014) 253 CLR 83 - Hunter v Organic and Natural Enterprise Group Pty Ltd [2012] QSC 383; (2012) 92 ACSR 183 - Mordecai v Mordecai (1988) 12 NSWLR 58; 12 ACLR 751; 6 ACLC 370 - Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 - Munstermann v Rayward [2017] NSWSC 133 - Pennimpede v Gerard Pennimpede [2009] NSWSC 85 - Re AJ Roberts Removals & Storage Pty Limited [2017] NSWSC 1054 - Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; (2014) 101 ACSR 233 - Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547 - Re Ledir Enterprises Pty Ltd [2013] NSWSC 1332; (2013) 96 ACSR 1 - Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914 - Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; (2011) 278 ALR 291 - Supercar International Holdings Ltd v Sommers [2011] NSWSC 336; (2011) 84 ACSR 466 - Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 - Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 84 ACSR 121 - Victory Projects Pty Ltd v AAA Self Storage Pty Ltd [2016] NSWSC 1758 - Watson v Foxman (1995) 49 NSWLR 315 - Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 Category: Principal judgment Parties: Abdul Rahman Najjarine (Plaintiff/Cross-Defendant) Rodney St John Kielt (Defendant/Cross-Claimant) Representation: Counsel: F P Carnovale (Plaintiff/Cross-Defendant) V Whittaker/D Birch (Defendant/Cross-Claimant) Solicitors: Antunes Lawyers (Plaintiff/Cross-Defendant) Webb Henderson (Defendant/Cross-Claimant) File Number(s): 2015/354468 Judgment 1. By his Second Amended Statement of Claim filed on 12 March 2018 ("SASC"), Abdul Najjarine (to whom I will refer as "Dr Najjarine" as he prefers) brings proceedings against Mr Rodney Kielt seeking an order that ICB Medical Distributors Pty Ltd ("ICB Medical") and several other companies within the ICB group of companies ("ICB Group") be wound up or, alternatively, an order that he purchase all of Mr Kielt's shares at a price equal to half of the value of the ICB Group as determined by a valuer, determined on a particular basis. Dr Najjarine placed primary emphasis on seeking a winding up order at the hearing and made no submissions of substance in support of an order that he buy out Mr Kielt's shares in those companies. The other companies in the ICB Group that are the subject of the proceedings are International College of Biomechanics Pty Ltd ("ICB College"), ICB Gait and Posture Clinic Pty Ltd ("ICB Gait") and Foot Steps Orthotics Pty Ltd ("Foot Steps Orthotics"). None of the companies that are sought to be wound up were joined as party to the proceedings, but the parties took no point as to that matter. 2. By a Cross-Claim, Mr Kielt alleged that Dr Najjarine had engaged in oppressive conduct, to put it broadly, in respect of the conduct of the affairs of ICB Medical and the several companies in the ICB Group. I will address that Cross-Claim below. 3. The parties led voluminous affidavit evidence, tendered a substantial volume of documents and engaged in lengthy cross-examinations of Dr Najjarine, Mr Kielt and two accountants to the ICB Group who had given evidence in Mr Kielt's case. It is not necessary to reach factual findings as to all of the disputed factual matters, which extended to many dealings between the parties over an extended period. I have had regard to all of the evidence led and all of the submissions as to all of those matters but only set out those factual findings that I consider are necessary to a determination of the proceedings. Factual background, affidavit evidence of Dr Najjarine and Mr Kielt and their credit 1. By way of background, it appears that Dr Najjarine and Mr Kielt initially had contact in respect of a proposal to promote and sell orthotics known as "Footsteps" in late 1999. ICB Medical was incorporated in May 2000, the company Foot Steps Orthotics was incorporated in July 2000 and ICB Gait was incorporated in March 2001. ICB Medical manufactures laboratory made orthotics which are made to a prescription provided by a healthcare practitioner, and were and are sold to third party clients and were also sold to a company associated with Dr Najjarine, AOL FootCare Clinics Pty Ltd ("AOL"). It appears that AOL has now substantially ceased to purchase orthotics from ICB Medical. ICB Medical also imports and sells pre-made prescription orthotics, which are heat moulded to the foot of a wearer by health practitioners, and over the counter retail orthotics under the brand "Pedi Step". 2. Each of the parties filed and relied on numerous affidavits in the proceedings, many of which were in parts inadmissible, and significantly repetitive, and parts of which were ultimately not read at the hearing. Dr Najjarine relied on part of his first affidavit dated 18 November 2015, filed in the original proceedings which he had commenced. Dr Najjarine's evidence was that he would sign a single page of the accounts, often when he was with a patient at his clinic, and based on an understanding that the accounts would be correct because the companies employed external accountants, apparently notwithstanding his suggested concerns as to how Mr Kielt was managing the group businesses. That evidence exposed a significant failure to comply with Dr Najjarine's duties as a director of the companies, which required that he personally engage with the content of their financial reports, understand that information and, if necessary, make further enquiries if matters revealed in those financial statements called for such enquiries: compare, albeit in the context of more substantial entities, Australian Securities & Investments Commission v Healey [2011] FCA 717; (2011) 83 ACSR 484 at [20]. Dr Najjarine's evidence was also that, as he had been concerned over the accuracy of accounts, he has refused to sign financial reports since 2012 (Najjarine 18.11.15 [21]–[22]). 3. Dr Najjarine also relied on a second affidavit also dated 18 November 2015 and also filed in the same proceedings, which deals with Dr Najjarine's training as a podiatrist, the commencement of his business relationship with Mr Kielt and the incorporation of the companies in the ICB Group. A substantial part of that affidavit dealing with his concerns as to Mr Kielt's management of those companies was not read, although that question was addressed in several later affidavits. 4. Dr Najjarine relied on a third affidavit dated 13 May 2016, in response to Mr Kielt's affidavit dated 8 April 2016 (to which I refer below), although large parts of that affidavit were also not read. That affidavit refers to the commencement of Dr Najjarine's business relationship with Mr Kielt in late 1999 and sets out lengthy conversations, in direct speech, that are said to have occurred nearly 20 years ago. I will return to that issue below. Dr Najjarine also referred, in this affidavit, to the travel which he had undertaken for ICB Medical between 2000 and 2012 which appears largely to have involved giving seminars to promote ICB Medical's products, to lectures given by Mr Joshua Kielt for ICB Medical in China in late 2014 or early 2015 and to other matters in dispute to which I refer below. Dr Najjarine also responded to other aspects of Mr Kielt's evidence in that affidavit. Dr Najjarine's fourth affidavit dated 10 August 2016 responded to Mr Pyne's affidavit dated 21 April 2016, which I will address below, and took issue with Mr Pyne's account of his dealings with Mr Kielt and Dr Najjarine. Dr Najjarine also relied on his fifth affidavit dated 10 March 2017, large parts of which were not read. He was, however, cross-examined as to aspects of that affidavit, including parts of it that had not been read. 5. By his sixth affidavit dated 23 January 2018, Dr Najjarine set out his recollection of a meeting in May 2012. I will refer to that evidence below. Dr Najjarine also there refers to a number of other matters, which largely involved documents and matters which were addressed in the cross-examination of Mr Kielt. Dr Najjarine also relied on his seventh affidavit dated 5 April 2018, which responded to allegations made in Mr Kielt's Cross-Claim. Dr Najjarine's eighth affidavit dated 10 April 2018 addressed a collateral issue, which had arisen in his cross-examination, as to the techniques used by health professionals to prescribe orthotic devices and in the manufacture of such devices. 6. Dr Najjarine (like Mr Kielt, whose evidence I will address below) set out detailed accounts in his affidavits, in direct speech, of conversations that had purportedly occurred many years ago. He did not demonstrate any such detailed recollection of conversations in cross-examination, and there deployed his lack of recollection of events long ago, particularly when faced with cross-examination that would be adverse to his case. I am comfortably satisfied that he did not have a reliable recollection of the conversations set out in his affidavits, at least in earlier years. There were occasions, of which examples are given in Mr Kielt's submissions concerning the Cross-Claim, where Dr Najjarine gave inconsistent evidence as between his affidavit evidence and his cross-examination, and within his cross-examination. Inconsistencies between Dr Najjarine's affidavit evidence and cross-examination included, for example, his evidence as to the content of the meeting in May 2012, which I will address below; his evidence as to whether Mr Kielt had been involved in the development of orthotic products sold by ICB Medical; and the extent of his knowledge of his son's and daughter's, Mr Joshua Kielt's and Ms Naomi Kielt's, employment by ICB Medical and of the business of overseas companies associated with ICB Medical. 7. In cross-examination, Dr Najjarine was often not prepared to focus on the particular questions asked and sought to use his answers to develop a point that he wished to make, for example, his assertions that he had developed the "Najjarine Assessment System" or "NAS" in response to questions directed to the accuracy of a description of that system (T177–178). Dr Najjarine's evidence in cross-examination was at times contradictory, including as to the question whether he trusted or distrusted Mr Kielt when ICB Medical's accounts for the year ended 30 June 2012 were signed; whether Mr Poole, an accountant retained by Dr Najjarine, was undertaking investigations of the ICB Group companies' financial accounts at that time; and whether he trusted Mr Kielt to prepare those accounts correctly, notwithstanding the distrust reflected in Mr Poole's investigation (T282–285). There were several occasions on which Dr Najjarine's explanation of matters in cross-examination was implausible, or sought to depart from the obvious meaning of evidence that he had previously given, including his evidence in cross-examination as to the number of seminars which he had given for businesses that compete with ICB Medical, and his evidence in cross-examination as to whether he and Mr Kielt had both been involved in developing orthotic products sold by ICB Medical. Dr Najjarine was generally not prepared to accept that evidence he had given was incorrect, even when that was plainly demonstrated in the course of his cross-examination. There were plainly also significant difficulties as to the adequacy of production of documents by Crown Orthotics Laboratory Pty Ltd ("Crown Orthotics") and AOL on subpoena, where Dr Najjarine seems at least to have had a significant role in the production of such documents. 8. In closing submissions, Ms Whittaker, who appeared with Mr Birch for Mr Kielt, submitted that other witnesses' evidence should be preferred to Dr Najjarine's evidence where there is a conflict between the witnesses. I am not satisfied of the reliability of Dr Najjarine's evidence, and I generally would not accept that evidence unless it is adverse to his interests or, rarely, corroborated by contemporaneous documentary evidence. However, there were corresponding difficulties with the evidence of Mr Kielt, Mr Pyne and Mr Green, to which I refer below, such that I also cannot place significant weight on their evidence or prefer it to Dr Najjarine's evidence. It seems to me that the primary witnesses in the case all had little reliable recollection of events and reconstructed or tailored their evidence to support the cases in which they were called and protect their own interests. 9. Dr Najjarine also relies on an affidavit of a solicitor employed by the firm acting for him in the proceedings, Ms Carollo, dated 25 January 2018 which refers to the production of documents on subpoena and in response to notices to produce in the proceedings. A further affidavit of Ms Carollo dated 31 January 2018 corrected aspects of that affidavit. Dr Najjarine also read a further affidavit dated 27 February 2018 of his solicitor, Ms Antunes, which was intended to establish the basis for a claim for privilege in several emails. Dr Najjarine also read a further affidavit of Ms Carollo dated 5 April 2018 which exhibited a number of documents. 10. Mr Kielt relied on his affidavit dated 8 April 2016. That affidavit referred to Mr Kielt's contact with the late Mr Phillip Vasyli in the period from 1991 onwards, involving his distribution of Mr Vasyli's medical and retail products, and his initial contact with Dr Najjarine who was then employed as a podiatrist in Mr Vasyli's business. Mr Kielt also there addressed matters relating to his provision of security for a bank overdraft for ICB Medical in late 2006, the relocation of ICB Medical's premises in early 2007, the incorporation of ICB UK Limited ("ICB UK") and Abu Trading (Shanghai) Co Ltd ("Abu Trading"), and ICB Medical's change of accountants to PKF (which later merged with and traded as BDO) ("BDO") in mid-2010. Mr Kielt also there referred to a meeting with representatives of BDO said to have occurred on 1 May 2012. Mr Kielt there set out, in direct speech, conversations in relation to the establishment of ICB Medical's business that had occurred some 18 years ago, in early 2000, and detailed conversations with Dr Najjarine that were said to have occurred in 2010 and 2011. Mr Kielt's evidence of those matters contrasted with his lack of recollection of more recent matters, when pressed in cross-examination. I am satisfied that Mr Kielt did not have a reliable recollection of those conversations and that they were, at best, reconstructions intended to advance his defence of Dr Najjarine's oppression case and his attack on Dr Najjarine's conduct. 11. Mr Kielt also referred in that affidavit to payments made by ICB Medical to Dr Najjarine's company in respect of Dr Najjarine's six trips to China in 2012, which I will address below, to Dr Najjarine's indication that he wished to be more involved in the running of the business and to have more input into ICB Medical's direction in 2013, and to subsequent steps taken by Dr Najjarine to retain Mr Poole to investigate the position in respect of ICB Medical's accounts. Mr Kielt also referred to the first correspondence received from the solicitors now acting for Dr Najjarine, in February 2014, which indicated that Dr Najjarine would not make himself available for seminars in 2014 and sought to require that all future correspondence with Dr Najjarine was to be through his legal representatives, and that Mr Kielt was not to contact Dr Najjarine. Notwithstanding that position, it appears that the parties subsequently attended directors' meetings which were conducted in a confrontational manner. 12. Mr Kielt relied on his second affidavit dated 16 December 2016 which addressed several of the matters particularised in Dr Najjarine's Amended Statement of Claim, as it then stood, and on a third affidavit dated 3 May 2017 which responded to Dr Najjarine's affidavit dated 10 March 2017. 13. Mr Kielt's fourth affidavit dated 2 February 2018 addressed, inter alia, the then position in respect of ICB Medical and companies in the ICB Group, including ICB UK and Abu Trading; his response to Dr Najjarine's affidavit dated 23 January 2018; matters addressed at a directors' meeting of ICB Medical held on 2 May 2017, which appears to have been the last directors' meeting of ICB Medical attended by Dr Najjarine; the steps that would need to occur within the companies in the ICB Group to effect a buy-out of shares by one or other shareholder; and correspondence between the parties and their solicitors since the beginning of the dispute in February 2014. 14. Mr Kielt's evidence in that affidavit was also that BDO had decided not to prepare further annual accounts or further tax returns for ICB Medical until the proceedings had been resolved, and advised the Australian Securities and Investments Commission ("ASIC") and the Australian Taxation Office ("ATO") of that decision, and that ICB Medical had not filed company returns for 2014 through 2017 or company tax returns for the financial years 2014/15, 2015/16 and 2016/17 and had been issued with fines by the ATO for its failure to file tax returns for the 2014/15 and 2015/16 financial years. Mr Kielt's evidence was that, because ICB Medical could not file its tax returns, it could not access the tax refunds that are "owing to it". As will emerge below, there is a real question as to whether any tax refunds then claimed by ICB Medical would have been properly founded, had they reflected the approach it had adopted in previous years. Mr Kielt's evidence was that ICB Gait and ICB College had not traded since the close of the 2013/14 financial years and that the bank accounts for those companies were closed in late 2014. 15. Mr Kielt also there referred to a letter sent by his solicitors dated 7 February 2017 which referred to earlier offers to buy Dr Najjarine's shares in ICB Medical, according to a mutually agreed valuation methodology. No evidence was led of the substance of those earlier offers, and there is no reason to think that they adjusted for several impugned transactions which I will address below. Mr Kielt also led evidence, which was admitted subject to a limiting order under s 136 of the Evidence Act 1995 (NSW) as evidence of his understanding only, of the steps that would need to be taken by ICB Medical if Mr Kielt acquired Dr Najjarine's shares in the companies in the ICB Group, or if Dr Najjarine acquired Mr Kielt's shares in those companies. Mr Kielt's evidence was, in effect, that the former would be preferable, because Dr Najjarine had not been actively involved in the running of ICB Medical's business since January 2014. 16. In that affidavit, Mr Kielt also referred to loans and other amounts that he claimed ICB Medical owed to him and associated companies including amounts of $183,486 owed to LW&S Hartley Pty Ltd ("LWS"), a company associated with him, $445,449 owed to him, accrued entitlements to annual leave in the amount of $28,208.67 and to long service leave in the amount of $30,037.29, and Mr Kielt asserted that the total amount owed to him by ICB Medical as at 31 December 2017 was $697,180.96. Mr Kielt also referred to the need for repayment of amounts owed by ICB Medical to Mr Joshua Kielt and Ms Naomi Kielt on termination of their employment, if Dr Najjarine bought out Mr Kielt's shares, and summarised the position as that the cost to ICB Medical of paying out Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt would amount to around $856,845 and that amount represented approximately 80% of ICB Medical's total assets and was significantly higher than the cash held in the various ICB Medical bank accounts. I find below that the circumstances in which these loans and other amounts arose involved serious irregularities and were oppressive of Dr Najjarine, and Mr Kielt here sought to take advantage of those irregularities and that oppression to avoid the relief sought by Dr Najjarine. 17. Mr Kielt's fifth affidavit dated 14 March 2018 sought to support allegations made in the Amended Statement of Cross-Claim against Dr Najjarine and also addressed a range of allegations made by Dr Najjarine, many of which had previously been addressed, often in less detail, in his previous affidavits. Mr Kielt's sixth affidavit dated 17 April 2018 led further evidence to address matters that had previously been the subject of evidence that was not in admissible form. Mr Kielt there led evidence of Dr Najjarine's suggested agreement, in March 2011, that LWS could issue an invoice to ICB Medical "to compensate for the loss of tax losses" in LWS, and of a conversation said to have occurred in March 2013 by which Dr Najjarine was said to have agreed to Mr Kielt issuing a further invoice from LWS to ICB Medical for "consultancy services" in respect of research and development, which would "lower [ICB Medical's] tax liability for the year, and would also recognise [Mr Kielt's] work in the ICB Group providing R[esearch] & D[evelopment] services during the financial year". I am not persuaded that either conversation occurred, given the issues as to the credit of Mr Kielt's evidence to which I refer below. It also seems to me to be inconceivable that, shortly after Mr Kielt had declined to pay Dr Najjarine for giving further seminars in China in 2013 on the basis of cash flow issues in ICB Medical, Dr Najjarine would have approved ICB Medical incurring a substantial liability to LWS for purported consultancy or research and development services, even if doing so would have had the perceived advantage of avoiding payment of tax that would otherwise be payable on ICB Medical's taxable income. That approach would be wholly inconsistent with the fact that Dr Najjarine plainly felt strongly that he should be paid for such presentations and with the then level of distrust between the parties. 18. Mr Kielt (like Dr Najjarine) set out detailed accounts in his affidavits, in direct speech, of conversations that had purportedly occurred many years ago. He (like Dr Najjarine) demonstrated no such detailed recollection of conversations in cross-examination and also there emphasised his lack of recollection of events long ago, especially when faced with cross-examination that would be adverse to his case. I am comfortably satisfied that he (like Dr Najjarine) did not have a reliable recollection of the conversations set out in his affidavits, at least in earlier years. There were also many occasions in Mr Kielt's cross-examination where Mr Kielt initially attempted to avoid conceding straightforward matters that were put to him in cross-examination, formulating an answer in different terms to the question asked, only to concede that matter when the question was pressed (for example, T610). 19. In closing submissions, Ms Whittaker submits that the cross-examination of Mr Kielt was about accounting matters of some sophistication, which were outside his primary expertise or experience, and that he gave responsive evidence about matters of which he had experience. Ms Whittaker accepted that there were occasions on which Mr Kielt's answers were argumentative, but pointed to the extent of open ended questions asked in cross-examination, and to a level of interruption of Mr Kielt's answers, which, I should add, was combined with Mr Kielt's interruptions of the questions asked by Mr Carnovale who appeared for Dr Najjarine. I do not accept substantial parts of Mr Kielt's explanations of the impugned transactions, and I consider that the circumstances of those transactions and Mr Kielt's explanations of them were adverse to his credit. I generally would not accept Mr Kielt's evidence (like Dr Najjarine's evidence) unless it is adverse to his case or, rarely, corroborated by contemporaneous documentary evidence. 20. Mr Kielt relied on an affidavit dated 13 March 2018 of Mr Lawrence Green, who was the external accountant for the companies in the ICB Group, prior to BDO's appointment, which referred to the establishment of those companies, investigations made by Mr Green in 2008–2009 in respect of the amount recorded for "sundry creditors" in ICB Medical's internal accounts, and Mr Kielt's claim for payment for tax losses applied by LWS to the amounts invoiced to ICB Medical, which were in turn invoiced as consulting fees by LWS and by East Coast Sales Brokerage Pty Ltd ("ECS") to ICB Medical. 21. Ms Whittaker submits that Mr Green was an impartial witness with no motivation to give evidence that favoured Mr Kielt rather than Dr Najjarine. It was not put to Mr Green that he gave deliberately false evidence, and I do not reach any finding to that effect. However, it seems to me that Mr Green's affidavit evidence and evidence on cross-examination was significantly influenced by his wish to deflect the attacks on the accounting treatments with which he had been involved. An "amendment" to Mr Green's affidavit evidence, to which I refer below, to indicate that he was not aware of the basis of the difference between the sundry creditors balance of $272,502.44 as at 30 June 2008 and the sundry creditors balance of $373,318.73 as at 30 June 2010, made at the commencement of his oral evidence, seems to me to emphasise the difficulty with his original affidavit evidence that sought to justify the larger figure, rather than supporting his credit as Mr Whittaker submitted. Mr Green was not prepared, in cross-examination, to accept that the purpose and not merely the effect of the issue of consultancy invoices by ECS to ICB Medical was to reduce ICB Medical's tax liabilities, despite the contemporaneous emails indicating that purpose (T732). Mr Green's unwillingness to accept that matter reduces the weight that can be given to his evidence. 22. Mr Kielt also relied on the affidavit dated 21 April 2016 of Mr Grant Pyne, who was a partner in PKF's East Coast practice, and is now a partner in BDO. Mr Kielt also relied on a report prepared by Mr Pyne dated 14 December 2016, which responded to an affidavit of Ms Bateman dated 10 November 2016 on which Dr Najjarine did not rely, the then Amended Statement of Claim and matters implicit in a subpoena directed to BDO dated 29 August 2016 (Ex D1). I will refer to several aspects of Mr Pyne's report below. Mr Kielt relied on a second affidavit of Mr Pyne dated 16 February 2018, which addressed the meeting on 1 May 2012, referred to BDO's identification of several issues in the ICB Group companies' accounts, and addressed several matters said to have been discussed at the meeting on 1 May 2012 and BDO's preparation of ICB Medical's accounts for the year ended 30 June 2011. Mr Pyne's evidence was that he had only met with Dr Najjarine once in person, on 1 May 2012, and had spoken to him once by telephone on 10 May 2012, and that BDO took instructions from Mr Kielt, who he understood was the managing director of ICB Medical, before he was aware of any dispute between the directors. Significant parts of Mr Pyne's evidence in that affidavit were not admissible and were not admitted. 23. By a third affidavit dated 15 March 2018, Mr Pyne addressed the question of time off in lieu or "TOIL" in respect of Mr Joshua Kielt, which I address below, and the claim for long service and annual leave in respect of Mr Kielt, which I also address below. Mr Pyne also addressed a claim for travel allowances in some detail, but without reference to the fact that the relevant travel costs had (as Mr Kielt acknowledged in cross-examination) been paid by ICB Medical directly, not by the employees to whom travel allowances were paid. By a fourth affidavit dated 13 April 2018, Mr Pyne led further evidence of the meeting on 1 May 2012, which I will address in dealing with that meeting below. By a further affidavit dated 8 June 2018, Mr Pyne addressed the present position of ICB Medical, including the deferral of lodgement of annual its financial statements for several years, the deferral of lodgement of returns to ASIC, the position as to the shareholding in ICB UK and incorrect information provided in ICB Medical's income tax returns as to that shareholding. 24. In closing submissions, Ms Whittaker submits that Mr Pyne's evidence should be accepted in preference to Dr Najjarine's evidence, where there is a conflict between them. I will refer to several difficulties with Mr Pyne's evidence, particularly in respect of the 1 May 2012 meeting, below. Ms Whittaker also submits that Mr Pyne was an impartial witness. However, it seems to me that Mr Pyne's evidence by affidavit and in cross-examination was influenced by his wish to support the accounting treatments that BDO had previously accepted. Ms Whittaker accepts that, during at least the first part of his cross-examination, Mr Pyne's answers were often not responsive to questions, but submits that did not reflect evasiveness. It seemed to me that, whether deliberately or not, Mr Pyne's approach in cross-examination often avoided directly confronting the challenges to the accounting treatments with which he or his firm was involved. 25. In addition to the issues as to credit in this case, I have also had regard to the fallibility of human memory, particularly when disputes intervene, in determining these proceedings. In an often quoted observation in Watson v Foxman (1995) 49 NSWLR 315 at 319, McLelland CJ in Eq observed that: "… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene; and the processes of memory are overlaid; often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 1. In Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 at [15], the High Court similarly approved an observation at first instance in that case that: "[Given the lapse of time] between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time." 1. In Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 129, Gleeson CJ, Gummow and Kirby JJ observed that: "Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical." 1. In Pennimpede v Gerard Pennimpede [2009] NSWSC 85 at [29], Bryson AJ noted similar issues in observing that: "Considerations of these kinds pose serious difficulties of proof for a party relying upon spoken words as a foundation of a cause of action in the absence of some reliable contemporaneous record or other satisfactory corroboration. … A great deal of what I was told related to conversations which were alleged to have occurred well over 10 years before I heard the evidence. Most of what I was told about the conversations seemed to me to be little more than impressions, accompanied by plausible details which were very unlikely to be based and were not based on actual memory. These impressions came to me through a filter (perhaps an osmotic barrier) of years of conflict, argument and strong feeling." 1. I summarised the applicable principles in Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547 at [7], as follows: "It is important in this context to have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319 per McLelland CJ in Eq; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41] per Rares J; Varma v Varma [2010] NSWSC 786 at [424]-[425] per Ward J. To the extent that credit issues need to be determined in respect of particular conversations, I have also had regard to the fact that objective evidence is likely to be the most reliable basis for determining them. I summarised the relevant principles in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [10], where I noted that the credibility of a witness and his or her veracity may be tested by reference to the objective facts proved independently of the testimony given, in particular by reference to the documents in the case, by paying particular regard to the witness's motives and the overall probabilities: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Camden v McKenzie [2007] QCA 136 ; [2008] 1 Qd R 39 at [34]; Craig v Silverbrook [2013] NSWSC 1687 at [141]; State of New South Wales v Hunt [2014] NSWCA 47 at [56]." Chronology and factual findings 1. I now set out a brief chronology of events, which I deal with in more detail in addressing the parties' respective claims below. I have drawn, in this chronology, upon chronological statements of the facts for which the parties contended, the affidavit and documentary evidence and evidence given in lengthy cross-examinations, particularly of Dr Najjarine and Mr Kielt. 2. It appears to be broadly common ground that, in late 1999 or early 2000, Dr Najjarine and Mr Kielt agreed that they would establish a company to sell pre-made orthotics, that Mr Kielt would focus on the day to day affairs of the business, Dr Najjarine would focus on conducting education and training courses, and Mr Kielt would work for one year without pay and thereafter for an agreed salary (Najjarine 13.5.16 [5.22]–[5.33]; Kielt 8.4.16, [12]–[17]). ICB Medical was incorporated in May 2000 with Dr Najjarine and Mr Kielt as its directors and each held 50% of the shares. From July 2000, ICB Medical sold pre-made orthotics to health care professionals; Mr Kielt was substantially responsible for its day-to-day affairs and Dr Najjarine provided seminars to health professionals to promote its products. Foot Steps Orthotics was also incorporated in July 2000; Mr Kielt was initially its sole director and he and Dr Najjarine each held 50% of its shares, and Dr Najjarine later also became a director of that company; and it held intellectual property used by ICB Medical and gave the right to use the intellectual property to ICB Medical (Kielt 8.4.16, [28]–[29]; Ex J1, 1633). ICB Gait was incorporated in March 2001 with Mr Kielt and Dr Najjarine as its directors and each held 50% of its shares. Mr Green, who gave evidence in Mr Kielt's case as I noted above, was initially the external accountant for ICB Medical, ICB Gait and ICB College (Green 14.3.18, [2]). 3. From about July 2001 to 2002, Mr Kielt was an employee of ICB Medical and was paid wages of about $52,000 per annum (Kielt 14.3.18 [93]). From at least 2001, ICB Medical manufactured and sold pre-made orthotics, including an "ICB dual density" orthotic. From about 2003 on, Mr Kielt's employment arrangement was replaced by an arrangement for LWS to provide Mr Kielt's services to ICB Medical in return for consulting fees paid by ICB Medical to LWS in place of Mr Kielt's salary (Kielt 14.3.18 [102]). Mr Joshua Kielt and Ms Naomi Kielt later commenced employment with ICB Medical. From about 2006, ICB Medical made laboratory orthotics, including for AOL. For the majority of the period from 2006 until 2014, AOL was the largest buyer of ICB Medical's products (Najjarine 5.4.18 [52]; T174). 4. Dr Najjarine claims to have requested and not received (other than in one year) payment for giving seminars for ICB Medical in the period from 2008 and I address that issue in paragraphs 77–81 below. From March 2010, LWS invoiced ICB Medical for annual leave and I address that issue in paragraphs 105–116 below. ICB UK was incorporated in May 2010 and I address an issue as to the shareholding and appointment of directors to that company in paragraphs 87–92 below. In March 2011, LWS issued invoices to ICB Medical claimed to be referable to interest on a loan by ICB Medical and for compensation for the use by ICB Medical of ECS's tax losses. I address those issues in paragraphs 129–131 below. 5. In about July 2011 BDO replaced Mr Green as external accountants for ICB Medical, ICB Gait and ICB College (Kielt 8.4.16 [113]). In December 2011, Mr Kielt caused LWS to issue nine invoices totalling $12,909.71 to ICB Medical for the months of March to November 2011 in relation to payments made by ECS to Quality Pharma Brokers ("QPB") which I will address in paragraphs 126–127 below. Abu Trading was established in February or March 2012 and I will address an issue as to the appointment of Mr Joshua Kielt as its sole director or executive director in paragraphs 90–92 below. 6. By an email dated 28 February 2012 (Ex J1, 2312), Mr Green advised Mr Kielt that Mr Stubley, an accountant from BDO, had asked about what made up a sundry creditors balance of $373,318.73 (an issue that I will address in paragraphs 151–161 below) and advised that: "This largely arose back in 2006 calendar year and has been carried forward ever since then. I have assumed it was amounts owing to Shareholders from back then but have no argument for that position. The balance substantially arose at a time when there was lots of confusion in the GST accounts and debtors and creditors that were being sorted out and still remains there even though those issues were sorted out. If it was anything else than it should have come to light or else it would be taxable income from almost five years ago if it isn't shareholders balances. Effectively the formal balance sheet says that shareholders loaned the company money to pay for the IP etc. QuickBooks doesn't at the moment show the same story but rather shows it as income. Happy to chat this through with you but noted that [Dr Najjarine] needs 2011 ICB [Medical] financials completed fairly quickly for financing purposes so feel free to call me on my mobile if you cant [sic] reach me at the office." This email provides no real explanation of how the sundry creditors balance arose, where that matter is described as an assumption for which Mr Green had "no argument". 1. Plainly, Mr Joshua Kielt was not persuaded by Mr Green's explanation of how the sundry creditors balance arose, and he forwarded the email to Mr Stubley asking "[d]oes this make any sense?" (Ex J1, 2311–2312). Mr Stubley responded, by email dated 29 February 2012, observing that: "Regarding the sundry creditors balance, no that makes no sense. It is odd to have a $380,000 payable which has been unreconciled for five years?? I suggest we move on and reallocate it to a loan account, however should this be [Mr Kielt's] loan account or should it be split 50/50 between [Mr Kielt] and [Dr Najjarine]? For example if we split 50/50 we are saying that the company now owes [Mr Kielt] and [Dr Najjarine] an additional $190,000 each. In light of [Dr Najjarine's] divorce we need to give strong consideration to this and all the loan accounts shown at 30 June 2011." (Ex J1, 2315) 1. Mr Stubley's suggested reallocation of that amount was proposed for convenience, rather than by reference to any analysis of its substance. Mr Stubley's email would also have made apparent to Mr Joshua Kielt and to Mr Kielt, to whom it was copied, that a reallocation of the loan account to Mr Kielt would have the consequence that the financial records would show an additional amount of over $370,000 payable to Mr Kielt, notwithstanding the absence of any objective basis for such a liability. 2. By email dated 24 April 2012, Mr Stubley advised Mr Joshua Kielt, with copies to Mr Kielt and Mr Pyne (but not Dr Najjarine) of key issues for discussion in respect of draft financial statements and tax for the companies in the ICB Group for the year ended 30 June 2011, and attached draft financial statements and tax positions. That email referred to the position as to sundry creditors and observed that: "There is a significant sundry creditor's balance in ICB Medical of $399,347. On querying [Mr Green] on what this relates to it was clear it hasn't been reconciled for a number of years and also that it is unlikely it relates to any present obligation of the company. I suggest that this balance be cleared to the directors' loan account, the split of this will need to be discussed in light of other issues identified below." 1. That email in turn identified items for discussion as follows: "1. Loan account and sundry creditors discussion; 2. [Dr Najjarine's] divorce and impact on loan accounts and company; 3. Recording of travel allowances in future, consideration of profit vs tax implications; 4. [ICB Gait] future profits and interaction with ICB Medical." Mr Stubley invited Mr Joshua Kielt to pass the email onto Dr Najjarine "if appropriate" and proposed a meeting be organised to sign off on the accounts (Ex J1, 2346). 1. There is a contest as to whether a meeting took place on 1 May 2012 between Mr Kielt, Mr Pyne and others, or at least as to whether Dr Najjarine attended that meeting and agreed to the steps taken following that meeting. The minutes of that meeting recorded a resolution to allocate an amount referable to sundry creditors of $373,318.73 and other amounts of $57,725.90 to Mr Kielt's loan account as at 30 June 2011, with the result that Mr Kielt was treated as a creditor of ICB Medical for those amounts. Mr Kielt's and Mr Pyne's evidence is that a decision was also made at that meeting that led to amounts being recorded as due as travel allowances to Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt. I will address that meeting at this point and return to the issues as to the treatment of sundry creditors and travel allowances in paragraphs 151–161 and 117–125 below. 2. Mr Kielt's and Mr Pyne's evidence is that a meeting occurred on 1 May 2012, lasting between one and two hours (Kielt 2.2.18 [31]–[32], Pyne 21.4.16 [6], Pyne 16.2.18 [17]), which led to the reallocation of an amount recorded in sundry creditors (which I address in paragraphs 117–125 below) so that it was treated as a debt owed to Mr Kielt. There are uncertainties as to who attended that meeting. Both Mr Kielt and Mr Pyne give evidence that Mr Stubley attended, but there is no record of Mr Stubley's attendance at that meeting in contemporaneous time records (Ex J2, 1071; T792). Dr Najjarine, at least in the latest version of his evidence, denies that he attended that meeting. 3. Mr Pyne's evidence is that he received instructions from Mr Kielt and Dr Najjarine as to specified matters at that meeting, including that he should allocate unreconciled cash transfers of $25,685 between ICB Medical and ICB Gait against the intercompany loan difference of $17,027.96, so that the net difference in the loan account between ICB Medical and ICB Gait was $8,657.04 (Pyne 13.4.18 [5]); that he should allocate differences in the intercompany loan balances totalling $21,489.76 to the directors' loan accounts equally in ICB Medical (Pyne 13.4.18 [6]); that he should consolidate all directors' loan accounts (as set out below) into ICB Medical, with a loan to AOL being allocated to Dr Najjarine (Pyne 13.4.18 [8]); and that a "loan from directors" of $10,000 to ICB Medical was to be allocated equally between the directors' individual loan accounts (Pyne 13.4.18 [9]). Mr Pyne's evidence is also that the directors instructed him that several other unreconciled amounts were to be allocated equally between the directors' individual loan accounts (Pyne 13.4.18 [11]–[17]). His evidence on cross-examination was that he provided the directors with a copy of Mr Green's email dated 28 February 2012 which referred to the sundry creditors balance of $373,318.73 and the directors concluded that the amount should be allocated equally between the directors individual loan accounts (T804-805). The instruction which Mr Pyne claims to have sought and obtained from the directors as to the treatment of sundry creditors is strikingly inconsistent with the view previously expressed by Mr Stubley, of his firm, as to the lack of sense in Mr Green's explanation of that amount. 4. Mr Pyne's evidence was also that Mr Kielt provided a list of items he believed should have been accounted for in his loan account, and the directors instructed Mr Pyne to review that list and advise whether those items had been accounted for in Mr Kielt's loan account and the LWS loan account (Pyne 13.4.18 [19]). Mr Pyne's evidence was that he then informed Dr Najjarine that loan accounts, whether assets or liabilities, would ordinarily be included in a personal asset and liability statement, which (if it was said) appears to have been an indirect reference to the availability of such assets to Dr Najjarine's former wife in his divorce proceedings. Mr Pyne's evidence is that the directors then reversed, without any discussion to which he refers, all previous instructions to allocate amounts equally between the directors and instructed Mr Pyne that the adjustments that were previously to be allocated 50/50 between the directors were to be wholly allocated to Mr Kielt's loan account, and that the directors would revisit that arrangement again in the future. Mr Pyne does not suggest that he then pointed out that such a reallocation could have no proper basis, because if the amount was properly owed to both directors, it could not be reallocated to one for convenience, still less to avoid proper third party claims. 5. Mr Pyne's affidavit evidence (Pyne 16.2.18 [38]) was initially that he was instructed at the meeting on 1 May 2012 that calculations be carried out to reimburse Mr Kielt for his travel expenses over earlier years. In his further affidavit dated 13 April 2018, Mr Pyne's evidence was that Mr Kielt and Dr Najjarine instructed him, at this meeting, that travel allowance entitlements for Mr Joshua Kielt, Ms Naomi Kielt and Mr Kielt should be calculated for the 30 June 2011 year in accordance with the ATO's Tax Determination 2011/17, and that calculation would be provided to BDO and would apply for future years; and that ICB Medical was not in a financial position to pay the travel allowances at the time and the entitlement should be treated as a loan from Mr Joshua Kielt and Ms Naomi Kielt to ICB Medical until it could repay the loan (Pyne 13.4.18 [20]–[21]). Mr Pyne accepted in cross-examination that his initial affidavit evidence that such an instruction extended to earlier years, as distinct from to expenses in the 2011 year and subsequent years, was incorrect (T767). Mr Pyne did not accept, but I find, that that error reflected his lack of reliable recollection of that meeting. 6. I do not accept that Mr Pyne has a reliable recollection of the meeting on 1 May 2012 and I give little weight to his evidence of that meeting. Mr Pyne's evidence of this meeting was purportedly given in direct speech, after his earlier inadmissible evidence had been rejected, although he still relied on his usual practice in order to support his evidence of what he now claimed to recall was said. His evidence did not refer to any advice that he had given at that meeting, or to any discussion of the kind that ordinarily occurs at meetings, but instead recorded Mr Kielt and Dr Najjarine having instructed him in respect of each open accounting issue to take the approach that was in fact taken. Mr Pyne's evidence of that meeting was strikingly inconsistent with ordinary experience of the conduct of meetings and the process by which professionals, including accountants, provide advice to their clients. At best, it seems to me that evidence amounted to no more than an extended exercise in reconstruction to seek to make good Mr Kielt's (and Mr Pyne's) contention that Dr Najjarine had acquiesced in the accounting treatments of these issues. 7. At least until his fifth affidavit dated 10 March 2017, Dr Najjarine accepted that he was present at the meeting on 1 May 2012, inconsistent with his later position in his sixth affidavit dated 23 January 2018 and at the hearing that he had not attended that meeting. In his third affidavit dated 13 May 2016, Dr Najjarine refers to a conversation with Mr Kielt, although the date of that conversation is not made clear by that affidavit, as to a suggested liability of Dr Najjarine and Mr Kielt to ICB Medical, which could be changed to show that ICB Medical owed Dr Najjarine and Mr Kielt the relevant amount. That appears to be a reference to the treatment of sundry creditors, although the conversation to which Dr Najjarine refers does not correctly state the amount involved. Dr Najjarine there also addressed a comment said to have been made by Mr Pyne as to the incorrect allocation of an amount of approximately $600,000 (Najjarine 11.5.18 [5.211], [5.214]), and his then recollection was that he was asked to sign a pre-prepared typed letter (Najjarine 13.5.18 [5.215]), rather than Mr Kielt having signed the minutes of that meeting with a handwritten notation to which I refer below. 8. In his sixth affidavit dated 23 January 2018, Dr Najjarine gave evidence that the meeting which he had attended, and which he previously accepted took place on 1 May 2012, in fact took place on 15 May 2012. Dr Najjarine also there set out, in direct speech, evidence of a conversation with Mr Kielt at that meeting that took place some six years ago. Dr Najjarine's evidence, in that version, was that he, Mr Kielt, Mr Joshua Kielt and Mr Pyne attended that meeting and Mr Kielt represented to Dr Najjarine that the amount of $373,318.73 referable to sundry creditors and the other variances of $57,725.90 in ICB Medical's financial statements (which I address below) were the result of errors by Mr Green and that those amounts should be transferred to Mr Kielt's loan account in ICB Medical and recorded there as owed to him, apparently to avoid any claim by Dr Najjarine's former wife that they were an asset of Dr Najjarine. I am not satisfied that Dr Najjarine has any reliable recollection of that conversation, having regard to the alterations in his evidence and his lack of recollection of events that have occurred in the more recent past. It seems to me likely that Dr Najjarine's account of the statements made by Mr Kielt for that meeting is in the nature of reconstruction. 9. In cross-examination, Dr Najjarine's evidence of that meeting was that Mr Kielt, Mr Joshua Kielt and Mr Pyne walked into the boardroom, after Mr Green had been replaced with BDO as ICB Medical's accountant; Mr Kielt mentioned that Mr Green had made mistakes in the accounts and the directors owed the business $600,000; and, remarkably, that BDO had "worked out a system" that would convert the amount owing by the directors to the business to an amount that the business owed to the directors. Dr Najjarine's evidence was that Mr Kielt rather than Mr Pyne addressed these matters. Dr Najjarine said that Mr Kielt then referred to Dr Najjarine's divorce and to the amount to be transferred to Mr Kielt and then split 50/50 between Mr Kielt and Dr Najjarine after one year. Dr Najjarine claimed to have been confused by the process, a reaction which would not be surprising if it had occurred in the manner that Dr Najjarine described (T238). In cross-examination, Dr Najjarine also claimed that his recollection of this meeting had become better as the proceedings had developed (T240). Dr Najjarine again denied, in cross-examination, that the adjustments made on the 2011 accounts in respect of sundry creditors were discussed with him, that he had agreed the course that was taken with Mr Kielt, or that he had agreed that the adjustment to the sundry creditors account would be made to Mr Kielt's loan account only by reason of Dr Najjarine's divorce, with a view to reallocating his half of the adjusted amount in the future (T269). As I understood Dr Najjarine's evidence, in cross-examination, he agreed that there had been discussion of those matters, but his position was that the matters were not properly explained to him, he did not understand what was occurring and he had not, in substance, consented to these steps. 10. Ms Whittaker submits, and I accept, that the inconsistencies in Dr Najjarine's evidence as to the 1 May 2012 meeting are such that his recollection as to that meeting is plainly unreliable. These inconsistencies between the several versions of Dr Najjarine's evidence included not only the date of the meeting, but also whether it was Mr Kielt or Mr Pyne who outlined the proposed treatment of sundry creditors to Dr Najjarine, and whether Dr Najjarine did or did not recall what Mr Pyne had said at the meeting. It seems to me that those accounts are also adverse to Dr Najjarine's credit, where he was prepared to give evidence of what occurred, in several differing versions, without a sufficient basis in recollection to support that evidence. 11. On about 8 May 2012, BDO drafted, dated and provided a minute which recorded a directors' resolution on 1 May 2012 with respect to the adjustments to Mr Kielt's loan account. That minute (Ex J1, 1634) was dated 30 June 2011 and recorded that: "LOAN ACCOUNT AND SUNDRY CREDITORS VARIANCES IT WAS RESOLVED the following items be adjusted to the loan account of [Mr Kielt] at 30 June 2011. Sundry creditors 373,318.73 Loan account variances 57,725.90 Total adjustment 431,044.63. The transactions relate to prior to 30 June 2006 and the directors confirm there are no known present liabilities not accounted for and if there were at the time they would have been settled by the directors. Based on the above, the balance substantially relates to shareholders personal contributions to the entity and has now been adjusted accordingly." 1. Mr Pyne's evidence in cross-examination was that the fact that minute was backdated to the last day of the previous financial year, when it would be relied on for the accounts in that financial year, was an "error in the drafting" (T794) and he thereafter would not provide direct or responsive answers to questions about that "error" in cross-examination. If Mr Pyne's evidence was intended to suggest the backdating of that minute was inadvertent, then I do not accept it. The backdating of that minute was a significant matter. 2. Dr Najjarine and Mr Kielt subsequently signed the 2011 accounts for ICB Medical and the other companies in the ICB Group and Mr Kielt signed the backdated directors' resolution as chairman of the meeting, and verified that it was a "true and correct" record notwithstanding its false date (Kielt 2.2.18 [34]; Pyne 16.2.18 [47]; Ex J1, Tabs 120, 127, 129). Ms Whittaker contends that Dr Najjarine signed those financial statements because he was comfortable with their contents at that time. I think it more likely that Dr Najjarine, consistent with his evidence although in significant breach of his directors' duties, failed to give any real attention to the content of the accounts. On or about 15 May 2012, Mr Kielt also wrote a handwritten notation to the minute of the purported 30 June 2011 directors' meeting, stating that the amount attributed to Mr Kielt's loan account would be redistributed 50/50 in the following year (Ex J1, 1635; Kielt 2.2.18 [35]–[36]). Ms Whittaker submits that that notation is only consistent with the directors having reached a consensus that the sundry creditors would be reallocated to the directors' loan accounts. There is force in that proposition, but it does not follow that Dr Najjarine then had any adequate understanding of the origin of the amounts comprising the sundry creditors amount, and that consensus was not subsequently implemented. 3. In February or March 2013, Mr Kielt advised Dr Najjarine that ICB Medical did not have the funds to be able to pay for Dr Najjarine's seminars in China in 2013. Dr Najjarine continued to conduct overseas seminars for ICB Medical during 2013, without payment. In March 2013, Mr Kielt caused LWS to issue a further invoice dated 29 June 2012 to ICB Medical charging $77,000 (including GST) for consulting fees, and I address that issue in paragraphs 135–150 below. ICB Medical's financial statements for the 2012 financial year recorded a further amount of $24,303.80 as travel allowances due to Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt. I return to that issue in paragraphs 117–125 below. 4. Also in March 2013, Dr Najjarine's personal accountant, Mr Poole, asked BDO several questions in relation to ICB Medical's accounts for the years ended 30 June 2011 and 30 June 2012 (Ex J1, 2496) and correspondence continued during March and April 2013, without BDO providing a substantive response (Ex P7). On 28 June 2013, although Mr Poole's questions had not been addressed, Dr Najjarine and Mr Kielt signed the 2012 accounts for ICB Medical, ICB Gait, and ICB College, prepared by BDO (Ex J1, 1395, 1470, 1478). Mr Kielt's evidence is that BDO prepared a response that addressed the issues about which Dr Najjarine now complains and Dr Najjarine was invited to participate in a discussion about that response (Kielt 8.4.16 [155]; Kielt 14.3.18 [155]) and it appears that, while BDO was preparing its response, Dr Najjarine terminated his engagement of Mr Poole (Ex J1, 3034; Pyne 21.4.16 [13]). There was of course nothing to prevent Mr Kielt or BDO providing a substantive written response to Mr Poole's questions directly to Dr Najjarine, after Mr Poole's engagement ceased, but they did not do so. On 18 November 2013, Dr Najjarine's now wife, Ms Nabiha Najjarine, requested copies of financial records from ICB Medical's account clerk, for the purposes of Dr Najjarine's family law property settlement with his former wife, and records were provided in response to that request (Ex J1, 2529). 5. In January 2014, Dr Najjarine and Mr Kielt had a disagreement in Dr Najjarine's clinic, which appears to have contributed to the breakdown of their relationship. The circumstances of that disagreement are disputed, including as to whether Mr Kielt had claimed, in front of a patient, that the patient's orthotics were correct when Dr Najjarine had indicated they were not, and Mr Kielt had then rushed out and fallen over a baby stroller. I do not consider it necessary to determine the dispute as to the circumstances of that disagreement to determine these proceedings. 6. In February 2014, Dr Najjarine declined to conduct any more seminars for ICB Medical, at least without remuneration. It appears to be common ground that, since February 2014, Dr Najjarine has referred at least a substantial portion of AOL's orthotic work to companies associated with him or his family members, AOL and Crown Orthotics rather than to ICB Medical and no longer promotes ICB Medical's pre-made orthotics to his patients (Najjarine 5.4.18 [59]; T174) and has ceased visiting the ICB Medical laboratory to oversee work, to the limited extent to which he previously did so. Plainly, the loss of referrals of a significant element of ICB Medical's business has been detrimental to ICB Medical. Dr Najjarine or AOL have also employed staff who were previously employed by ICB Medical to work for AOL or Crown Orthotics, necessarily in competition with ICB Medical (Najjarine 5.4.18 [59], [79], Kielt 14.3.18 [46]–[52]). 7. Voluminous correspondence from Dr Najjarine's solicitors' to Mr Kielt commenced in February 2014 (Ex J1, 2635) and continued thereafter. On 5 June 2014, Mr Kielt signed the ICB Medical management accounts for the 2013 financial year and BDO provided them to Dr Najjarine for signature (Kielt 8.4.16 [166]). Dr Najjarine did not sign those management accounts or subsequent accounts. In a letter from his solicitors sent on 17 June 2014, Dr Najjarine requested payment for presenting overseas seminars and also sought to require that ICB Medical cease using the so-called "NAS/ALM" method (Ex J1, 2710). Dr Najjarine accepted in cross-examination that he knew that he had no property rights in the NAS system when that demand was made (T176). 8. ICB Medical's financial statements for the 2014 financial year recorded a further amount of $96,785.70 as travel allowances due to Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt. I address that question in paragraphs 117–125 below. 9. In August 2014, Dr Najjarine instructed an accountant, Ms Fiona Bateman, to conduct a review of ICB Medical's accounts (T290). It appears that Ms Bateman's report was not provided to Dr Najjarine until May 2015 (T292) and he did not then disclose its findings to ICB Medical or Mr Kielt until it was served in these proceedings. Dr Najjarine ultimately did not read Ms Bateman's affidavits or tender her report in these proceedings. 10. From 9 March 2015, Dr Najjarine and Mr Kielt exchanged correspondence concerning a long-term lease of its business premises and a long-term hire-purchase agreement for a motor vehicle used by Mr Joshua Kielt and, on 18 March 2015, ICB Medical entered into a new lease of those business premises and also entered into a new finance agreement for that motor vehicle. I address those matters in paragraphs 82–86 below. In April 2015, Dr Najjarine objected to ICB Medical's conducting of educational seminars using Mr Joshua Kielt as the presenter (Ex J1, 3123). That issue was pleaded by Dr Najjarine but not pressed by him in these proceedings. I address it below in the context of Mr Kielt's Cross-Claim. 11. ICB Medical's accounting records for the 2015 financial year also recorded an expense of $69,934.14 for money said to be owed to Mr Joshua Kielt in respect of TOIL. ICB Medical's financial statements for the half year to 31 December 2017 (Ex J1, 1623) also included an expense of an amount of $30,037.29 in respect of long service leave said to be owed to Mr Kielt up to 30 June 2017. I address these questions in paragraphs 93–116 below. The applicable legal principles 1. Before turning to the particular matters on which Dr Najjarine and Mr Kielt rely in their respective oppression claims, it will be convenient to identify the applicable legal proceedings as to whether oppression is established. I defer dealing with the question of the applicable remedy, which is the most difficult issue in this case, which I address below. I have drawn upon Counsels' submissions and my summary of the relevant principles in Re Ledir Enterprises Pty Ltd [2013] NSWSC 1332; (2013) 96 ACSR 1, Victory Projects Pty Ltd v AAA Self Storage Pty Ltd [2016] NSWSC 1758, Re AJ Roberts Removals & Storage Pty Limited [2017] NSWSC 1054 and Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914 in that respect. 2. Section 233(1)(d) of the Corporations Act 2001 (Cth) relevantly provides that the Court may make an order for the purchase of shares by a member of a company and s 233(1)(j) allows the Court to make an order requiring a person to do a specified act. Such an order may be made where the matters specified in s 232 of the Corporations Act are established. Section 232 of the Corporations Act provides that the Court may make an order under s 233 if: "(a) the conduct of a company's affairs; or (b) an actual or proposed act or omission by or on behalf of a company; or (c) a resolution, or a proposed resolution, of members or a class of members of a company; is either: (d) contrary to the interests of the members as a whole; or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity." 1. Section 232 of the Corporations Act and its predecessors extend to conduct involving "commercial unfairness" or where the conduct complained of involves a visible departure from the standards of fair dealing and a violation of the conditions of fair play, or a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair: Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704; Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459. In Morgan v 45 Flers Avenue Pty Ltd above at 704, Young J observed that the phrases "oppressive, unfairly prejudicial or unfairly discriminatory" in a predecessor to s 232 of the Corporations Act should be construed as "a composite whole and the individual elements mentioned in the section should be considered merely as different aspects of the essential criterion, namely commercial unfairness". His Honour also there noted that whether oppression was established was to be determined by reference to the nature of the business carried on by the company and the nature of the relations between its participants and: "whether objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair." 1. The principles applicable to a claim for oppression were summarised by Austin J in Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [39], and the Court of Appeal noted the parties did not challenge that summary of the applicable principles in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 84 ACSR 121 at [140]. His Honour observed that: "(a) consistent with the principle that the purpose of relief is to terminate the effects of oppression, relief will generally be inappropriate as a matter of discretion if there is no continuing oppression: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, at [182]; [2009] HCA 25; (b) unfairness is assessed by reference to whether "objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair": eg, Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359, per Basten JA at [181]; [2008] NSWCA 95; (c) while it is recognised that conduct may be oppressive if inconsistent with the "legitimate expectations" of shareholders, expectations are not immutable. The non-fulfilment of expectations will not establish oppression, if there has been some good reason for the extinguishment of the expectation: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672, at [85], [86], [175]; [2001] NSWCA 97; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343, at [96]; [2009] NSWSC 342 per Barrett J; (d) "it is important when assessing corporate activities to see if there has been oppression that judges do not remain in their ivory tower": Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1988) 28 ACSR 688, Young J at 739; [1998] NSWSC 413; (e) a particular matter which will be taken in account in assessing the gravity of any allegation of oppression, is the extent to which the minority shareholder has "baited" the majority shareholder to act in an oppressive manner: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1988) 28 ACSR 688, at 741; [1998] NSWSC 413 …" 1. In Munstermann v Rayward [2017] NSWSC 133 at [22], Stevenson J summarised the applicable principles as follows (omitting citations): "(1) The test of oppression is an objective one of unfairness ... (2) The court must look to determine whether on the balance of probabilities the objective commercial bystander would be satisfied that the affairs of the company were being conducted unfairly … (3) A director may act oppressively in the sense relevant to the operation of s 232 and yet not breach any fiduciary or other duty owed as a director ... (4) Conduct of a company's affairs may be oppressive even though the conduct is otherwise lawful ... (5) Conduct that has the effect of paralysing a company in the operation of its business is properly characterised as conduct contrary to the interests of the members as a whole … (6) A shareholder of 50 per cent of the shares in a company can seek relief for oppressive conduct because they do not have control in the form of power to prevent the oppression, particularly where individual strong arm tactics are used … (7) The court must formulate an opinion about oppression or unfair prejudice as at the date of the institution of proceedings and the issue of relief under s 233 must be determined at the date of the hearing … (8) The discretion under s 233 is wide as to the appropriate remedy … (9) The nature of the remedy chosen by the court under s 233 will be dependent upon the conclusions drawn by the court as to the type of oppression with which the court is dealing and the court will choose the remedy which is least intrusive …. (10) The aim of any order under s 233 must be to put an end to the oppression … (11) The court should only look to wind up an otherwise solvent company as a "last resort" … (12) As a remedy for oppression, an oppressor can be ordered to sell their shares to the oppressed party …. (13) If an order is to be made for the purchase of shares under s 233 the task of the court is to fix a price that represents a fair value in all the circumstances." [citations omitted] 1. I have also borne in mind the observation in Tomanovic v Global Mortgage Equity Corporation Pty Ltd above that each case has to be considered on its own facts and circumstances, and by reference to the conduct as a whole. Dr Najjarine's pleaded case 1. Dr Najjarine commenced two proceedings, the first in 2015 and a second in 2017, and his claims were ultimately consolidated in a Second Amended Statement of Claim referable to both proceedings. Mr Kielt filed Defences in each of the 2015 and 2017 proceedings, which admitted only formal paragraphs and otherwise denied the entirety of the pleaded facts and claims. 2. Dr Najjarine pleads that he and Mr Kielt were equal shareholders in and the only directors of each of the relevant companies (SASC [5]). Dr Najjarine also pleads (SASC [6]) that Mr Kielt, as a director of the companies and as de facto chief executive officer of each of the companies, is subject to: "An implied term of his position that he would honestly and in good faith consult [Dr] Najjarine as his co-director of each of the companies in matters of importance to the respective company and would not make and implement significant decisions concerning each company's affairs unilaterally as if he were the sole shareholder and director in the company." (SASC [6]) The contract in which the suggested term is to be implied was not identified, and no submissions were put as to how that implication might satisfy the usual tests for implication of a term. Even if such an implied term were established, no relief by way of contractual damages was claimed for a breach of it. However, the matters that might give rise to a breach of such an implied term, if it existed, would be relevant to an oppression claim. 1. Dr Najjarine also relied (SASC [10]–[11]) on duties alleged to apply to Mr Kielt, as director and de facto chief executive officer of each of the companies, to keep written financial records that correctly recorded and explained their transactions and financial position and performance, and that would enable true and fair financial statements to be prepared and audited, and relied on s 286 of the Corporations Act in that respect. Dr Najjarine also pleaded the duty of care and skill attaching to Mr Kielt as director and as "de facto" chief executive officer of each of the companies. Dr Najjarine did not, of course, have standing to bring a claim for breach of s 286 of the Corporations Act or for breach of directors' duties, and did not seek leave to bring a derivative action or invoke the principles in which such a claim may, in an appropriate case, be brought in an oppression claim. The factual matters underlying those allegations were also relevant to the oppression claim. 2. Dr Najjarine pleaded (SASC [14]), in a rolled up and conclusory paragraph, that Mr Kielt: "Acted as he thought fit and treated the ICB Group companies as if he were the sole owner thereof in disregard of [Dr] Najjarine's status as a co-director and interests as an equal 50% shareholder." That allegation was particularised by reference to seven paragraphs, some of which had sub-paragraphs, which set out matters that ordinarily ought to have been pleaded as allegations of material fact, rather than provided as particulars. The parties treated those matters as largely comprising the factual issues in dispute in Dr Najjarine's claim. I will address those matters seriatim below, adopting the not particularly logical order in which they were particularised by Dr Najjarine. Dr Najjarine's complaint as to lectures given by Mr Joshua Kielt (SASC [14] particular (a)) 1. First, Dr Najjarine initially contended that, despite Dr Najjarine's objections, Mr Kielt refused to prevent Mr Joshua Kielt from giving lectures and presentations on matters on which Mr Joshua Kielt had no qualifications or relevant experience: "which could have not only diminished ICB Group's standing amongst professionals in the field of lower limb problems in humans but exposed ICB Group to the risk of liability for erroneous advice given by an unqualified person". 1. This claim was ultimately not pressed but is relevant to Mr Kielt's cross-claim which I address below. Dr Najjarine's complaint as to non-payment for lecturing fees (SASC [14] particular (aa)) 1. The second particular to the claim pleaded in SASC [14] is that Mr Kielt "improperly" refused to allow the ICB Group to pay Dr Najjarine to conduct seminars and training sessions for the ICB Group, except for a series of seminars and training sessions conducted during six overseas trips by Dr Najjarine in 2012. 2. Dr Najjarine's affidavit evidence was that, from 2008 to 2011, he orally requested that ICB Medical start paying him for conducting seminars for ICB Medical and Mr Kielt did not agree that it should do so (Najjarine 5.4.18 [85]). However, in cross-examination, Dr Najjarine appeared to accept that he had been prepared to conduct seminars for ICB Medical without remuneration at an earlier point, but changed that view when the time involved in the seminars was increasing, and his podiatry practice was suffering from the time that he spent away giving seminars (T290). That evidence seems to me to be consistent with the probabilities and I can see nothing unreasonable in Dr Najjarine's perception in that respect. 3. By letter dated 8 December 2011, addressed to Dr Najjarine's company, AOL, ICB Medical offered to cover airfares and pay a fee for each of Dr Najjarine's trips to China mainland for training in the amount of $9,000 plus GST (Ex J1, 2196). During 2012, AOL issued six invoices in that amount to ICB Medical in respect of the training conducted by Dr Najjarine in China, and ICB Medical applied the amounts payable to amounts that were then owed by AOL to ICB Medical. In early 2013, Mr Kielt did not agree to the continuance of that arrangement in 2013. By a letter also dated 8 December 2011, although it is common ground that it was sent in February or March 2013, Mr Kielt advised Dr Najjarine that: "As discussed prior to Christmas and again with [Joshua Kielt] during January 2013 [ICB Medical] does not have the funds to be able to pay for your teaching trips to China in 2013. Our current agreement was for 2012 for six trips to China at a consultancy rate of $9,000.00 per trip plus GST and we have met this obligation with credits on the AOL account against Laboratory product purchases. In the discussion with Josh, you indicated that you were OK with the 2013 arrangement, as you understood that the current cash flow was making it difficult to provide the support this year." (Ex J1, 2195) 1. Mr Kielt was cross-examined to seek to establish that ICB Medical was in a position to pay lecturing fees to Dr Najjarine in earlier years, by reference to reductions in its overdraft over that period, as at the end of the financial year (T505ff). I am not persuaded that the reduction in ICB Medical's overdraft, at a point in time, is capable of establishing that matter, since there is no reason to doubt Mr Kielt's evidence that the overdraft would vary during the year, as ICB Medical was required to make payments to suppliers and others. Mr Kielt's evidence in cross-examination was also that there was no agreement to pay Dr Najjarine for seminars prior to 2012; that ICB Medical did not pay him for those seminars; that ICB Medical may not have had the capacity to pay him for those seminars; and the decision in respect of payment for seminars in earlier years was made by the directors jointly (T513-514). Mr Kielt's unwillingness to authorise that remuneration significantly contributed to the deterioration of the parties' relationship. In February 2014, Dr Najjarine declined to conduct any more seminars for ICB Medical. 2. It appears that, for at least some period, Dr Najjarine agreed to conduct such seminars in order to promote the ICB Group and, it appears, his personal profile, without payment; in later years, he claims to have pressed for payment, but continued to give seminars for a period although Mr Kielt did not agree that ICB Medical should make such payment; and, after 2014, when payment was not made, he ceased to conduct such seminars. It has not been established that Mr Kielt's refusal to agree that Dr Najjarine should be paid to conduct such seminars was (as pleaded) "improper" in the sense of a breach of any legal or other standard that required Mr Kielt to agree that ICB Medical should pay Dr Najjarine for conducting such seminars. I am not persuaded that this matter, alone or together with other matters, establishes oppression on the part of Mr Kielt. Dr Najjarine's complaint as to entry into long term lease for ICB Medical's business premises and lease of motor vehicle (SASC [14] particulars (ab)–(ac)) 1. The third particular to the claim pleaded in SASC [14] is that, in March 2015, Mr Kielt, knowing that he, acting alone, lacked authority to do so, caused ICB Medical to enter into a long term lease of business premises to be occupied by ICB Medical and "improperly threatened" Dr Najjarine that Mr Kielt would cause ICB Medical to enter into that long term lease on particular terms without Dr Najjarine's consent, if Dr Najjarine did not provide his views as to those terms in a timely manner, and took a similar step and made a similar threat in respect of a lease of a motor vehicle. 2. By way of background, by memorandum dated 11 February 2011 to Mr Joshua Kielt (Ex J1, 2028), Mr Kielt recorded that: "I have discussed the extra work that you are engaging in on behalf of the company and discussed this situation with [Dr Najjarine] who agrees that we should commit to a vehicle as an ongoing part of your employment package. We have agreed that you are able to source an Audi sedan and the company will take a lease on the vehicle." 1. On 9 March 2015, Mr Kielt sent an email seeking Dr Najjarine's comment and input in respect of the lease of ICB Medical's premises and the lease of the Audi vehicle (Ex J1, 3048). By a further letter dated 18 March 2015 (Ex J1, 3097), Mr Kielt noted that he had not received a response to those matters and outlined his reasoning for proposed courses of action, namely to enter into a 3 year lease with a 3 year option for ICB Medical's premises, and to re-lease the Audi for another 3 years, at reduced lease payments, and stated that: "I believe that pursuing the above courses of action are in the best interests of [ICB Medical]. Should I not receive any comments from yourself by 5pm today, I will make arrangements to proceed as outlined above." 1. By his affidavit dated 14 March 2018, Mr Kielt responds to Dr Najjarine's allegations in respect of the lease of ICB Medical's premises and the company vehicle used by Mr Joshua Kielt. In cross-examination, Mr Kielt's evidence is that he would not in fact have gone ahead to execute a lease or sign a finance document in accordance with his recommendation, because that would have required a sign off of both directors and shareholders in respect of the documents (T390). Mr Kielt accepted that he was in a position of conflict in the relevant decision, so far as his son was interested in the position in respect of the lease, but pointed out that the leasing company required both directors sign off on the relevant arrangements (T391). 2. In each case, Mr Kielt indicated that he would proceed with the relevant transaction, absent a comment by Dr Najjarine within a stated time period. In each case, Dr Najjarine ultimately provided that comment, and the transactions appear to have proceeded on a reasonable basis and in a manner that took into account Dr Najjarine's views. Mr Kielt may well have placed pressure on Dr Najjarine to provide a timely response to those requests, but it does not seem to me that that matter rises to the level which it is capable, alone or with other matters, of establishing an oppression claim. Dr Najjarine's complaints as to ICB UK Limited and Abu Trading (SASC [14] particulars (ad)-(af)] 1. Dr Najjarine contends that Mr Kielt, without his consent, caused Mr Kielt to be the sole director of ICB UK, a subsidiary of ICB Medical, from when it was established and did not inform Dr Najjarine of that matter until late 2010 or early 2011, and caused himself to be the sole shareholder of ICB UK from its establishment until early 2012 and did not inform Dr Najjarine of that fact. Dr Najjarine also claims that Mr Kielt, without his consent, caused Mr Joshua Kielt to be the sole director of Abu Trading, a subsidiary of ICB Medical, from its establishment and did not inform Dr Najjarine of that fact. 2. ICB UK was incorporated in May 2010. On 18 May 2010, Mr Kielt was appointed the sole shareholder in and a director of ICB UK (Ex J1, 1955) and he remains the sole director of ICB UK (Ex J1, 2354). There is at least some evidence that ICB UK was set up with Mr Kielt as sole shareholder and director, on UK accounting advice, because it was the quickest way to incorporate, and Mr Joshua Kielt had confirmed at least by February 2012 that it had always been the intention that ICB UK be owned by ICB Medical, with both Mr Kielt and Dr Najjarine being directors. 3. Dr Najjarine's evidence in his affidavit dated 13 May 2016 is that he was informed that ICB UK would have the same directors as ICB Medical, namely himself and Mr Kielt. Mr Kielt's evidence is that he and Dr Najjarine discussed that he would be the sole director because it was easier for Mr Kielt fly to the UK on short notice (Kielt 2.2.18 [42](c)]). I am unable to place significant weight on either Dr Najjarine's or Mr Kielt's evidence of those matters, given my reservations as to the reliability of their evidence. It appears from Dr Najjarine's evidence that he was aware, from at least 2010 or 2011, that Mr Kielt was the sole director of ICB UK (Najjarine 23.1.18 [26]). The shares in ICB UK were subsequently transferred to ICB Medical in 2012. 4. It appears that Mr Joshua Kielt was named both as legal representative and as director or "executive director" in the application for registration of Abu Trading lodged with the Chinese authorities (T430-431). Dr Najjarine accepts that he agreed at least that Mr Joshua Kielt would be Abu Trading's general manager (Najjarine 13.5.16 [5.206]). There was a considerable degree of confusion in Dr Najjarine's cross-examination, shared by Counsel and Dr Najjarine, as to the significance of such an appointment under Chinese law. Mr Kielt was also cross-examined at some length as to the appointment of Mr Joshua Kielt as an officer in Abu Trading (T431ff) and there was at least a suggestion, in Mr Kielt's evidence, that a director of a parent company could not hold an office in a Chinese subsidiary company (T432), which would provide a reason for the appointment of a person other than Mr Kielt or Dr Najjarine as director or executive director of Abu Trading. 5. In each of several tax returns, including its tax returns for the years ended 30 June 2011, 30 June 2012 and 30 June 2013 which were signed by Mr Kielt, ICB Medical did not disclose its interest in respect of ICB UK and Abu Trading, in response to question 24 which required disclosure of any "direct or indirect interest" in a foreign company (Ex J1, 1292, 1416, 1521). In applications for research and development grants lodged in 2010–2011, ICB Medical again failed to disclose any interest of ICB Medical in ICB UK or Abu Trading (Ex J1, 2189). An application for export market development grants lodged with Austrade by ICB Medical, for the 2011–2012 year, also did not disclose ICB Medical's interest in ICB UK or Abu Trading (Ex J1, 2383ff). However, these matters were not pleaded; Mr Carnovale relied upon them only as to credit and it has not been established that they had any taxation impact. 6. No allegation that ICB UK was incorporated in this manner to allow Mr Kielt to assert beneficial ownership was pleaded, although it was put to Mr Kielt in cross-examination, and I do not consider that I could fairly reach such a finding. Where the shares in ICB UK were subsequently transferred to ICB Medical, and I am not persuaded by either Dr Najjarine's or Mr Kielt's evidence as to Dr Najjarine's consent to or acquiescence in the original arrangements in respect of that company, I do not find that the shareholding or appointment of Mr Kielt as a director of that company, alone or with other matters, would now warrant relief in oppression. Given the uncertainty in the evidence as to the significance and circumstances of Mr Joshua Kielt's appointment as director or executive director of Abu Trading, I also do not find that the matters in respect of that company, in themselves or with other matters, amounted to oppression. Recording of TOIL amount due to Mr Joshua Kielt (SASC [14] particular (b)(i)) 1. Dr Najjarine advances several complaints as sub-particulars of a particularised claim that: "Without [Dr] Najjarine's agreement or consent, [Mr] Kielt wilfully exploited the ICB Group companies as a source of funds for [Mr] Kielt, [Mr] Joshua Kielt, [Ms] Naomi Kielt and [LWS] ([Mr] Kielt's company so as to enrich them and correspondingly deplete the assets and resources of the ICB Group companies." The sub-particularised allegations were largely not capable of supporting that particular, since they involved the recording of liabilities and, in some cases, provisions in ICB Medical's accounts which did not, until enforced, either involve a transfer of funds to the named persons or any enrichment of those persons or have any immediate impact on the assets and resources of the ICB Group, as distinct from the liabilities recorded in its accounts. That is not to say that those transactions were not significant, for other reasons noted below. 1. The first of the sub-particularised allegations relates to an amount recorded in ICB Medical's accounting records for the year ended 30 June 2015 as an expense in the amount of $69,934.14, which was recorded as annual leave but related TOIL for Mr Joshua Kielt for the period 8 April 2006 to 6 July 2014. That amount was calculated by multiplying the number of Saturdays, Sundays and public holidays that Mr Joshua Kielt was out of Australia on ICB Medical's business in that period, being 202 days or 1616 hours (Ex J2, 1776), by an hourly rate of pay (T556). 2. Turning to the factual basis of this issue, Mr Joshua Kielt's letter of engagement with ICB Medical dated 26 August 2005 (Ex J1, 1769) stated: "It is not envisaged at this stage that you will be required for overseas travel. If this does eventuate, or if you are required to travel to assist the Directors of the business, we will negotiate an agreement for both a) travel allowance and b) repatriation of public holidays and weekend days lost by way of a log and addition to your annual leave entitlement." That letter does not itself provide justification for the subsequent approach taken to this issue, both because it contemplates the negotiation of a future arrangement, and because it is apparent that arrangement contemplated the provision of additional leave to Mr Joshua Kielt, rather than the incurring of a monetary liability to him. A further letter dated 6 September 2005 from Mr Kielt to Mr Joshua Kielt (Ex J2, 1007) went further and stated that: "Any weekend or public holidays worked whilst travelling or attending Trade functions for [ICB Medical] will be recorded and reimbursed." However, that letter also does not support the quantum of the amount now treated as TOIL, since it refers to weekends or public holidays "worked" while travelling or attending trade functions for ICB Medical, and there is no evidence to indicate, and no reason to think, that Mr Joshua Kielt worked on all of the weekends and public holidays for which an amount was claimed by way of TOIL. 1. Mr Kielt's evidence is that, prior to 3 June 2008, he and Dr Najjarine had a conversation in which they agreed that that ICB Medical should reimburse Mr Joshua Kielt for any time spent overseas during weekends and public holidays as TOIL (Kielt 16.12.16 [84]; Kielt 17.4.18 [21]; T559). There is a dispute between Mr Kielt and Dr Najjarine as to that matter. That conversation is not corroborated by a letter dated 3 June 2008 from Mr Kielt to Mr Joshua Kielt to which I refer below, which could have been sent by Mr Kielt without such a conversation having occurred about this topic. I am otherwise unable to resolve that dispute, given the observations I have made above as to the reliability of Mr Kielt's and Dr Najjarine's evidence. Even if a discussion took place in the terms suggested by Mr Kielt in his affidavit evidence and in cross-examination, that discussion did not go so far as to establish an entitlement to Mr Joshua Kielt to payment for time that he was travelling or present overseas but not working. 2. A letter dated 3 June 2008 from Mr Kielt to Mr Joshua Kielt (Ex J2, 1025) stated that: "Your question about 'travel for the Company and reimbursements', this is not a big issue at this stage as there has only been a couple of occasions that this has happened. However, we have agreed to record and reimburse you for any time spent away attending training etc … as we do for all employees. If you wish to have this recorded as a TOIL component and accrued, I cannot see this as being an issue for the future." The reference to "we" in this letter is equivocal as to whether it refers to ICB Medical rather than its directors, and the arrangement referred to does not extend, in terms, to the quantum of the amounts later recorded by way of TOIL in respect of Mr Joshua Kielt. The letter refers to a practice adopted for other employees and there is no evidence as to the content of that practice. 1. Some six years later, by email dated 25 July 2014 (Ex J1, 2743), Mr Joshua Kielt made a claim for allocation of TOIL "for days spent working or travelling on weekends or official public holidays". That email stated that the matter had been identified in 2011/2012 but then deferred at BDO's suggestion; requested that the amount be entered into the system and provisioned for the 2013/2014 accounts; and rightly noted that the suggested "entitlement" was "not an insignificant amount". 2. Mr Neil of BDO subsequently expressed the view, in an email dated 1 April 2015 from Mr Neil to Mr Kielt, copied to Mr Pyne (Ex J1, 3129) that TOIL would usually be treated in the same way as sick leave or personal leave and not provided in a company's accounts, that it was usually taken in time and not in money and it was not usually provided to employees or executives on long term assignments overseas as that was not commercially viable. Mr Pyne's evidence in cross-examination was that he did "not necessarily" agree with the (I interpolate, apparently sensible) advice given by Mr Neil in that regard (T760). Mr Pyne's evidence was also that he did not advise ICB Medical that an amount in respect of TOIL should be recorded in its accounts (T760). 3. Mr Pyne's evidence is that that amount was incorrectly booked as annual leave in ICB Medical's accounts and should be reclassified as a provision Ex D1, [80]–[82]) and would not then give rise to a tax deduction to ICB Medical or constitute an amount that was presently owing to Mr Joshua Kielt, as distinct from an estimate of the amount that would be due to Mr Joshua Kielt if his entitlement crystallised. That approach assumes that some future event, which was not identified, would then be capable of crystallising that entitlement. In cross-examination, Mr Pyne's evidence (T761) was unclear as to whether he was there expressing any view that any such a provision should properly be made, as distinct from addressing a view as to how it would be made, if it were properly made. Mr Pyne's affidavit evidence (Pyne 16.2.18 [52]–[55]) was that BDO's position was that an employee would only be entitled to TOIL if that was included in the relevant employment contract. 4. Mr Joshua Kielt did not give evidence and there is no satisfactory evidence that he in fact worked the number of weekends and Australian public holidays that might justify the amount presently recorded in respect of TOIL. So far as Mr Kielt contends that it was a term of Mr Joshua Kielt's employment contract that he should be paid for weekends and Australian public holidays during which he was overseas, but not working, it seems to me inconceivable that Dr Najjarine would have approved such a contract, at least if its effect had been fairly explained to him, and the entry into such a contract with Mr Joshua Kielt would be a further matter that supports Dr Najjarine's oppression claim. Mr Kielt's affidavit dated 14 March 2018 raised the possibility that this amount could be reclassified as a provision for TOIL, rather than as annual leave, as ICB Medical's financial statements for the year ended 30 June 2015 had not been finalised. 5. Although this amount has not been paid to Mr Joshua Kielt, the recording of a debt of that amount in ICB Medical's accounts is significant, since it would have allowed Mr Joshua Kielt to seek to call upon that debt and also allowed Mr Kielt to rely on that debt as affecting the price at which he might acquire Dr Najjarine's interest in ICB Medical on a buy-out. I am satisfied that this matter, combined with the recognition of other liabilities to members of Mr Kielt's family and associated companies that did not have a proper basis, to which I refer below, amounted to oppression. Mr Kielt's consultancy arrangements and claimed liabilities for long service leave and annual leave (SASC [14] particular (b)(ii)–(iii)) 1. The second of the sub-particularised allegations relates to an amount of $30,037.29 recorded in ICB Medical's accounting records for the year ended 30 June 2015 in respect of long service leave for Mr Kielt. In closing submissions, Mr Carnovale also referred to the inclusion of an expense of $30,037.29 in respect of long service leave said to be owed to Mr Kielt in ICB Medical's financial statements for the half year to 31 December 2017. Dr Najjarine's solicitors appear to have extended particular (b)(ii) to paragraph 14 of the Second Amended Statement of Claim to incorporate that further allegation by letter dated 1 April 2018. 2. An entry in ICB Medical's accounting records for the year ended 30 June 2015 records, as an expense of ICB Medical for that year, the amount of $30,037.29, purportedly payable to Mr Kielt in respect of untaken long service leave, notwithstanding that Mr Kielt was not an employee but a consultant of ICB Medical at that time. Mr Kielt's evidence in cross-examination was that the amount was calculated by a staff member on his instruction, by reference to a number of weeks, number of hours and hourly rate, covering the seventeen year period from 1 July 2000 to 30 June 2017. It emerged in cross-examination that that calculation overstated Mr Kielt's hourly rate, and was performed at the end of a seventeen year period in which no previous charge for long service leave was recorded (T553–554). 3. The third of the sub-particularised allegations relates to amounts of $35,978.28 recorded in ICB Medical's accounting records for each of the years ended 30 June 2010 and 30 June 2011 in respect of annual leave for Mr Kielt, totalling $71,956.56 for the two years. It appears that Mr Kielt caused LWS to issue an invoice to ICB Medical for $35,978.28 and ICB Medical included a liability in that amount in its financial statements for the 2010 financial year, referable to accrued annual leave for Mr Kielt, although he was then a consultant to and not an employee of ICB Medical. In May 2012, Mr Kielt caused a liability of $32,707.55, also said to be in respect of accrued annual leave for him, to be included in ICB Medical's financial statements for the 2011 financial year, referable to annual leave for 2009. 4. Turning to the documentary and other evidence as to these matters, an email dated 4 February 2010 from Mr Kielt to Mr Green (Ex J1, 1887) contemplated that an amount of 30 weeks accrued leave would be invoiced by a consultancy invoice from LWS "for the equivalent dollar value for other work done". That email appears to contemplate, not a charge for annual leave which would be inconsistent with a consultancy arrangement, but a charge for other work in substitution for a claim to annual leave. If that other work had been done, then no reliance would need to have been placed on a right to annual leave to support that invoice; and, if that other work had not been done, then reliance on a claim for annual leave would not support that invoice. Mr Kielt was unable to identify any relevant "other work done" in cross-examination (T526). The amount invoiced by LWS in March 2010 was initially recorded as "consulting expenses", but with a reference to accrued annual leave, and subsequently transferred to wages (T787) and subsequently appears to have been recorded under the heading "trade creditors" in ICB Medical's financial statements for the 2010 financial year (Ex D1, [6]; T789). 5. In an email dated 7 May 2012 (Ex J1, 2351), Mr Stubley of BDO advised Mr Kielt that an annual leave balance for him was not previously accounted for but would be taken up as a provision, since Mr Kielt would be taxed on the amount if it was transferred to a loan, and observed that this treatment meant that Mr Kielt was "technically still an employee of ICB Medical". A document attached to that email, apparently prepared by Mr Kielt, identified accrued annual leave for Mr Kielt of $35,978.28, forming part of total outstanding loans payable to Mr Kielt of $77,554.38. That figure was then also recorded in ICB Medical's 2012 accounts (Ex D1, [6]). 6. By his affidavit dated 14 March 2018, Mr Kielt led evidence of the circumstances in which he commenced work with ICB Medical, his move from being an employee to a consultant during 2002, and the circumstances in which that took place. Mr Kielt sought to characterise the change in those arrangements as made for ICB Medical's benefit, on the basis that Mr Kielt could then issue invoices for consultancy fees when ICB Medical had sufficient cash flow to be able to pay them, and that consultancy invoices issued by LWS would provide a net cash flow increase for Mr Kielt in lieu of a pay rise. There is no evidence that Mr Kielt in fact deferred issuing invoices for regular consultancy fees to meet ICB Medical's cash flow requirements, and there is no basis to assume that Dr Najjarine would have agreed to an increase in Mr Kielt's remuneration, had he not moved to a consultancy arrangement. It seems to me that that change was likely made for Mr Kielt's benefit, particularly where LWS could apply existing tax losses to reduce or eliminate the income tax that would otherwise be payable on consultancy fees that it received. 7. Mr Kielt also gave evidence in that affidavit that he remained on ICB Medical's payroll records, which continued to measure his accrued annual leave, and that an annual leave entitlement of $32,707.55 was "properly accrued" by him. Mr Kielt also addresses the claim for long service leave in that affidavit. I do not accept Mr Kielt's assertion of the propriety of those liabilities, where the arrangements established by Mr Kielt had the result that he was a consultant and not an employee entitled to annual leave or long service leave. Mr Kielt also gave evidence, in that affidavit, suggesting that he had worked for ICB Medical for an income lower than that to which someone of his experience would ordinarily be entitled to. I am not persuaded by Mr Kielt's assertion of that matter, uncorroborated by other evidence, and that matter in any event provides no justification for the accrual of debts for annual leave or long service leave to Mr Kielt that were otherwise not properly founded. 8. Mr Kielt's evidence in cross-examination was also that he remained an employee of ICB Medical although he was paid as a consultant (T540), implicitly justifying a claim for annual leave and long service leave. I do not accept that evidence, which is inconsistent with the fact that no PAYG tax was withheld from payments made in respect of the consultancy arrangements, and is also inconsistent with Mr Kielt's affidavit evidence as to the circumstances in which LWS commenced charging consulting fees for his services. Mr Kielt was also cross-examined as to a significant error in his affidavit evidence as to this matter, in a calculation made by Mr Kielt of the remuneration which he would be paid, if an inflation rate of 2.53% per annum had been applied to his starting remuneration of $52,000 in 2000, which significantly overstated the amount of that remuneration as $101,000 rather than $77,557; the origin of that error was not explained by Mr Kielt in cross-examination, who went no further than to say he was "giving an example", which did not explain that significant overstatement (T596). However, I do not conclude that overstatement was deliberate. 9. Mr Kielt's evidence in cross-examination was also that he was "classed as a contractor" but "had an agreement that was developed with Dr Najjarine, Mr Green and [Mr Kielt] that [he] would retain [his] – the basic benefits as an employee because [he] had been an employee" (T597). Mr Kielt did not accept, in cross-examination, that LWS would not have used up any tax losses had it paid wages to Mr Kielt that corresponded to the income that it was receiving from ICB Medical (T598). That proposition seems to me to be correct, although that course may have deprived Mr Kielt of any tax advantage that was obtained by payment to a company as a consultant, and using its tax losses to shelter the income it received. 10. Mr Kielt denied in cross-examination that the "only reason" why he switched to consulting through LWS was to receive consulting fees tax free (T600). Mr Kielt did accept that the arrangement gave rise to a large net cash increase to him, and that was one of the reasons for the arrangement (T601). In cross-examination, Mr Kielt also sought to justify the additional amounts claimed by consulting fees, in cross-examination, by claiming that in 2010 and 2011, he was working extremely long hours and weekends for which no remuneration was provided other than normal salary, and in 2012, was engaged in research and development (T608). There was no evidence, beyond Mr Kielt's assertion, of that matter, and others who would have had knowledge of the hours worked by Mr Kielt, and who might have been able to corroborate or falsify that evidence, were not called by Mr Kielt. I infer that their evidence would not have assisted Mr Kielt in that respect. 11. There were difficulties with aspects of Mr Kielt's evidence in cross-examination as to this matter, including his suggestion that his calculation of long service leave did not reflect the amount that he believed was LWS's weekly consulting fee, of $1,216.49 multiplied by 8.67 being two-thirds of the amount of long service leave that an employee would accrue after 13 years of service; and the fact that that calculation gave rise to the amount that he claimed, of $10,547, was a coincidence (T627) and instead the amount reflected interest on a loan of $31,000 that he claimed to have made to ICB Medical (T628). 12. Mr Kielt also relies on a conversation in which he claims Dr Najjarine agreed to his receiving annual leave and superannuation benefits, although he was paid as a consultant (Kielt 16.12.16 [22]). Mr Green also suggested in cross-examination that, in 2002, Mr Kielt and Dr Najjarine agreed the "principle" that Mr Kielt would be remunerated by payment of consulting fees to LWS at the same level as if he was an employee of ICB Medical, which would include receiving compensation for entitlements such as long service leave, (T720, T746). Dr Najjarine's evidence is that he could not recall, or possibly that he denies, being informed of or consulted about that matter (Najjarine 23.1.18 [34]-[35], T277). I have referred above to my lack of confidence in the evidence of each of Dr Najjarine and Mr Kielt and I am not persuaded by Mr Green's evidence given the passage of time and the reservations that I have addressed in paragraph 24 above in respect of another aspect of his evidence. Mr Kielt has not discharged an evidentiary onus of establishing that that conversation occurred or any agreement to that effect was formed. 13. In closing submissions, Ms Whittaker points to the fact that Mr Kielt's claim for long service leave relates to an amount accumulated between the years 2000 to 2009, and submits that no adverse inference should be drawn from the limited documentation produced to support it. I accept that proposition, so far as it goes, but it remains that there is no evidence to support the calculation of that amount. Ms Whittaker also submits that the amount recorded as long service leave for Mr Kielt is a provisional liability, recorded in ICB Medical's accounting software file, which has not yet been agreed between directors or incorporated in accounts. Ms Whittaker also submitted that, even if the current provision was incorrect, it did not constitute unfairness where the issue had not been discussed between the directors or the accounts finalised. Nonetheless, Mr Kielt deployed that liability in his evidence in these proceedings as an amount for which he would be a creditor in any winding up of ICB Medical. 14. It seems to me that the approach that Mr Kielt caused ICB Medical to take to annual leave and long service leave reflected a fundamental inconsistency, where annual leave would only be payable to Mr Kielt as an employee, but both ICB Medical and Mr Kielt were otherwise conducting themselves on the basis that he was a consultant and not an employee. Assuming, without deciding, that that arrangement was genuine and that Mr Kielt was entitled to cause the company to make payments of consulting fees to LWS without deducting PAYG tax, there was no basis for recording amounts referable to annual leave and long service leave as debts to him. I am not persuaded that any agreement was reached with Dr Najjarine that avoids that result. It is also no answer to say that BDO could have, but failed to, challenge the propriety of the claimed liabilities. A liability of this size owed by ICB Medical to Mr Kielt was significant, although that amount was not paid to Mr Kielt, in respect of the economic interests in ICB Medical. The recording of that amount also depressed ICB Medical's profitability and purportedly reduced its liability to pay tax on its income. I am satisfied that oppression is established in respect of this matter. Recording of amounts payable as travel allowances (SASC [14] particular (b)(iv)) 1. Dr Najjarine also relies on the recording in ICB Medical's accounting records for each of the years ended 30 June 2011 to 30 June 2014 of travel allowances totalling $161,759.80 payable to each of Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt, purportedly to cover the costs of accommodation, meals and incidental expenses of interstate and overseas trips when, Dr Najjarine alleges, ICB Medical had paid for those meals and incidental expenses. 2. Mr Kielt claims that the treatment of travel expenses was approved at the meeting on 1 May 2012 which I addressed in paragraphs [ ] above. I do not accept that Mr Kielt's or Mr Pyne's evidence provides a reliable basis for such a finding, for the reasons noted above in respect of that meeting. By an email dated 1 May 2012 to Mr Stubley, likely to have been sent after the meeting on that day, Mr Joshua Kielt identified figures for a claimed travel allowance for himself; noted that he had not done so for Mr Kielt and Dr Najjarine as they were not employees; and asked: "Is it worth adding [Mr Kielt] as employee and trying to recoup the allowance, or is that unrealistic?" (Ex J1, 2348) That email is not consistent with a concluded position approving travel allowances having been reached in respect of Mr Kielt at the meeting on 1 May 2012. 1. ICB Medical's financial statements for the 2011 financial year then recorded amounts totalling $40,670.30 as travel allowances due to Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt. ICB Medical's financial statements for the 2012 financial year recorded amounts totalling $24,303.80 as travel allowances due to Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt. ICB Medical's financial statements for the 2014 financial year recorded further amounts totalling $96,785.70 as travel allowances due to Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt. Mr Pyne's affidavit evidence was that the amounts claimed in the 2014 financial year also included travel allowances in relation to the 2013 financial year (Pyne 15.3.18 [19(a)]). These amounts were both reflected in ICB Medical's financial statements and claimed in its tax returns as expenses (T572). 2. In his report dated 14 December 2016, Mr Pyne refers to the liabilities for travel allowances and to the ATO's tax determination setting out amounts that it considers reasonable for claims for domestic and overseas travel expenses, which are set by reference to the cost of accommodation and living in particular areas. Mr Pyne records that: "I was instructed by ICB Medical that it expected employees to fully expend any applicable travel allowance and that the amount of the allowance was less than or equal to the reasonable travel expenses. Accordingly, there was no requirement to withhold PAYG withholding from the payment of travel allowances by ICB Medical." (Ex D1, [45]) Mr Pyne confirmed in cross-examination that he had been told by Mr Kielt, at the 1 May 2012 meeting, that Mr Joshua Kielt and Ms Naomi Kielt had personally incurred expenses for interstate and overseas travel for many years and had not been reimbursed for those expenses (T762). This evidence is consistent with the probabilities, notwithstanding the issues as to the reliability of Mr Pyne's evidence of other aspects of that meeting, since it is unlikely that BDO would otherwise have accepted the treatment of travel expenses in ICB Medical's accounts. That instruction was false, since Mr Kielt accepted in cross-examination that travel expenses were in fact paid by ICB Medical rather than by relevant employees. Mr Pyne's conclusion that there was no requirement for ICB Medical to withhold PAYG tax or for Mr Joshua Kielt and Ms Naomi Kielt to treat those travel expenses as taxable also does not follow where its premise is false. 1. Mr Kielt also relied on a review undertaken by Mr Pyne of the relevant expenditure. That exercise was flawed because, as Mr Pyne accepted in cross-examination (T774), it may not (and I interpolate, likely would not) have identified a payment of travel or accommodation expenses made by ICB Medical either in advance of or in arrears of the date of the relevant travel or accommodation, and there is a real prospect that any such payment was likely to be made in advance or arrears. In any event, that exercise can have little weight, where Mr Kielt accepted in cross-examination that travel expenses were in fact paid by ICB Medical rather than by the relevant employees. 2. By his affidavit dated 14 March 2018, Mr Kielt denied the allegation that travel allowances were paid to him, Mr Joshua Kielt and Ms Naomi Kielt to cover the cost of accommodation, meals and incidental expenses that had been paid by ICB Medical, and asserted that: "The travel allowances provision in the ICB Medical accounts was never purported to be for travel expenses that had been paid by [Mr Kielt], Joshua [Kielt] and Naomi [Kielt]. The cost of accommodation and food while travelling is paid for directly by ICB Medical, using credit cards. While some minor expenses may occasionally be paid by us personally, the general practice is for travelling expenses to be paid directly by the company." (Kielt 14.2.18 [160]) 1. Mr Kielt also claimed that: "The travel allowances were an alternative to increasing the salaries of those employees required to travel extensively where [ICB Medical] could not afford to increase salaries on an ongoing basis. The travel allowances recorded are not intended to reflect, as has been suggested by [Dr Najjarine], any expenditure made overseas by those employees. None of the travel allowances have ever been paid out to [Joshua Kielt, Naomi Kielt or Mr Kielt]. As such, these allowances can be reversed if necessary as a result of these proceedings" (Kielt 15.2.18 [164]). 1. I do not accept Mr Kielt's evidence in that regard. The evidence establishes that the travel allowances were calculated by reference to the ATO's guidelines, which assumed that expenditures would in fact be incurred in respect of travel, and not as an alternative to increased salaries, and tax deductions were claimed by ICB Medical on that basis. As I noted above, Mr Pyne's evidence is that BDO was informed, apparently falsely, that travel expenditures were in fact incurred by the relevant employees. It seems to me that Mr Kielt's conduct in respect of travel allowances and his evidence as to this matter is significantly adverse to his credit. I also do not accept Mr Kielt's later attempt in cross-examination to justify the travel allowances as directed, not to travel expenses, but to compensation for the "inconvenience" involved in travel (Kielt 14.3.18 [162], T584, 586). 2. Ms Whittaker accepted, in closing submissions, that expenses are recorded in ICB Medical's accounts in respect of travel allowances for Mr Joshua Kielt, Ms Naomi Kielt and Mr Kielt. She submitted that Dr Najjarine was present at the 1 May 2012 meeting and that the accrual of travel expenses was approved at that meeting. That proposition would not assist Mr Kielt, where there is no suggestion that there was fair or proper disclosure at that meeting of the fact that those travel expenses related to claims for payments that had in fact been made by ICB Medical rather than by Mr Joshua Kielt, Ms Naomi Kielt or Mr Kielt, and could not properly be made. These amounts were recorded in ICB Medical's accounting records and gave rise to a substantial debt which Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt could call upon, or rely upon in any attempt to reduce the cost of buying out Dr Najjarine's equity interest in ICB Medical or in a winding up of ICB Medical, and the claim for those expenses was wholly unjustified where ICB Medical had in fact paid those expenses. The effect of recording those amounts in ICB Medical's financial accounts was also to reduce the tax that would otherwise have been payable in respect of the income earned by ICB Medical in those years. It seems to me that that matter strongly supports Dr Najjarine's oppression case. But for the fact that it is open to the Court to require the parties to draw this matter and this judgment to the attention of the ATO, and I will do so, this matter may well also have supported a winding up of ICB Medical on the basis of a significant failure to meet its Australian taxation obligations during the relevant years. Dealings with LWS (SASC [14] particulars (b)(v)-(viii)) 1. Dr Najjarine attacks several liabilities recorded in ICB Medical's financial records in respect of claims by LWS against ICB Medical. The first relates to the recording in LWS's loan account with ICB Medical for the year ended 30 June 2011 of an expense of $12,909.71 purportedly payable to LWS for its cost of its agreement with QPB. A list of "loans to ICB Medical" prepared by Mr Kielt (Ex J1, 2352) recorded that: "[LWS] and ICB Medical entered into an agreement for [LWS] to contribute its product range and employ a Pharmacy broker to ensure that when the Pedistep product was ready to relaunch ICB [Medical] would have a Pharmacy broker on hand." That document attached a list of invoices paid by LWS to QPB for representation of LWS's "Gripe Water" range, described as "total paid to maintain representation" of $12,909.71 (Ex J1, 2352). 1. Mr Kielt's evidence is that, in 2010, he and Dr Najjarine decided to obtain distribution for ICB Medical's "Pedistep" product in pharmacies (Kielt 16.12.16 [89]-[90]) and that QPB was the only pharmacy sales broker interested in representing the Pedistep product, on the basis that it was also given rights to sell products of LWS known as "Gripe Water"; that QPB charged a 12.5% sales commission on all LWS products that it sold (Kielt 16.12.16 [91]; and see email correspondence with QPB, Ex J1, 1975); Dr Najjarine and Mr Kielt agreed to proceed with QPB, on the basis that LWS could recoup the lost profit margin of 12.5% from ICB Medical (Kielt 16.12.16 [92]); and this arrangement was reflected in the debt of $12,909.71 recorded as owing by ICB Medical to LWS in its 2011 financial statements (Ex D1, [83]–[84]). I am unable to reach a finding as to whether Dr Najjarine consented to this arrangement or this consequential liability, where I can place little reliance on either Dr Najjarine's or Mr Kielt's evidence in that regard. I am not persuaded that oppression is established in respect of this matter, alone or together with other matters. 2. The second challenged liability in respect of claims by LWS against ICB Medical relates to two amounts of $15,069.85 and $11,601.70 (totalling $26,671.55) recorded in ICB Medical's accounts in each of the years ending 30 June 2010 and 30 June 2012. (It appears that the particulars in paragraph (b)(vi) to paragraph 14 of the Second Amended Statement of Claim were amended, by letter dated 10 April 2018, to refer to the year ended 30 June 2012 rather than the year ended 30 June 2011). 3. The first of those amounts of $15,069.85 was invoiced by LWS to ICB Medical in March 2011, although that invoice was backdated to 23 or 24 January 2011 (Ex J2, Tabs 84, 85, Ex P10, Kielt 14.3.18 [115], [124]–[125]). There are three versions of LWS's invoice for that amount (Ex J2, 1054, 1055, Ex P10), one of which refers to consultancy fees for "lost income on ICB losses"; a second to consultancy fees; and a third to consultancy fees, with a handwritten note referring to "patent loan". Mr Kielt's evidence in cross-examination appeared to suggest that the amount was a charge for the use of ECS's tax losses, and that amount was recorded in ICB Medical's trade creditors ledger as payable to LWS in the year ended 30 June 2010 under a description "Lost income on [ICB Medical] losses". A document attached to the email dated 7 May 2012 from Mr Stubley to Mr Kielt (Ex J1, 2351), apparently prepared by Mr Kielt, identified that amount as compensation for the use by ICB Medical of ECS's tax losses, and as forming part of amounts owed by ICB Medical to Mr Kielt of $77,554.38. Mr Kielt also sought to justify the claim for reimbursement by ICB Medical of tax losses on the basis that there was often a charge by a company for non-payment and Mr Kielt had not made such a charge to ICB Medical (T621). It seems to me that that proposition has nothing to do with the question whether there was a loss to ECS, for which it should be reimbursed by ICB Medical, in applying its tax losses to avoid the payment of tax on income that it had derived from ICB Medical. 4. Mr Green's affidavit evidence was that he advised Mr Kielt that, when Mr Kielt shifted from being an employee of ICB Medical to causing LWS to issue consulting invoices, the accumulated tax losses in LWS were being used up, in a way that Mr Green considered was to the benefit of ICB Medical and to the detriment of LWS (Green 13.3.18 [6]). However, in his cross-examination, Mr Green attributed the understanding that LWS suffered a detriment because of the loss of tax losses to Mr Kielt, without himself accepting that position, although he acknowledged that he had not "objected" to that position at the time (T726). It is also not clear how that evidence supports a claim for lost tax losses of ECS, still less payment to LWS in compensation for lost tax losses of ECS. 5. I can see no logical or proper basis for the claim for reimbursement for tax losses to LWS, since ICB Medical did not benefit from any use of ECS's or LWS's tax losses, which had no impact on its tax position, and ECS or LWS suffered no detriment in reducing the tax that would otherwise be payable on consulting income by use of its tax losses. Dr Najjarine's evidence is that he had no knowledge of those matters other than through the proceedings (Najjarine 23.1.18 [30]) and that evidence seems to me to be consistent with the probabilities, notwithstanding my comments as to the reliability of Dr Najjarine's evidence above. 6. The second of those amounts relates to an invoice issued by LWS to ICB Medical for $11,601.70 23 or 24 March 2011. Three versions of that invoice (Ex J2, 1056, 1057, Ex P9) include inconsistent descriptions as to the basis for the invoice, one referring to consultancy fees for "lost income on [ICB Medical] loans", another to consultancy fees, and a third to consultancy fees referable to "pro rata long service leave". 7. A document attached to an email dated 7 May 2012 from Mr Stubley to Mr Kielt (Ex J1, 2351), apparently prepared by Mr Kielt, identified "loans" to ICB Medical from Mr Kielt, including an amount of $11,601.70 referrable to interest on a loan raised by Mr Kielt "on home mortgage" (which was in fact the giving of security, not the making of a loan) forming part of the total outstanding loans to Mr Kielt of $77,554.38. Mr Kielt's affidavit evidence was that the amount represented interest from a loan balance of $31,800 owed by ICB Medical to him in respect of a loan made in 2004 (Kielt 14.3.18 [109]–[114]), although there was no reference to such a loan in ICB Medical's financial statements for the 2008 and 2009 financial years (Ex J1, tabs 103, 105, T623–624). The amount claimed appears to be consistent with a calculation of long service leave rather than with a calculation of interest (T627). That amount was recorded in LWS's loan account with ICB Medical for the year ended 30 June 2010 with the description "lost interest on loans." Mr Kielt's evidence was that Dr Najjarine agreed to the issue of the invoice for $11,601.70, and that was denied by Dr Najjarine (Kielt 17.4.18 [13]–[14]); Najjarine 23.1.18 [28]–[30], T281). I have identified my reservations as to the evidence of each of Dr Najjarine and Mr Kielt above, and Mr Kielt has not satisfied the evidentiary onus of establishing such agreement. 8. I am satisfied that there was not a proper basis for the claims for $15,089.85 and $11,601.70 and that the recording of liabilities in favour of LWS in respect of these amounts, combined with the recording of other amounts that I have found to be not properly based, amounted to oppression. The total of these two amounts, $26,671.55, was then duplicated in ICB Medical's accounting records for the year ended 30 June 2010 and 30 June 2011, totalling $53,341.10 for the two years (Ex D1 [6(iii)]). The evidence does not establish that was deliberate and I would not have found that duplication amounted to oppression had the claims for the initial amounts not done so. 9. The third of the liabilities to LWS attacked by Dr Najjarine relates to an amount of $77,000 (inclusive of GST, equating to $70,000 exclusive of GST) that was recorded in LWS's loan account for the year ended 30 June 2012 as "consultancy fees R&D" owing to LWS. Dr Najjarine contends that no consulting services were provided by LWS, other than the normal services of Mr Kielt for which LWS charged fortnightly fees and which did not support the additional consulting fees claimed, that LWS was not entitled to the amounts claimed and Mr Kielt was aware of that matter. 10. Mr Kielt omitted reference to the invoice for this amount issued by LWS in an exhibit to his affidavit dated 16 December 2016, which he described as a record of all transactions between ICB Medical and LWS from July 2007 to June 2014 (Kielt 16.12.16 [21]; Ex J1, 3561; T657). The same omission occurred in an exhibit to Mr Kielt's affidavit dated 14 March 2018 which was stated to show all transactions between LWS and ICB Medical between 2000 and 2014 as recorded in the ICB Group's accounting software (Ex J2, 1199; T658). That omission was plainly unfortunate and it led to a significant understatement in the evidence of the amounts that LWS had claimed against ICB Medical. However, I do not find it was deliberate, although it highlighted that this claim was of a different nature to consultancy fees ordinarily charged by LWS for Mr Kielt's services. 11. I will first refer to the correspondence and documents relating to this transaction, and it will be convenient also to address a wider but related question, which relates to all of the transactions with LWS, as to the issue of invoices to reduce ICB Medical's liability for tax at this point. A number of emails between Mr Kielt and BDO suggest that the invoices for consultancy and other fees issued by LWS to ICB Medical were not referable to services rendered by Mr Kielt as a consultant, and were directed to achieving a reduction in ICB Medical's liability to income tax in the relevant years. By an email dated 4 February 2010 to Mr Green (Ex J1, 1887), Mr Kielt raised the possibility of issuing consultancy invoices, apparently in substitution for accrued annual leave, as follows: "[Mr Kielt] has a total of 30 weeks leave accrued in ICB [Medical] BUT I have been paying [Mr Kielt] on consultancy. Can I authorise ICB [Medical] to remove the holidays from the register and then submit a [LWS] consultancy invoice for the equivalent dollar value for other work done?" This email contemplated the issue of a consultancy invoice, in substitution for leave purportedly accrued by Mr Kielt, although he was a consultant and not an employee. Mr Kielt was cross-examined as to that matter (T526ff) in evidence given under a certificate under s 128 of the Evidence Act. The proposition that this invoice was referable to other work, advanced by Mr Kielt in cross-examination, is undermined by the lack of any evidence of an agreement by ICB Medical to pay for other work done, beyond Mr Kielt's contracted services to ICB Medical, either at all or on the basis of any agreed hourly rates, and there was also no convincing evidence that such other work was done. 1. By an email dated 22 March 2011 (Ex J1, 2029) to Mr Green, Mr Kielt referred to a possible charge for interest on a loan to ICB Medical for payment of patents (which was a matter referred to in one version of the March 2011 invoice) and suggested that: "LWS should raise an invoice for the interest on this amount over the last six years as this could help reduce the profit." [emphasis added] No such loan was recorded in ICB Medical's balance sheet as at 30 June 2009, and that loan only came to be recorded in ICB Medical's balance sheet as at 30 June 2010, apparently after Mr Kielt had drawn Mr Green's attention to his claim to be owed it by this email (T623). This email also raised the possibility of raising a consulting invoice to reduce the profit if there were tax losses, implicitly to be issued by LWS, and also stated: "What about the ECS and LWS losses that have been forgone over the last several years to reduce the ICB [Medical] profit? Can I raise another consultancy invoice for the losses that I am unable to access in the future??" [emphasis added] 1. By a further email dated 23 March 2011 to Mr Green, Mr Kielt observed that tax losses had been used in ECS and LWS and that "I remember that we raised invoices from ECS to reduce the tax in the past" [emphasis added], and noted that once Mr Green had confirmed the loss amounts used from ECS and LWS, Mr Kielt would raise another invoice dated January 2011 (Ex J1, 2031). Mr Green then advised Mr Kielt of the level of consulting fees, leaving open which fees were received from ICB Medical, and Mr Kielt responded that they looked like "wage consulting fees", implicitly distinguishing those fees from consulting fees issued by ECS and LWS to reduce ICB Medical's taxation liabilities (Ex J1, 2030). 2. Mr Pyne also referred (Pyne 16.2.18 [50]) to a meeting on 1 March 2013, to discuss ICB Medical's financial statements for the year ended 30 June 2012 and gave evidence that: "Although I can no longer recall the precise words spoken, I recall that during the course of the meeting [Mr] Kielt raised the issue of services he believed he had provided to ICB Medical for the 30 June 2012 financial year which remained unbilled. The issue of the potential tax implications for ICB [Medical] if [Mr Kielt] raised such an invoice was touched upon. The conversation concluded on the basis that [Mr Kielt] would raise this issue with Dr Najjarine and, if he was in agreement, [Mr Kielt] would provide BDO with a copy of the relevant invoice" [emphasis added] . Although Mr Pyne's account of that matter does not identify the "potential tax implications" to which he referred, that implication was plainly that the issue of a further invoice for consulting fees by Mr Kielt, which could be treated as an expense of ICB Medical although it was not paid by ICB Medical, but was treated as a further debt owing to Mr Kielt, would reduce the profit apparently earned by ICB Medical, and reduce the tax payable by ICB Medical, although it would also increase the debt apparently owing by ICB Medical to LWS. 1. By email dated 15 March 2013 (Ex J1, 2474), Mr Kielt advised Mr Neill of BDO that he had spoken to Mr Green regarding LWS's losses and had tax losses of $70,000 available, and would now raise an invoice for $70,000 for consultancy services, again backdated, this time to 29 June 2012. Mr Kielt also sought Mr Neill's advice as to whether he needed to indicate that the consultancy was for research and development services provided by LWS, and noted that the approach would add a further $28,000 to the refund from the ATO, implicitly to ICB Medical, which "[Mr Kielt was] desiring to be paid by ICB [Medical] to [him] personally". Mr Kielt also raised the possibility that ICB Medical should be charged interest, accrued in the loan account to Mr Kielt, on "outstanding loans" owed to Mr Kielt and observed that: "This would seem fair since I now have wiped out my losses (which were considerable) over the years assisting ICB [Medical] to reduce tax etc. And I have maintained an artificial lower income level and benefits from ICB [Medical]" [emphasis added] 1. Mr Carnovale put to Mr Kielt in cross-examination, and I accept, that the phrase "assisting ICB [Medical] to reduce tax" in this email and similar references in relation to additional invoices issued by LWS did not describe a position where LWS or Mr Kielt had provided services for which they were invoicing, in the ordinary course, and for which ICB Medical was paying, in the ordinary course, and obtaining a consequential tax deduction. The contractor who charges for his services, in the ordinary course, does not do so to assist the recipient of those services to reduce its tax. 2. A document prepared by BDO, in preparation for a meeting on 18 April 2013 (Ex J1, 2510), recorded that consulting fees had been charged in the amount of $77,000 and recorded the then loan balance purportedly owing to Mr Kielt of $448,108 and to LWS of $211,486, on an assumption that Dr Najjarine should pay Mr Kielt for "tax losses", and also referred to remuneration, and also noted several issues, namely: "What is [Mr Kielt's] agreed consulting fee … [Mr Kielt] is responsible for the tax … What is the consulting fees assisting ICB [Medical] tax liability." 1. By an email dated 3 October 2014 to Mr Pyne of BDO (Ex J1, 2890), Mr Kielt noted that: "The directors loans to Director [Mr Kielt], they are made up of losses etc which were used by ICB [Medical] to assist out annual company tax situation, in accounting terms are these regarded as actual loans from [Mr Kielt]? Can their 'loan' status be challenged?" The first reference in this email should plainly be to loans from Mr Kielt, rather than to Mr Kielt. In cross-examination, Mr Kielt sought to explain that email by the suggestion that it was badly worded. I am not persuaded by that explanation. In closing submissions, Mr Carnovale submitted that that email displays Mr Kielt's consciousness that the amounts recorded in his loan account were not "real loans" and that he had no "real entitlement" to those amounts. It seems to me that this email reflected Mr Kielt's understanding of those "loans" as a means to manage the amount of tax that was payable by ICB Medical, rather than as referable to additional consultancy services that were in fact provided by Mr Kielt to ICB Medical, and also indicated Mr Kielt's awareness of the possibility that the amounts recorded as "loans" owing to him were not loans as that concept is ordinarily and properly understood. 1. By email dated 30 March 2015 to Mr Neil of BDO (Ex J2, 1152), in connection with ICB UK's financial statements for the 2014 financial year, Mr Kielt referred to the fact that ICB UK had made a profit despite the fact that he had worked it so that ICB UK was break even or as close as possible to break even, and noted that: "We need to raise 'consultancy' invoices from ICB [Medical] to reduce the profit and bring that profit back into Aus." The word 'consultancy' was in quotation marks in that email, and it seems to me that, notwithstanding the denial of that proposition by Mr Kielt in cross-examination (T699), that also reflected a recognition by Mr Kielt that the invoices would not be genuinely issued for consultancy services provided by ICB Medical to ICB UK, but were instead directed to reduce the tax payable by ICB UK. That reduction would again depend upon backdating documents, with the discussion taking place in March 2015 as to the issue of 'consultancy' invoices which would be treated as referable to the year ending 30 June 2014. 1. Mr Kielt was not prepared to accept in cross-examination that ECS and LWS had been rendering invoices over several years to reduce ICB Medical's profit, but accepted that a consequence of raising those invoices was that they "mitigated ICB [Medical] cash flow and also assisted with our tax liability" (T610). I am comfortably satisfied, bearing in mind the serious character of the finding, that the former had occurred and Mr Kielt's denial of that matter was false. That matter significantly undermines Mr Kielt's credit generally. 2. Returning now to the invoice in respect of the $70,000 (exclusive of GST), Mr Kielt, in his 14 March 2018 affidavit, supports this invoice by reference to work undertaken on research and development projects of ICB Medical during the 2012 financial year. Mr Kielt also referred to several documents which described research and development activities (Ex J2, 1079) in that affidavit. Mr Kielt accepted in cross-examination that this invoice, although created in March 2013, was dated 29 June 2012 (Ex J1, 2474; T645). Mr Kielt's evidence, in cross-examination, was that LWS made a determination to only raise an invoice for the amount of any tax losses it had available to it, because he made a decision that he did not want any more tax exposure for LWS at that time (T647). It appears that no documents to support the additional work claimed in that invoice were produced, in response to a notice to produce issued by Dr Najjarine which sought documents that recorded or described the consulting or other work for which that invoice was issued, although Mr Kielt claimed to be uncertain as to that matter in cross-examination (T650–651). It was put to Mr Kielt in cross-examination that the amount of $70,000 plus GST that was charged by LWS was fictitious, although he denied that proposition (T655). 3. The claim that the invoice for $70,000, plus GST, totalling $77,000 was for research and development activities is not necessarily inconsistent with the fact that it equated to the amount of unused tax losses available to LWS (Ex J1, tabs 301, 311), since it is possible that, as Mr Kielt claimed, he limited the charge made to that amount, particularly where the amount would be partly accrued as a debt rather than paid. However, this transaction also had the potential to generate export market development grants for research and development tax incentives for ICB Medical, possibly without a proper basis, and there is at least a possibility that the amount Mr Kielt sought to be paid personally was calculated to reflect the benefit of the transaction to ICB Medical in reducing its income tax and generating a research and development tax grant (Ex J1, tabs 301, 311, T825). That amount was subsequently paid by ICB Medical to LWS (T667). 4. Mr Kielt claimed, in his 14 March 2018 affidavit, that Dr Najjarine knew of this invoice on the basis of his "standard practice" to consult with Dr Najjarine on any decision of significance for ICB Medical. Dr Najjarine denied authorising the transaction (Najjarine 23.1.18 [28], [30], T280). I am not persuaded by Mr Kielt's evidence as to this matter. I have referred to the issues as to the reliability of both Mr Kielt's and Dr Najjarine's evidence above; there is no contemporaneous documentary evidence to support the claim that Dr Najjarine consented to this transaction; and I think it unlikely that Dr Najjarine would have authorised that transaction in the context of the then dispute as to payment for seminars conducted by Dr Najjarine. Mr Kielt has not discharged the evidentiary onus of establishing Dr Najjarine's consent to the transaction. 5. I am satisfied that there was not a proper basis for the recording of this amount as a liability of ICB Medical to LWS. The recording of that substantial liability in favour of LWS, combined with the recording of other amounts that I have found to be not properly based, amounted to oppression. But for the fact that it is open to the Court to require the parties to draw this matter and this judgment to the attention of the ATO, and I will do so, this matter may also have supported a winding up of ICB Medical on the basis of a significant failure to meet its taxation obligations during the relevant years. Amount recorded as "sundry creditors" (SASC [14] particular (e)(i)-(ii)) 1. Dr Najjarine also advances a complex allegation in respect of an amount of $373,318.73 that was at one point recorded in ICB Medical's financial records under the description "sundry creditors". Dr Najjarine alleges that, in the period 1 July 2001 to 7 March 2011 (the date ICB Medical's financial statements for the year ended 30 June 2010 were signed), Mr Kielt, without Dr Najjarine's knowledge or consent, caused LWS and ECS to charge ICB Medical amounts totalling at least $373,318.73 in respect of the financial years 30 June 2001 to 30 June 2010, and caused those charges to be recorded as expenses in ICB Medical's accounting records for those years. Dr Najjarine contends that that amount was then reflected in the liability recorded under the heading "sundry creditors" in ICB Medical's accounting records in the amount of $373,318.73, and no services or other consideration were provided to ICB Medical, or any other company in the ICB Group, for those charges. As I noted above, the financial statements of ICB Medical, ICB Gait and ICB College for the 2011 financial year, issued in May 2012, reflected the transfer of the amounts referable to sundry creditors of $373,318.73 to Mr Kielt's loan account in ICB Medical, where they were recorded as amounts owed to him as at 30 June 2011. 2. I have addressed the documents relating to the discussion of this issue in May 2012 and the affidavit evidence in paragraphs 43–55 above. Turning now to the question of whether the amount for sundry creditors includes amounts due to LWS or ECS, Mr Pyne's report dated 14 December 2016 refers to the amount of $431,044.63 now recorded in ICB Medical's accounts as owing to Mr Kielt and indicates that: "The amount of $431,044.63 is a journal entry that was credited to [Mr Kielt's] loan account on instructions from Mr Kielt and [Dr Najjarine] and in accordance with the minutes of the Directors' meeting dated 30 June 2011 … The amount represents the transfer and correction of accounts that could not be identified or reconciled as at 30 June 2010 and the treatment of loan accounts, following enquiries with Mr Green and the directors of ICB Medical …" (Ex D1, [23]–[24]) Further details are provided in respect of particular items which could not be verified in respect of ICB Gait and, significantly, sundry creditors in the amount of $373,318.73 recorded in respect of ICB Medical. 1. Mr Kielt identifies correspondence relating to the treatment of sundry creditors in his affidavit dated 14 March 2018 and gives evidence that he is "certain that the amount is not comprised of any amounts charged by [LWS] or ECS" (Kielt 14.3.18 [176]). Mr Green's affidavit evidence was initially that he investigated this issue by sending an employed accountant to ICB Medical and himself attending to investigate the matter; he formed the view that there were several possible explanations for the discrepancies, being possible errors by ICB Medical's bookkeeper; he concluded that, as the discrepancies were the result of internal transactions, the proper financial treatment was to suspend the amounts in "sundry creditors"; at least in his initial evidence, he made an adjustment so that the sundry creditors balance as at June 2008 was $272,502.44; and he was "confident" that the amount of $272,502.44 did not include such charges by LWS and ECS (Green 13.3.18 [10]–[16]). Mr Green radically altered that position in his cross-examination by conceding that it was possible that an amount of $108,000 recorded in ICB Medical's records for the 2009 financial year related to charges reflecting anticipated invoices from LWS or ECS (T714, T717). Mr Green's evidence in cross-examination was also that, as at 30 June 2007, the sundry creditors balance was the amount of $78,550.65 and he did not know whether that amount had been cleared during the following year without reference to the detailed records (T738). It does not seem to me that Mr Green's evidence, particularly as qualified by Mr Green's late concession as to the amount of $108,000, displaces the inferences that are otherwise to be drawn from the other evidence to which I refer below. 2. The documentary evidence indicates that the explanation advanced by Mr Green, and adopted by Mr Kielt, for these transactions cannot be correct. The figure for consultancy fees incurred by ICB Medical for the year ended 30 June 2007 is $62,923.56, increased from $34,540.95 in the previous year, as recorded in its profit and loss statement for the period ended 30 June 2007; and the figure for "sundry creditors" for the year ended 30 June 2007 recorded in ICB Medical's balance sheet as at 30 June 2007 is $78,550.65, increased from $5,185.95 in the previous year (Ex J1, 1079). The figure for "sundry creditors" recorded in the balance sheet as at 30 June 2008 further increases to $272,502.44, increased from $78,550.65 in the previous year (Ex J1, 1104). The QuickBooks ledger for ICB Medical for the same financial year (Ex J2, 553) records the opening balance for the sundry creditors account as at 1 July 2007 as nil, and one transaction of $6,000 occurs in that year, with a closing balance of that account at 30 June 2008 of $6,000. 3. The figure for "sundry creditors" then further increases in the balance sheet of ICB Medical for the year ended 30 June 2009 to the amount of $380,502.44 (Ex J1, 1122). The QuickBooks ledger of ICB Medical (Ex J1, 1148) for the same year discloses a further transaction, being a debit of $3,600, in the 2009 financial year. There was therefore not a sundry creditor's balance of any substantial amount in the QuickBooks ledger of ICB Medical during the relevant years, by contrast with the financial statements of ICB Medical for those years. However, the consulting expenses account in the QuickBooks ledger (Ex J1, 1150) shows total consulting expenses for the 2009 financial year of $63,212.79, including amounts payable to LWS and smaller amounts payable to a third party. The financial statements for ICB Medical for the year ended 30 June 2009 (Ex J1, 1119) in turn record a consultancy fee amount in that year of $171,212.79, which exceeds the amount recorded in the QuickBooks ledger by an amount of $108,000. The amount of the sundry creditors contained as at 2008 and 2009, and recorded in ICB Medical's financial statements for the year ended 30 June 2009 (Ex J2, 1122) also shows an increase of $108,000, being the difference between an opening balance of $272,502.44 and a closing balance of $380,502.44. It also appears, from a note made by Mr Green on a 2009 trial balance of ICB Medical, printed on 25 June 2010, that an accrual was made in ICB Medical's 2009 accounts comprising $30,000 referable to LWS and $58,000 referable to ECS, partly referable to a claim for superannuation by Mr Kielt (although he was not an employee at that time), following a discussion between Mr Green and Mr Kielt (Ex P12, T716–717). 4. It appears, as Mr Carnovale put to Mr Kielt in cross-examination (T686), that the increase in the amounts recorded for sundry creditors from 30 June 2008 to 30 June 2009 is $108,000, being the difference between the lower amount of consultancy fees as recorded in ICB Medical's QuickBooks ledgers and the higher amount of consultancy fees recorded in its financial statements. Mr Carnovale put to Mr Kielt that what had occurred was that the financial statements recorded additional consultancy fees, in an amount of $108,000 greater than as recorded in ICB Medical's QuickBooks ledgers, which were disguised by placing them in the sundry creditor's account (T687). It is not necessary to adopt that characterisation, and it is sufficient for present purposes to find that the amount of sundry creditors increased, at least in significant part, by reason of consultancy fees incurred or purportedly incurred by ICB Medical, rather than for the reasons which Mr Green had initially suggested. 5. In closing submissions, Mr Carnovale submitted (consistent with the findings that I have reached above) that the sundry creditors did not arise largely in the 2006 calendar year, as Mr Green had initially suggested, since the amount for sundry creditors was $8,185.95 at 30 June 2006 (Ex J1, 1062); $78,550.65 at 30 June 2007 (Ex J1, 1079); $272,502.44 at 30 June 2008 (Ex J1, 1097); $380,502.44 at 30 June 2009 (Ex J1, 1115) and $373,318.73 at 30 June 2010 (Ex J1, 1160). Mr Carnovale submitted, and I accept, that the entry for sundry creditors in ICB Medical's balance sheet for the 2010 financial year largely arose in 2008 and 2009, and that Mr Green's initial explanation in his affidavit evidence of the amount of sundry creditors as at 30 June 2008, namely $272,502.44, was inconsistent with the explanation that he had previously provided by his email dated 28 February 2012, and unsupported by documentation. Mr Carnovale submitted, and I accept, that the difference between the sundry creditors balance of $272,502.44 in ICB Medical's financial statements for the financial year 2008 (Ex J1, 1097) and the balance of $380,502.44 in its 2009 financial statements (Ex J1, 1115) is likely to reflect an increase of $108,000 between consulting fee expenses of $63,212.70 recorded in the QuickBooks ledger for the 2009 financial year and $171,212.79 recorded in ICB Medical's 2009 financial statements, which appears to reflect the change made by Mr Green to the amount recorded in the QuickBooks ledger (T715). Mr Green accepted, in cross-examination, and by reference to contemporaneous handwritten notes that he had subsequently discovered that that change reflected expected invoices, and he could not identify anything other than charges by LWS or ECS underlying that amount (Ex P12, T716–717, 740–742). 6. Ms Whittaker submitted, in closing submissions, that the Court should find that the amount recorded as sundry creditors of $373,318.73 did not include any invoice issued by ECS or LWS. That submission may be accepted but only on the inconsequential basis that the amount of $108,000 in consultancy fees to ECS or LWS was recorded in ICB Medical's financial records without first having been invoiced by ECS or LWS. Ms Whittaker's further submission that the accrual of those amounts could readily be reversed does not address the fact that it had been maintained for a significant period and would likely not have been exposed but for these proceedings. 7. I have referred above to Mr Kielt's notation of the minutes of the 1 May 2012 meeting that these amounts were to be reallocated between Mr Kielt and Dr Najjarine. That did not occur. Mr Kielt's evidence in his further affidavit dated 2 February 2018 was that neither Dr Najjarine nor his solicitors had asked for the loan amounts that had been transferred to Mr Kielt to be redistributed between Mr Kielt and Dr Najjarine. The immediate answer to that proposition is that Dr Najjarine did not need to, because the notation made by Mr Kielt recorded when that was to be done, although it was not then done. In any event, I do not accept that evidence. At a directors' meeting on 23 September 2014, Dr Najjarine had referred to the arrangement for reallocation of the loan amounts, and for them subsequently to be divided equally between Dr Najjarine and Mr Kielt, although he had misstated the amounts involved. Mr Kielt responded that he did not "remember that" and that "[w]e never ever made an agreement about $300,000 for you and $300,000 for me". That proposition was strictly correct, but only because Dr Najjarine had incorrectly stated the amount of the loans to be transferred to him (Ex P11). I think it likely that Mr Kielt in fact understood Dr Najjarine's reference, and chose not to implement a redistribution of the loan account in respect to Dr Najjarine's then request. Mr Kielt's continuing denial, in cross-examination, of the proposition that Dr Najjarine had in fact sought reallocation of the amounts dealt with at the May 2012 meeting was not credible, and undermines his credit generally. 8. Mr Kielt's evidence (Kielt 2.2.18 [40]) was also that: "Had [Dr Najjarine] or his solicitors requested the redistribution of the loan account based on the directors' meeting minute, then I would have agreed that the loan account would be redistributed. The redistribution of the loan account has no effect on the business. It does not change the value of the assets and liabilities of the company, or its profitability." It follows from the finding that I have reached above that that evidence is, at best, incorrect, because Mr Kielt did not redistribute the loan amounts when asked to do so. It also seems to me that Mr Kielt was well aware that, although the redistribution of the loan amounts would have no effect on the assets or liabilities of ICB Medical, or its profitability, it would have an effect on the amounts that Mr Kielt could claim as against ICB Medical, including in a winding up of ICB Medical, where it was recorded as a debt owed wholly to Mr Kielt rather than in equal shares to Mr Kielt and Dr Najjarine. I note, for completeness, that Dr Najjarine indicated in the course of closing submissions that he now does not seek to have the agreement recorded in the handwritten notation performed, and the position as to this amount is also now affected by the undertakings that Mr Kielt has offered and the orders he seeks to have made, to which I refer below. 1. I am satisfied that oppression is also established by the combination of recording substantial liabilities for consulting fees to LWS and ECS under the unilluminating description "sundry creditors", such that their nature was not exposed other than through these proceedings; engaging in a reallocation of those liabilities, without adequately disclosing their origin to Dr Najjarine, and on the basis that they would then further be reallocated between Dr Najjarine and Mr Kielt; and failing to undertake that reallocation. I do not accept Dr Najjarine's further allegation in respect of an untrue representation as to the nature of the sundry creditors item referable to the 1 May 2012 meeting, where that allegation depends on Dr Najjarine's most recent account of the meeting in mid-May 2012, which I have found not to be reliable. Failure to cause adequate financial records to be kept (SASC [17]) 1. Dr Najjarine also advances a wider allegation (SASC [17]) that Mr Kielt did not cause and has not caused each of the companies in the ICB Group to keep written financial records that enable true and fair financial statements to be prepared and audited. This allegation is particularised by several matters, not all of which were adequately addressed in submissions. It is not necessary to address all of these matters to determine the proceedings, given the findings I have reached on other grounds. 2. Several of these matters relate to loan account variances. The resolution arising from the meeting in May 2012, and backdated to 30 June 2011, also provided for other "Loan account variances [$]57,725.90" to be adjusted to the loan account of Mr Kielt at 30 June 2011 (Ex J1, 1634). The financial statements of ICB Medical, ICB Gait and ICB College for the 2011 financial year, issued in May 2012, reflected the transfer of those amounts to Mr Kielt's loan account as at that date. Dr Najjarine contends that the other amount of $57,725.90 treated as payable by ICB Medical to Mr Kielt comprised $15,000 owing by ICB Gait to AOL, $27,500 owing by ICB Gait to Dr Najjarine, $10,000 owing by ICB Medical to AOL and $5,225.90 representing the net total of various asset and liability amounts that were unable to be verified as legitimate assets or liabilities. Dr Najjarine contends that the $15,000, $27,500 and $10,000 amounts were not amounts that Mr Kielt was entitled to have treated as owed to him. 3. Mr Kielt leads evidence to address the position as to the amount of $27,500 that Dr Najjarine claims was owing to him by ICB Gait. Mr Kielt's evidence is that, in 2007, Mr Kielt and Dr Najjarine had a conversation in which Dr Najjarine agreed to take the remaining furniture from a clinic at Crows Nest in satisfaction for his outstanding loan to ICB Gait for the amount of $27,500 (Kielt 16.12.16 [52]) and that Dr Najjarine's loan account with ICB Gait was not extinguished after he took that equipment. Mr Kielt's evidence is that, in 2013, he and Dr Najjarine had a further conversation confirming that BDO should remove the outstanding loan of $27,500 recorded as owing to him (Kielt 16.12.16 [54]). There is no contemporaneous evidence supporting that conversation and I am not persuaded by Mr Kielt's evidence in that regard given the issues as to the reliability of his and Dr Najjarine's evidence to which I have referred above. The amount was also not "removed" by the 2012 transaction but remained recorded as due to Mr Kielt. It is not necessary to reach a finding as to the other two amounts on which Dr Najjarine relied, or as to whether these matters amount to oppression, where that finding would have no impact on the outcome of these proceedings given the findings that I have reached as to other matters. 4. The findings that I have reached above in respect of the several transactions particularised to SASC [14] provide support for the wider allegation that Mr Kielt did not cause and has not caused each of the companies in the ICB Group to keep written financial records that enable true and fair financial statements to be prepared and audited, although it should be noted that Dr Najjarine had also not caused adequate financial records to be prepared and, as I have noted above, did not himself comply with his duties as a director of ICB Medical in respect of its financial records and accounts. This matter would not support an order for the winding up of ICB Medical or other companies in the ICB Group, where the particular matters that cause those accounts to be unreliable or incorrect can be addressed in any valuation of Mr Kielt's shares in respect of a buy-out order, as I note below. Mr Kielt's Cross-Claim 1. By his initial Cross-Claim, Mr Kielt alleged that Dr Najjarine had engaged in oppressive conduct, to put it broadly, in respect of the conduct of the affairs of ICB Medical and the several companies in the ICB Group. That allegation was particularised by reference to several matters (Cross-Claim [3]). By his First Cross-Claim Amended Statement of Cross-Claim filed on 22 March 2018, Mr Kielt advanced additional allegations in that regard. In his Defence to Cross-Claim, Dr Najjarine denied the various allegations made against him, and that denial was particularised by a range of matters which, if relevant, should properly have been pleaded as material facts. I will address several wider submissions made Mr Carnovale and by Ms Whittaker, including as to the Cross-Claim and as to relief, below. Competition by entities associated with Dr Najjarine 1. The first group of related allegations made by Mr Kielt relates to the diversion by Dr Najjarine of business of the companies in the ICB Group, either personally or through AOL, away from those companies to Crown Orthotics and/or to a business known as Happy Feet Orthotics; his causing AOL to cease to place orders for products with ICB Medical; and his causing AOL or Crown Orthotics to appropriate copyrighted material in seminars, advertising, website promotions and packaging owned by Foot Steps Orthotics and/or ICB Medical. It appears, from the particulars to paragraph 2 of Dr Najjarine's Defence to the Cross-Claim, that he denies that Crown Orthotics operates in direct competition with the companies in the ICB Group and contends that those companies do not trade in the fields in which Crown Orthotics trades. 2. By his affidavit dated 14 March 2018, Mr Kielt led evidence seeking to establish that companies associated with Dr Najjarine were competing with ICB Medical. Mr Kielt's evidence was that (as I noted above) ICB Medical manufactured and sold three categories of orthotics, namely laboratory made orthotics, pre-made prescription orthotics and over the counter orthotics (Kielt 14.3.18 [8]). Mr Kielt referred to the process by which such orthotics were made and their relevant markets, and to the suppliers used by ICB Medical in respect of its manufacture of orthotic products and to training courses that have been run by ICB Medical to promote its business. 3. Mr Kielt also referred to the circumstances in which Dr Najjarine, his wife and his brother, Mr Adam Najjarine, had incorporated Crown Orthotics and to Mr Adam Najjarine's previous employment with ICB Medical and his current involvement with Crown Orthotics. Mr Kielt also referred to the fact that the address for Crown Orthotics' laboratory is the same address as that of AOL, from which Dr Najjarine operates his podiatry practice in Kirrawee, New South Wales. Mr Kielt also referred to similarities between ICB Medical's products and Crown Orthotics' products, although that evidence is of limited assistance where the extent of any distinctiveness of ICB Medical's products is not established. Mr Kielt also referred to evidence of a loss of customers from ICB Medical to Crown Orthotics and to the substantial similarity between the prescription forms used by ICB Medical and Crown Orthotics; identified a number of customers included in a customer list produced by Crown Orthotics under subpoena which were previously customers of ICB Medical; and referred to the fact that Crown Orthotics now employs two orthotic technicians who resigned from ICB Medical, in addition to Mr Adam Najjarine, who was, as I noted above, previously employed by ICB Medical. Mr Kielt also referred to matters on which he relied for an allegation that Crown Orthotics was expanding into pre-made orthotics, in competition with ICB Medical's pre-made orthotics business in Australia and China, which I will address below. 4. Mr Kielt also claims that Dr Najjarine undermined a central premise of his relationship with Mr Kielt by causing AOL to cease to place orders with ICB Medical. Mr Kielt's evidence was that, from when ICB Medical was established, he and Dr Najjarine expected that AOL would become a customer of ICB Medical (Kielt 14.3.18 [17]). I accept that evidence, which is consistent with the commercial logic of Dr Najjarine's initial involvement in ICB Medical. It appears that, at least until the relationship between the parties broke down, Dr Najjarine prescribed ICB Medical pre-made orthotics (and from 2006, laboratory made orthotics) for his patients. Mr Kielt's evidence was that, from February 2014, Dr Najjarine ceased sending orthotic prescriptions for his patients to ICB Medical's laboratory to be manufactured, and he noted that AOL had been ICB Medical's biggest customer (implicitly, for laboratory made orthotics) until the end of February 2014 and the loss of AOL as a customer had a significant impact on ICB Medical's sales (Kielt 14.3.18 [40]ff). These issues had been raised between the parties prior to the commencement of the proceedings. An email dated 11 March 2013 from Mr Kielt to Dr Najjarine referred to a loss of customers to Happy Feet Orthotics, also associated with Mr Adam Najjarine, and suggested that that matter had financially impacted ICB Medical. That email also referred to Dr Najjarine having indicated that he had sent only two jobs to Happy Feet Orthotics, but identified several other orthotics that were sent to it for manufacture from ICB Medical's records (Ex J1, 2461). Mr Kielt also referred to acrimonious discussions of that matter at a directors' meeting on 12 August 2014 and again on 9 September 2014. 5. Dr Najjarine accepted, in his affidavits dated 5 and 10 April 2018, that he had removed AOL's business from ICB Medical in 2014; that orthotics needed by AOL were now generally made by Crown Orthotics; and that Crown Orthotics is in the business of manufacturing laboratory made orthotics for health practitioners (Najjarine 5.4.18 [59]–[66]). Dr Najjarine's evidence also indicates that he has used similar methods to promote AOL's or Crown Orthotics' business as he previously used to promote ICB Medical's business, by the delivery of seminars which promote its products, although on occasion under the names of other businesses under his control (Najjarine 5.4.18 [82]). Dr Najjarine also accepted in cross-examination that he ceased prescribing ICB Medical pre-made orthotics and referring work for lab orthotics to ICB Medical from February 2014, although his evidence was that he had not previously prescribed a substantial quantity of pre-made rather than custom-made orthotics, and he accepted that removing work from ICB Medical was detrimental to ICB Medical's business and accepted that initially AOL had done its own orthotic work and now part of that work was done by AOL and the balance by Crown Orthotics (T174). 6. Dr Najjarine sought to justify the referral of work to Crown Orthotics by reference to issues as to the quality of products produced by ICB Medical, or their suitability for use with the NAS. Issues as to the quality of ICB Medical's product were not established, where I am not satisfied that I can give significant weight to Dr Najjarine's evidence in that respect, and no other evidence was led to seek to establish such quality issues. There is also no evidence of Dr Najjarine having taken any systematic steps to seek to improve ICB Medical's manufacturing processes or to address any difficulties in the quality of its products, although he claimed in cross-examination to have written emails to Mr Kielt and sent him photographs which were not led in evidence (T189). I accept that it is at least possible that, as Dr Najjarine suggested, that may reflect issues as to the scale of the case and the difficulty in identifying relevant evidence. Dr Najjarine also claimed that, in moving business from ICB Medical, he had the interests of his patients in mind and did not want them to be compromised (T190). 7. Both Dr Najjarine and Mr Kielt also gave evidence, and were cross-examined, at some length as to the components of the NAS. The evidence indicates that the NAS is not proprietary in character and is a term used to refer to assessment protocols that are widely used, in differing combinations, in podiatry. While it is possible that the NAS reflects the particular manner in which those protocols are applied by Dr Najjarine, it was not established that the use of those protocols in that manner, for the purpose of diagnosis, would either prevent others using those protocols or prevent ICB Medical promoting similar steps which it subsequently described as the "ICB [Medical] anterior alignment method". I am also not persuaded that there was any inconsistency between use of the NAS system and the preparation of prescriptions using that system, and the manufacturing systems adopted by ICB Medical, particularly where Crown Orthotics used substantially the same prescription form as was previously used by ICB Medical. I therefore do not accept Dr Najjarine's evidence seeking to distinguish the markets of ICB Medical and Crown Orthotics, at least in respect of laboratory made orthotics, by reference to the method of diagnosis that is used. 8. In closing submissions as to the Cross-Claim, Ms Whittaker submitted that Dr Najjarine covertly established AOL and Crown Orthotics as businesses which compete with ICB Medical in the area of laboratory-made orthotics and in the area of pre-made orthotics, and utilise employees (or former employees) of ICB Medical to do so, and diverted business opportunities from the companies in the ICB Group to those competing businesses. Mr Carnovale submitted, in response, that the making of laboratory orthotics by Crown Orthotics is, in substance, no different from AOL making laboratory orthotics for itself, and that a former customer of a manufacturing business does not compete with that business by making, for itself, products that it formerly bought from the manufacturer. I am not persuaded by that submission. In my view, the conduct of Dr Najjarine in causing AOL to purchase from Crown Orthotics, and Crown Orthotics to supply, products that were previously acquired from ICB Medical is adverse to the latter's interests, and capable of constituting oppression in the relevant circumstances. Mr Carnovale also submits that the discussions between Mr Kielt and Dr Najjarine, in late 1999 and early 2000, were directed to the sale of mass produced China-made orthotics, and there was no discussion about ICB Medical making laboratory orthotics or AOL becoming its customer for laboratory orthotics at that time, and there was no mutual understanding as to what would occur if ICB Medical made laboratory orthotics. It seems to me that such an understanding can be inferred from the subsequent developments in ICB Medical's business and AOL's practice in acquiring such products from ICB Medical. 9. Ms Whittaker also submitted, in closing submissions as to the Cross-Claim, that the Court should find on the balance of probabilities that Dr Najjarine has taken preparatory steps to compete with the companies in the ICB Group in respect of pre-made orthotics. There is evidence as to several dealings between Dr Najjarine and his associated entities and a Chinese entity ("BDAC") which is an agent for Chinese suppliers of, inter alia, orthotic products, involving substantial expenditures, between July 2016 and August 2017 (Najjarine 5.4.18; Ex P7, Tabs 7, 8; T198). There were plainly issues with the adequacy of financial records produced by Crown Orthotics on subpoena, including ledgers and invoices for dealings between Crown Orthotics and BDAC, which Dr Najjarine attributed to issues with his emails having been "compromised" at the time that BDAC's bills were paid. Dr Najjarine subsequently expanded that allegation to suggest that not only his email system but also Crown Orthotics' computers had been compromised and that financial records, emails and correspondence were now difficult to find (T158). No evidence was led by Dr Najjarine to seek to corroborate the extent of any issue as to the relevant email and computer systems, and it was not apparent why that issue would have prevented the production of underlying financial records, assuming that Crown Orthotics is still in a position that it can maintain adequate financial records in respect of its business, as Dr Najjarine claimed (T154). 10. Dr Najjarine denied (Najjarine 5.4.18 [69]) that he, personally or through AOL or Crown Orthotics, intended to enter the pre-made orthotics market or the over the counter retail market, although that denial is not a complete answer to the evidence of earlier investigations of those matters. Dr Najjarine's evidence in cross-examination was that his meetings with BDAC were directed to acquiring a blank for use in manufacturing orthotics in the laboratory rather than the development of pre-made orthotics and that did not proceed (T148–149). Dr Najjarine also explained that a protractor acquired from BDAC was a "giveaway" that was not sold but provided for measurements using the NAS to diagnose issues that may require orthotic treatment (T150). Dr Najjarine's evidence in cross-examination as to these matters seemed to me to understate the significance of those dealings, and at points to verge on the evasive, and did not explain the extent of the expenditures with BDAC. 11. Ms Whittaker rightly accepted, in submissions, that the position in respect of this allegation was less clear than the position in respect of laboratory made orthotics. Mr Carnovale submitted that this allegation was not made good by the evidence to which ICB Medical refers. The evidence as to the dealings with BDAC at least raises the possibility that Crown Orthotics is seeking to extend its business to the making of premade orthotics, but does not establish on the balance of probabilities that it has done so. 12. Mr Kielt also claims that Dr Najjarine misappropriated the intellectual property of the ICB Group companies for Crown Orthotics and AOL. Dr Najjarine responds that he created the relevant documents and that ICB Medical's claim to copyright was advanced by Mr Kielt without his permission. The evidence establishes that Dr Najjarine and associated companies conducted presentations and published material that are substantially identical to material published by ICB Medical, for which ICB Medical has claimed copyright. Dr Najjarine has also copied documents used in the ICB Group companies' business to promote the businesses of AOL and Crown Orthotics, including using ICB Medical's prescription form in order to prepare a Crown Orthotics prescription form (Najjarine 5.4.18 [29]; Ex J2, Tabs 124–125; T181); used the pictures on the front of ICB Medical's packaging and some of the wording on that packaging to prepare packaging for AOL's competing products (Najjarine 5.4.18 [31]; Ex J2, Tabs 121-122); copied ICB Medical's newsletters to create "Fact Sheets" published on AOL's website (Najjarine 5.4.18 [28]; Ex J2, Tabs 117-119; T197); and copied the presentations he previously gave for ICB Medical in the presentations now given for his associated entities (Ex J2, Tabs 131-132). 13. There is a dispute as to whether Dr Najjarine on the one hand, or Mr Kielt and members of ICB Medical's staff on the other, or possibly both, originally prepared the relevant materials. The parties did not seek to lead objective evidence that might have cast light on that matter, such as evidence of the circulation of draft documents, and each of Dr Najjarine and Mr Kielt led contradictory evidence of the extent of their involvement in preparation of the documents. I am unable to determine the extent to which Dr Najjarine, Mr Kielt, other members of ICB Medical's staff, or publicly available information, was used to prepare those documents originally, where I have formed the view that both Dr Najjarine's and Mr Kielt's evidence is unreliable in respect of the matters that affect their respective interests. 14. It seems to me that, irrespective of the original authorship of the documents, or the legitimacy of ICB Medical's claim to copyright in them, Dr Najjarine's use of that material to promote a business competing with ICB Medical's business involved a serious breach of his director's duties, and is capable of supporting a claim in oppression by Mr Kielt, albeit that conduct appears to have occurred later in time than the events on which Dr Najjarine relies and may have been provoked by Mr Kielt's earlier conduct. 15. Mr Kielt also alleges that, from about January 2014, Dr Najjarine ceased to promote or participate in the business of the companies in the ICB Group. Dr Najjarine responds that there is no evidence that he was obliged to visit ICB Medical's laboratory to oversee and supervise the work, or that he was under any obligation to continue conducting seminars for ICB Medical indefinitely and for no fee; that ICB Medical stopped presenting seminars in Australia, after Dr Najjarine stopped conducting them, in February 2014; and that the seminars he presented for AOL or Crown Orthotics occurred after ICB Medical was no longer in the business of presenting seminars. That does not seem to me to be an answer to the fact that Dr Najjarine's conduct of such seminars, to promote a competing business, is adverse to ICB Medical's interests. 16. Issues as to a director's diversion of corporate or business opportunities are generally addressed by reference to the no conflict and the no profit rules applicable to a director under Australian law. Broadly, the no conflict rule prohibits conduct where a director has a personal interest or duty owed to a third party which gives rise to a real and sensible possibility of a conflict with his or her duty owed to the company. The no conflict rule has a strict application in the sense that, if a transaction has occurred in conflict of interest, a fiduciary (including a company director) cannot avoid a breach of that rule by asserting that the director was not acting with subjective dishonesty. That rule and the no profit rule, which provides that a director cannot obtain a profit from his or her fiduciary position without the company's consent, may overlap. 17. In Howard v Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83 at [31]–[37], French CJ and Keane J observed that: "The relationship of director and company is one of a class of accepted relationships which attract proscriptive fiduciary duties, including a duty 'not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict'. Those proscriptive duties attach to the powers and discretions exercised by company directors. As fiduciary agents, directors must exercise their powers 'honestly in furtherance of the purposes for which they are given' and not for their personal benefit or gain or for that of a third party. … Fiduciary duties apply beyond the exercise of powers and discretions flowing from the fiduciary relationship. A fiduciary cannot in his or her personal capacity be the subject of a conflict of interest. The general principle of equity, by reference to the liability to account, was stated by Deane J in Chan v Zacharia and was echoed in the unanimous judgment of the Court in Warman International Ltd v Dwyer: 'A fiduciary must account for a profit or benefit if it was obtained either (1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position.' … The scope of the fiduciary duty generally in relation to conflicts of interest must accommodate itself to the particulars of the underlying relationship which give rise to the duty so that it is consistent with and conforms to the scope and limits of that relationship. It is to be 'moulded according to the nature of the relationship and the facts of the case'. By way of example, company directors are frequently shareholders. The decisions they take as directors may therefore affect their personal interests. They do not breach their fiduciary obligations merely because in promoting the interests of the company they are also promoting their own. On the other hand, a decision taken by directors to advantage themselves other than as members of the general body of shareholders would constitute an abuse of fiduciary powers." 1. In Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524, Payne JA (with whom Gleeson and Leeming JJA agreed) summarised the no conflict and no profit rule as follows (at [105]): "A fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is a conflict, or a real or substantial possibility of a conflict, between the personal interest of the fiduciary and those to whom the duty is owed … A conflict arises if there is a real and sensible possibility that the personal interests of the fiduciary divide the loyalty of the fiduciary with the result that he or she could not properly discharge their duties to the beneficiary. …" 1. In Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd [2016] NSWCA 347; (2016) 116 ACSR 566, Bathurst CJ (at [4]; Sackville AJA to similar effect at [133]) observed that: "[D]ifferent minds may reach different conclusions as to the presence or absence of a real possibility of conflict between duty and interest or duty and duty and the doctrine cannot be inexorably applied without regard to the particular circumstances of the relationship." The Court of Appeal there upheld a finding at first instance that actions by a director in setting out a rival business could adversely affect a company in the conduct of its business, and that conduct had placed the director in a position where his duty to the company conflicted with his interests in establishing and promoting the new business. 1. It is also well-established that a director or senior employee who takes up a business opportunity within the scope of the company's actual or potential line of business, without the company's consent, may breach his fiduciary and statutory duties by doing so: Cook v Deeks [1916] 1 AC 554 at 563; [1916-17] All ER Rep 285; Green v Bestobell Industries Pty Ltd [1982] WAR 1; (1982) 1 ACLC 1; Mordecai v Mordecai (1988) 12 NSWLR 58; 12 ACLR 751; 6 ACLC 370; Edmonds v Donovan [2005] VSCA 27; (2005) 12 VR 513; Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789; (2014) 101 ACSR 233. In Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; (2011) 278 ALR 291 at [66], McLure P (with whom Buss JA agreed) observed that a fiduciary is under an obligation, without informed consent, not to promote his or her personal interest by making or pursuing a gain or benefit in circumstances in which there is a conflict or a real or substantial possibility of a conflict between the fiduciary's personal interest and those whom he or she is bound to protect. Her Honour (at [76]) noted a distinction between those cases in which the fiduciary was under a positive duty to acquire or seek to acquire a particular benefit or property for the company and where there is no such positive duty. This case falls into the former category. There can be no doubt, given the history of the parties' relationship, the circumstances in which ICB Medical was established and the previous referral of work by Dr Najjarine and AOL to ICB Medical, that his duties in respect of ICB Medical extended to a positive duty to promote the sale of orthotic products by ICB Medical. Ms Whittaker also submits, and I accept, that oppression may be established by a director's diversion of business opportunities to another company which he or she controls, and in which other shareholders in the company have no interest: Catalano v Managing Australia Destinations Pty Ltd [2014] FCAFC 55; (2014) 314 ALR 62 at [19]. 2. Irrespective of the subjective motivations of Dr Najjarine's conduct in respect of the manufacture of laboratory made orthotics by AOL, Crown Orthotics and Happy Feet Orthotics and his diversion of business to those entities and steps taken to promote those entities, it involved a substantial conflict of duty and interest, as between Dr Najjarine's duties as a director of ICB Medical and his interest in those competing businesses, exacerbated by the hostility which had developed between him and Mr Kielt. I am also satisfied that business opportunities of ICB Medical in respect of laboratory made orthotics were diverted by Dr Najjarine to AOL, Crown Orthotics and Happy Feet Orthotics. That conduct involved a serious breach of Dr Najjarine's director's duties and supports a claim in oppression by Mr Kielt, albeit that conduct appears to have occurred later in time than the events on which Dr Najjarine relies and may have been provoked by those events. Ms Whittaker also points out, and I accept, that there appears to be at least a coincidence in timing between the commencement of adversarial correspondence from Dr Najjarine's solicitors in respect of the issues raised in these proceedings and Dr Najjarine setting up a competing orthotics laboratory through AOL, producing laboratory made orthotics in competition with ICB Medical, and then (with his wife and brother) incorporating Crown Orthotics and referring AOL's orthotic work to Crown Orthotics. I am satisfied that oppression by Dr Najjarine is established at least in respect of his conduct as to laboratory made orthotics, diversion of business from ICB Medical to competing businesses and promotional activities for those competing businesses. Alleged failure to provide financial assistance 1. Second, Mr Kielt alleged that Dr Najjarine had failed and refused to provide appropriate financial assistance and support to ensure the companies in the ICB Group were and are able to meet their financial obligations as and when they fall due and their finance lease obligations in respect of motor vehicles. 2. Dr Najjarine responds to this allegation by contending that the companies in the ICB Group were only unable to meet financial obligations (if that were the case, which he does not admit) because Mr Kielt, Mr Joshua Kielt and Ms Naomi Kielt were taking money from the companies in excess of their entitlements, and that the "lease obligations" related to a vehicle used by Mr Joshua Kielt, which Dr Najjarine considered was an unjustified and extravagant use of ICB Medical's resources. The proposition that Mr Kielt and his family members had taken money from the companies was largely not established, where their claims were treated as debts owed by the companies which were generally not paid. 3. I am not satisfied that any conduct of Dr Najjarine was oppressive in that respect. The findings that I have reached above have the consequence that Dr Najjarine could not reasonably have had confidence in the correctness of the accounts of ICB Medical, so as to reach any proper assessment of whether financial assistance or support was required. It does not seem to me that a failure to provide financial assistance or support in those circumstances rises to the level of oppression. Failure to execute documents for Abu Trading 1. Third, Mr Kielt raised, but gave little attention to, a suggested failure to provide approvals for the ratification of documents necessary for Abu Trading to effect a change of registered business address. By his Defence to Cross-Claim, Dr Najjarine contends that his refusal to ratify documents in respect of Abu Trading was justified where he had been denied proper information about that entity and had not been permitted any role in its direction and management. I am not satisfied that Dr Najjarine could reasonably have had sufficient concern as to the manner in which Abu Trading had been established so as to decline to execute further documents until those concerns were addressed. I am also not satisfied that this matter, alone or together with other matters, would have been sufficient to establish a claim for oppression against Dr Najjarine. Failure to finalise ICB Group's accounts 1. Fourth, Mr Kielt alleged that Dr Najjarine failed and refused to finalise the accounts of the companies in the ICB Group for the financial years 2012/2013 to date. That allegation is undermined by the fact that ICB Medical's accountants have declined to advance the preparation of those accounts, while the dispute between the shareholders is pending. By his Defence to Cross-Claim, Dr Najjarine contends that his refusal to sign the accounts reflects his lack of satisfaction that they are true and fair. Dr Najjarine also relies, in that respect, on a dispute as to the matters addressed at the meeting in May 2012 and a challenge to the transfer of the amounts recorded under the heading "sundry creditors" to Mr Kielt. The conclusions that I have reached above have the consequence that Dr Najjarine could have had little confidence in the accuracy of those accounts, and could reasonably have declined to sign those accounts where there is every likelihood that they would not have complied with the relevant statutory obligations. This matter does not establish a claim for oppression against Dr Najjarine. 2. Mr Kielt also criticised Dr Najjarine's failure promptly to disclose the result of an accounting review of ICB Medical's accounts. As I noted above, in August 2014, Dr Najjarine instructed an accountant, Ms Fiona Bateman, to conduct a review of ICB Medical's accounts (T290). It appears that Ms Bateman's report was not provided to Dr Najjarine until May 2015 (T292) and he did not then disclose its findings to ICB Medical or Mr Kielt until that report was served in these proceedings. Dr Najjarine accepted in cross-examination that he knew that it would have been in the interests of ICB Medical for any inaccuracies to be resolved (T291–292). Dr Najjarine ultimately did not read Ms Bateman's affidavits or tender her report in these proceedings. It does not seem to me that this matter was properly raised by Mr Kielt's pleaded Cross-Claim. Even if it had been properly raised, there was no prospect that providing Ms Bateman's report to ICB Medical more promptly would have resolved the issues as to ICB Medical's accounts, where Mr Kielt and BDO largely did not concede the validity of the concerns raised in that report after it was served and Mr Kielt made no substantial attempt to correct the challenged transactions until offers made on the last two days of the hearings, which I will address below. Ownership of intellectual property 1. Fifth, Mr Kielt alleged that Dr Najjarine had made unjustified threats and claims in respect of inventing and owning intellectual property owned by the companies in the ICB Group or jointly with Mr Kielt. By his Defence to Cross-Claim, Dr Najjarine denies having made unjustified threats or claims in respect of these matters, implicitly on the basis that such claims were justified. 2. By a letter dated 17 June 2014, Dr Najjarine's solicitors sought to prevent ICB Medical from using the NAS technique at seminars (Ex J1, 2710). Dr Najjarine accepted in cross-examination that he understood he had no property rights in that system, at the time that demand was made, although he maintained that he had developed and conceived that system (T176). On 2 May 2017, at the last directors' meeting in respect of ICB Medical attended by Dr Najjarine, Dr Najjarine proposed a resolution to prevent ICB Medical from using the intellectual property owned by Foot Steps Orthotics (Kielt 2.2.18 [46], T298), which relevantly includes the patented ICB Medical dual-density pre-made orthotic. Dr Najjarine accepted in cross-examination, as he had to, that the course would not have been in the interests of the companies in the ICB Group (T298). 3. There is some evidence to suggest that Mr Kielt contributed to the development of the orthotic products promoted by ICB Medical, and Dr Najjarine had given evidence to that effect, and evidence of Mr Kielt's knowledge and experience in the production and manufacture of orthotic devices, in patent proceedings in New Zealand in 2010 (Ex J1, 1895ff). In cross-examination, Dr Najjarine accepted that Mr Kielt would be treated, at least in law, as a co-inventor of ICB Medical's pre-made dual density orthotic, although he plainly did not accept that Mr Kielt had made any significant contribution in that respect (T138). That acceptance is consistent with the evidence given by Dr Najjarine in patent proceedings in the High Court of New Zealand in 2010, where Dr Najjarine referred to co-developing that invention with Mr Kielt (T140), and with references to Dr Najjarine as co-inventor of ICB Medical orthotics in other publications (Ex J1, 1698). Given the concessions made by Dr Najjarine in cross-examination, it has not been established that Mr Kielt made no significant contribution to the development of the products over which he claims to have made such a contribution, notwithstanding the issues as to the credit of Mr Kielt's evidence generally. I am otherwise unable to reach any finding as to the ownership of that intellectual property, where I have little confidence in the evidence of either Dr Najjarine or Mr Kielt, and each claims to have had the predominant role in "inventing" the relevant items and preparing the relevant documents. It is otherwise not necessary to determine whether Dr Najjarine's claims to ownership of the intellectual property or the demand that ICB Medical should cease using it was oppressive, where I have found that each of Mr Kielt's and Dr Najjarine's conduct was oppressive on other more substantial grounds. Trading of Abu Trading 1. Sixth, Mr Kielt alleged that Dr Najjarine had hindered and prevented the effective operations of Abu Trading in its sales and marketing activities, although little attention was given to that allegation. In his Defence to Cross-Claim, Dr Najjarine responds that his actions in respect of Abu Trading were justified, because Mr Kielt denied him proper information about that subsidiary and refused him any role in its direction and management. This allegation appears to duplicate the earlier allegations as to Abu Trading, which I have addressed in paragraph 191 above. The oppression claim against Dr Najjarine is not established in this regard. Complaint as to allegations made by Dr Najjarine 1. Seventh, Dr Najjarine is alleged to have made continual unjustified allegations about the affairs and proper governance of the companies in the ICB Group to third parties, and to have made unjustified allegations about the provision of information concerning the affairs and management of those companies. In his Defence to the Cross-Claim, Dr Najjarine responds that any allegations that he made to third parties about the affairs of those companies and in respect of the provision of information were justified, or alternatively were honestly and reasonably believed by him to be justified, or were honestly believed by him to be justified. 2. Mr Kielt also refers to Dr Najjarine's repeated criticisms of Mr Joshua Kielt's involvement in providing seminars for ICB Medical in China, at least after Dr Najjarine had ceased to do so. As I noted above, Dr Najjarine initially brought, but did ultimately not pursue at the hearing, a claim in that respect in his oppression case. Mr Joshua Kielt is not qualified as a health professional. Mr Kielt's evidence in cross-examination was that, since 2012 or 2013, Mr Joshua Kielt had trained doctors in China in lower limb biomechanical procedures and how ICB Medical products could be used, although those seminars did not include everything that Dr Najjarine had previously undertaken and, in particular, did not include treatment of patients (T515–516). Mr Kielt's evidence is that, while Mr Joshua Kielt would demonstrate where a doctor would place his or her hands to undertake an assessment of a foot, the doctors would themselves make that assessment, and Mr Kielt's evidence was that lay persons employed by ICB Medical and its predecessors had previously undertaken the same approach (T519). 3. It does not seem to me that Dr Najjarine's criticisms of Mr Joshua Kielt's involvement in these seminars have been established. It appears that Mr Joshua Kielt has given seminars in which medical practitioners participate in China, intended to promote ICB Group's products. Dr Najjarine does not lead evidence to establish that there are any legislative requirements for the giving of such seminars in China, and Mr Kielt's evidence is that such seminars are commonly given by sales staff in promoting orthotic products. There is no evidence, including by any independent professional or any third party, that ICB Group's standing among professionals was, was likely to be or even might be diminished by that conduct, or that Mr Joshua Kielt gave any relevant advice at such seminars or that any such advice was erroneous. Nonetheless, it does not seem to me that Dr Najjarine's making these criticisms rises to the level that could establish oppression on his part. 4. Mr Kielt also submits that Dr Najjarine wrongfully alleged with no proper basis that Mr Kielt has caused ICB Medical unlawfully to evade tax and asserted that Mr Kielt should disclose that matter on ICB Medical's behalf to the ATO. I am satisfied that those allegations had a reasonable basis, at least so far as the issue of consulting fees by LWS is concerned. It follows from the findings that I have reached above that it has not been established that the wider complaints made by Dr Najjarine could be said to be without substance or not reasonably raised. Oppression is not established against Dr Najjarine in this respect. Communications by Dr Najjarine's solicitors 1. Mr Kielt also alleges that Dr Najjarine hindered and prevented the efficient operation and management of the companies in the ICB Group by instructing his solicitors to send some 65 communications to Mr Kielt from February 2014 until the date of the Cross-Claim, 22 May 2017. The findings that I have reached above indicate that Dr Najjarine had reason for concern as to the conduct of the ICB Group companies' affairs. It seems to me the aggressive and voluminous correspondence sent by Dr Najjarine's solicitors, throughout the relevant period, would not have promoted the prospects of any sensible resolution of the matters in issue in the proceedings. I am, however, not satisfied that this matter rises to the level that would constitute oppression on Dr Najjarine's part. Dr Najjarine's conduct in directors meetings 1. Mr Kielt alleges that Dr Najjarine engaged in "improper conduct" during directors' meetings, although that allegation was narrowed, in the course of the hearing, to his refusal to provide information as to the competing businesses that he had established at such meetings. In his Defence to Cross-Claim, Dr Najjarine denies that his conduct during directors' meetings was improper. This claim is derivative of the claim that Dr Najjarine had in fact established competing businesses, and it is not necessary to determine this claim given the finding that I have reached that oppression is established in respect of those businesses. Amounts payable by AOL to ICB Medical 1. Mr Kielt alleges that Dr Najjarine caused AOL to fail and refuse to repay debts owing to ICB Medical consistent with its trading terms. In his Defence to Cross-Claim, Dr Najjarine does not respond to the allegation that he caused AOL to fail and refuse to repay debts owing to ICB Medical consistent with its trading terms, and advances the unilluminating defence that any action that he took was justified, or alternatively was honestly and reasonably believed by him to be justified, or alternatively was honestly believed by him to be justified. Little attention was given to this claim in evidence in the parties' submissions. It is not necessary to determine this matter given the findings that I have reached on other grounds. Buy/sell life insurance 1. Mr Kielt alleges that Dr Najjarine also refused to execute buy/sell life insurance in respect of a particular policy, so as to ensure that his shareholding would revert to ICB Medical on his death or disability, where ICB Medical paid and continued to pay the premiums on the policy. In his Defence to Cross-Claim, Dr Najjarine does not address the factual basis of the allegation as to the buy/sell life insurance agreement, but submits that if ICB Medical has paid the premium, then the law protects its interests in respect of that money. It is also not necessary to determine this matter given the findings that I have reached on other grounds. The parties' wider submissions as to oppression and relief 1. I should now address wider submissions made by the parties, particularly in respect of the relief claimed by them. In closing submissions, Mr Carnovale submitted that the affairs of ICB Medical and the other companies in the ICB Group were conducted in a manner that was oppressive to, unfairly prejudicial to, or unfairly discriminatory against Dr Najjarine and that those companies should be wound up, or alternatively that it was just and equitable that those companies be wound up. The matters to which he referred largely related to ICB Medical, rather than the other companies in the ICB Group. Dr Najjarine did not plead that oppression was established by reason of the lack of financial return to him from ICB Medical, over the several years of his involvement with that entity, although references to that matter were made in the course of submissions. I should not approach the case on that basis where it was not fairly raised in the pleadings. 2. Mr Carnovale also addressed, in closing submissions, several matters which he accepted were not pleaded, on which he relied only as going to Mr Kielt's credit, relating to the lack of reference to shares in ICB UK in ICB Medical's financial statements; the backdating of a share transfer between Mr Kielt and ICB Medical; incorrect statements in ICB Medical's tax returns and applications for expert market development grants as to its interests in ICB UK and Abu Trading; and the appointment of Mr Joshua Kielt as a director of another entity, Australian Biomechanics Association Ltd. Ms Whittaker in turn responded to the attacks upon Mr Kielt's credit in respect of those matters. Although I have referred to several of those matters above, I do not consider it necessary to reach findings about them, and I do not treat them as in issue in respect of the substantive relief sought. 3. Mr Carnovale submitted, in closing submissions, that a company could be wound up on the basis of oppression where there was conduct involving "commercial unfairness, or involving a visible departure from the standards of fair dealing referring, inter alia, to Morgan v 45 Flers Avenue Pty Ltd above; Boyd v Feeney [2017] NSWSC 1595 at [35]. Mr Carnovale accepted that Dr Najjarine's conduct was a relevant factor in the balancing exercise involved in determining whether oppression was established. Mr Carnovale also submitted that an order for winding up, rather than a compulsory purchase, may be appropriate where the Court concludes that both parties have acted oppressively toward the other: Supercar International Holdings Ltd v Sommers [2011] NSWSC 336; (2011) 84 ACSR 466 at [275]; Catalano v Managing Australia Destinations Pty Ltd above at [47]; Re Pure Nature Sydney Pty Ltd above at [68]. Mr Canovale rightly accepted, in closing submissions, that an order to wind up an otherwise solvent company is a remedy of "last resort" although there is no principle that a winding up order cannot be made against such a company: Tomanovic v Global Mortgage Equity Corporation Pty Ltd above at [289]; Hillam v Ample Source International Ltd (No 2) (2012) 202 FCR 336 at [68]–[70]. I will assume, without deciding, that ICB Medical is solvent, where neither party submitted to the contrary. 4. Mr Carnovale also contended, in closing submissions, that it was just and equitable that ICB Medical be wound up for the purposes of s 461(1)(k) of the Corporations Act, and noted that such an order could be made where there was deadlock in the management of a company's affairs, and where the Company was formed on the basis of a personal relationship involving mutual confidence that had broken down. In closing submissions, Mr Carnovale submitted that a winding up order could be made on the "just and equitable" ground on the basis that there was a deadlock in ICB Medical's management and Mr Kielt has demonstrated a lack of understanding of fundamental commercial matters. It seems to me that the first of those matters was squarely raised and addressed by the evidence in the proceedings and I have addressed the relevant issues above. I do not consider that I could fairly grant relief on the second basis, where it was not pleaded and Mr Kielt was not afforded the opportunity to lead evidence that was squarely directed to it. In any event, nothing turns upon those matters, where I have found that oppression was established, but the Court would not order a winding up on just and equitable grounds where less intrusive orders, in the nature of a buy-out at a value that adjusts for the impugned transactions, would remedy that oppression. 5. Ms Whittaker submitted that Mr Kielt caused no material detriment to the companies in the ICB Group or Dr Najjarine, where the only amount paid to Mr Kielt (as distinct from recorded as a debt owing to him or his associated companies or family members) that is referrable to any of the impugned transactions is the amount of $28,000 paid on or about 27 June 2013. I do not accept that submission, where the transactions in issue involved the creation of debts recorded as owed by ICB Medical to Mr Kielt, which would have had a significant impact in any valuation of Dr Najjarine's equity in ICB Medical in a buy-out or in a winding up. Ms Whittaker also submitted that Mr Kielt had not unreservedly asserted the truth of the liabilities recorded in his favour. While that may accurately record Ms Whittaker's approach in submissions, it does not record Mr Kielt's position, where those liabilities were squarely asserted in his affidavit evidence in opposition to a winding up order. 6. Ms Whittaker also submitted that the fact that ICB Medical had taken accounting advice from Mr Green and BDO tended against a finding that the impugned transactions were oppressive. It may be that Mr Green's and BDO's role largely did not extent beyond acquiescence in the impugned transactions, as distinct from advising as to their propriety. Irrespective of that acquiescence, a reasonable director in Mr Kielt's position would have understood that the impugned transactions were not properly founded and advantaged Mr Kielt, his associated companies and his family members and disadvantaged Dr Najjarine. In those circumstances, it does not seem to me that the fact that ICB Medical's accountants acquiesced in those transactions is an answer to oppression: compare Hunter v Organic and Natural Enterprise Group Pty Ltd [2012] QSC 383; (2012) 92 ACSR 183 at [103]. Ms Whittaker submitted, and I accept, that any acquiescence by Dr Najjarine in the conduct in issue may be relevant both to whether oppression is established, and to the relief that should be granted: Dick v Alan Powell Holdings Pty Ltd [2009] QSC 184 at [43]. However, such acquiescence has not been established on the findings that I have reached above. 7. Ms Whittaker also submitted that several of Dr Najjarine's grounds of oppression relate to conduct that has ceased, for example as to Mr Kielt's previously having been registered as the sole shareholder of ICB UK. It is not necessary to address the principles applicable to whether relief for oppression can be granted in respect of conduct that is no longer continuing, where the effect of recording the several disputed liabilities, which were significant in amount, continued up to and throughout the hearing. Ms Whittaker also submitted that the Court would find that Mr Kielt is less culpable than Dr Najjarine. I would not reach that finding, where the financial transactions which I have referred above seem to me to be significant, preceded Dr Najjarine's conduct, and are likely to have provoked that conduct. I consider that both Mr Kielt's and Dr Najjarine's conduct was of a serious character, and both are significantly culpable in that regard. 8. Ms Whittaker submitted, by reference to Mr Pyne's evidence, that the companies in the ICB Group are compliant in regard to both their lodgement obligations with ASIC and the ATO. However, that submission amounted to no more than a statement that those companies have obtained ASIC's and the ATO's consent to not lodging financial or reporting documents, while the proceedings are ongoing, and have in fact not lodged such documents. That matter has little weight. 9. Ms Whittaker also submitted that Dr Najjarine's oppression claim is part of an interconnected strategy, directed to ending his association with Mr Kielt through the winding up of ICB Medical and its associated companies, while retaining its business for Dr Najjarine. Ms Whittaker identified several steps in that strategy, including the establishment of Crown Orthotics in competition with ICB Medical, Dr Najjarine moving the business of AOL, initially to AOL and then to Crown Orthotics, and Dr Najjarine's failure to participate in ICB Medical's business, including ceasing involvement in marketing ICB Medical's products at seminars since 2014. Ms Whittaker also referred to Dr Najjarine's failure to bring accounting issues or concerns, the subject of his primary claims, to Mr Kielt's or BDO's attention until these proceedings were commenced. It seems to me that the effect of the orders sought by Dr Najjarine would be to promote the competing businesses with which he is now associated, and it may be that they are intended to achieve what they would in fact achieve. That, however, does not undermine the significance of the matters that I have addressed above, or of the liabilities recorded in ICB Medical's accounts without a proper basis. 10. Ms Whittaker submitted that Dr Najjarine's conduct identified in the Cross-Claim constitutes oppressive conduct and would ordinarily justify the relief sought in the Cross-Claim, namely a buy-out order in Mr Kielt's favour, although she accepted that the Court would have regard to the issues in the proceedings as a whole when considering any such relief. She submitted that the companies in the ICB Group should not be wound up, but an order should be made for Mr Kielt to purchase Dr Najjarine's shares in those companies. Mr Kielt initially sought an order under s 233 of the Corporations Act that he purchase, and implicitly that Dr Najjarine sell, all shares held by him in the several companies at a price of 50% of the net value of the companies. That order, if made in the form that was initially proposed, would have had reference to the value of the companies, after taking into account the debts and liabilities recorded in their financial records, including the several debts and liabilities to Mr Kielt, his companies and members of his family that, as I have found above, did not have a proper basis. I would not have made that order on that basis. Mr Kielt only addressed that difficulty, in part, in submissions on the penultimate day of the hearing and more fully on the final day of the hearing, as I will note below. 11. Ms Whittaker submitted that the Court would not make a winding up order, on the just and equitable ground, where Dr Najjarine is the principal contributor to the breakdown of the relationship; Mr Kielt would have worked with Dr Najjarine to resolve the issues; the breakdown in relations has not frustrated the sensible operations of ICB Medical, and it continues to operate as a going concern; and Mr Kielt has made reasonable offers to buy out Dr Najjarine. I do not accept that Dr Najjarine has contributed to the present position, to a greater extent than Mr Kielt, for the reasons noted above. I also do not accept that Mr Kielt had made reasonable offers to buy out Dr Najjarine's shares, prior to the orders formulated on the last day of the hearing, where such offers had not excluded the debts and liabilities arising from the impugned transactions. Ms Whittaker also points to the adverse implications of a winding up of ICB Medical, which include the loss of employment for several employees, the loss of capital contributed to establishing ICB UK and Abu Trading, a potential impact on employee entitlements, possible difficulties in sale of stock which was the subject of forward orders as at March 2018 and consequences for ICB Medical's Australian and international distributors. I accept that those are relevant matters. 12. Ms Whittaker also drew attention to s 467(4) of the Corporations Act, applicable where a winding up order is sought on the just and equitable ground. Ms Whittaker submits that the matters identified in that section, including the availability of some other remedy, and whether the applicant is acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy, are also applicable where a winding up order is sought under s 233 of the Corporations Act: Asia Pacific Joint Mining Pty Ltd v Allways Resources Holdings Pty Ltd [2018] QCA 048; (2018) 125 ACSR 227 at [46]–[47], [62]. McMurdo JA there observed, in an observation which is of significance relevance in this case, that: "In my view, the reasonableness of the applicant's position is to be assessed by reference to the consequences of the events and circumstances upon which the application is founded and what is necessary to redress them. If they could be redressed only by a winding up, then the pursuit of a winding up order would not be unreasonable in the relevant sense. On the other hand, if there is an alternative remedy which would equally redress those consequences, then an applicant's preference for a winding up order would usually be considered to be unreasonable, because ordinarily the winding up of a solvent company will have far reaching effects. It will not only deprive the other shareholders of their investment in a solvent enterprise, but it will also be likely to affect the interest of others, such as the company's employees and third parties whose interests from transacting business with the company would be affected. It is the likelihood of substantial and wide ranging prejudice of this kind which would cause judges to describe a winding up of a solvent company in this context as an extreme step." 1. On the penultimate day of the hearing, Mr Kielt offered an undertaking to propose a resolution to Dr Najjarine, vote in favour of the resolution and execute any necessary documents to give effect to the resolution, which would have involved the replacement of BDO with another firm of accountants and an instruction to that firm to make "appropriate adjustments" to ICB Medical's accounts to address a number of the impugned transactions (MFI 19). Mr Carnovale identified a number of specific criticisms of the terms of that undertaking, in the course of submissions, which it is not necessary to address. Its fundamental difficulty was the uncertainty of the adjustments which were proposed, or would have been made, by the new accountants. The Court could not have granted an injunction in the terms of that undertaking, given its lack of certainty, and could not have accepted that undertaking where it could not have granted a corresponding injunction. 2. On the penultimate day of the hearing, Mr Kielt also proposed, for the first time, an undertaking not to assert the existence or enforceability of the liability recorded in his favour of $431,044.66, arising from the transaction recorded in the minutes dated 30 June 2011, or of $44,616.40, referable to travel allowances, or the amount of $32,707.55 with respect to annual leave to 2009, and not to cause LWS to assert the existence of enforceability of certain amounts (MFI 20). That undertaking would have gone some way in avoiding the fundamental difficulty with an order for the purchase of Dr Najjarine's shares in ICB Medical by Mr Kielt, to which I referred above, that the value of those shares would be substantially reduced by the amounts improperly recorded as debts owing to Mr Kielt and LWS. It would not have addressed the amounts recorded in ICB Medical's financial records as liabilities to Mr Joshua Kielt and Ms Naomi Kielt which I have also found were not properly based. 3. On the final day of the hearing, Mr Kielt proposed a form of orders, by which he would purchase Dr Najjarine's shares in ICB Medical and the other companies in the ICB Group by reference to their "market value" at the date of judgment, with that price to be calculated on a basis that made adjustments to ICB Medical's financial accounts in respect of identified transactions (MFI 21). Ms Whittaker made clear that the orders reflected the orders that Mr Kielt contended should be made if the Court reached adverse conclusions to him in respect of each of the matters in issue. I have reached adverse conclusions to Mr Kielt in respect of the treatment of the amount of $475,661.06 arising from the minutes dated 30 June 2011 and the amount referable to travel allowances; the amount of $26,671.55 claimed to be due to LWS; the loan account of $98,470 claimed to be due to Mr Joshua Kielt; the loan account of $18,673.40 claimed to be due to Ms Naomi Kielt; the amount of $32,707.55 referable to annual leave for Mr Kielt; the amounts of $11,601.70, $15,069.85, $35,978.28 and $77,000 recorded in the LWS loan account; the amount of $69,934.14 recorded as TOIL in respect of Mr Joshua Kielt; and the amount of $30,037.29 in respect of long service leave referable to Mr Kielt. Mr Kielt accepts that any valuation would also need to take account of income tax that would have been payable by ICB Medical in the relevant years, having regard to those adjustments, at least to the extent that it had regard to historical earnings of ICB Medical. Mr Kielt subsequently proposed amended orders which addressed several criticisms made by Mr Carnovale of the detail of those orders (MFI 22). 4. It seems to me that an order for Mr Kielt to buy out Dr Najjarine's shares in ICB Medical and the other companies in the ICB Group on that basis will sufficiently address the oppressive conduct that has been established without the adverse impacts on third parties, including employees, arising from a winding up, and without allowing Dr Najjarine to use a winding up order to advance his and his associated entities' adverse interests as trade competitors of ICB Medical. In principle, a valuation could be undertaken of Dr Najjarine's equity in the companies in the ICB Group, by reference to future cashflow, excluding the liabilities to which I have referred above, and having regard to income tax that would properly be payable on those future earnings. The financial adjustments that would be required to bring about a purchase of Dr Najjarine's shares at fair value, by excluding debt that I have held was not properly recorded as owed to Mr Kielt, his associated companies and members of his family, are relatively straightforward and Mr Kielt has proposed orders that would largely bring them about. There is no reason to think that those adjustments would not address all relevant matters, given the detail of the exploration of ICB Medical's financial affairs in these proceedings. Where an order of that kind can appropriately address the oppression, a winding up order should not be made. 5. Where a winding up order is not made, it seems to me several factors support an order that Mr Kielt should buy Dr Najjarine's shares, rather than the reverse, in circumstances that I have found oppressive conduct by both Mr Kielt and Dr Najjarine. First, as Mr Kielt points out, he has had a more substantial involvement in the day-to-day business of the companies in the ICB Group over a lengthy period. It is also a relevant factor to relief that the growth of ICB Medical's business has been funded, at least in part, by an overdraft guaranteed by both Dr Najjarine and Mr Kielt, but secured only against Mr and Mrs Kielt's home, where Dr Najjarine did not provide security for that overdraft (Kielt 8.4.16 [46]–[48]; Najjarine 13.15.16 [5.105]; Kielt 2.2.18 [58]). A winding up would potentially adversely affect Mr and Mrs Kielt, so far as it may be likely to generate a requirement for repayment of any overdraft and a potential claim against that security. 6. Second, Mr Kielt also has a continuing involvement in that business, whereas Dr Najjarine has withdrawn from any significant involvement in that business, and involved himself in the competing businesses of AOL and Crown Orthotics, since 2014. Third, Mr Kielt does not seek compensation, in any buy-out order, for any diversion of business to AOL or Crown Orthotics or other breach of duty by Dr Najjarine. On the other hand, it would be difficult to adjust, in determining the value at which Dr Najjarine could buy out Mr Kielt's shares, for the effect of diversion of business and the other conduct of Dr Najjarine to which I have referred above, and neither party advanced submissions or proposed orders as to how such an adjustment could be made. This is not a case, by contrast with the position which I considered in Re Pure Nature Sydney Pty Ltd above, where there is any conceptual difficulty in making adjustments in a valuation process that will eliminate the effect of the oppressive conduct on the part of Mr Kielt. 7. While I will make an order that Mr Kielt buy out, and Dr Najjarine sell, Dr Najjarine's shares in the companies in the ICB Group, I will not order the appointment of a single expert to value those shares as Dr Najjarine proposed. It seems to me that there is little or no prospect that the parties would agree common assumptions for such an expert, and the appointment of such an expert would be the precursor to a range of further disputes as to his or her instructions. I will instead make orders for each party to serve their respective expert evidence, based on assumptions they agree or otherwise adopt at their own risk, in respect of the valuation of those shares. There will then need to be a further hearing to determine the value of Dr Najjarine's shares, if the parties cannot agree that matter so as to avoid the costs of that further hearing. I should add, for completeness, that I do not consider it necessary to make orders in respect of amounts that would be credited to directors' loans accounts, as proposed by Mr Kielt, if Dr Najjarine does not consent to them, even to the extent that they would be in his favour. Orders and costs 1. In the result, Dr Najjarine has not been successful in obtaining the relief that he sought, namely a winding up order of the relevant companies. Dr Najjarine has failed in several of the matters alleged against Mr Kielt, and in significant aspects of his defence of the Cross-Claim, which together took up a substantial portion of the hearing time. Mr Kielt has succeeded in defending Dr Najjarine's winding up application, but only by reason of a position first advanced on the last day of a lengthy hearing. Had he not advanced that position, the companies in the ICB Group would have been wound up by reason of his and Dr Najjarine's conduct, because a buy-out order that did not exclude the debts improperly created in favour of Mr Kielt, his family members and his companies would not have done justice to Dr Najjarine. 2. I had, in the course of the hearing, drawn the parties' attention on several occasions to the fact that the conduct of the hearing, by both of them, might raise the possibility that no order as to costs would be made in favour of a successful party. In the result, Dr Najjarine has not achieved the result he sought, and Mr Kielt has only succeeded in achieving a much less favourable buy-out order than he originally sought by reason of a last minute change of position. It seems to me that the proper course will be to make no order as to the costs of the proceedings and leave each party to bear his own costs. I will, however, allow the parties a brief opportunity to be heard in that respect. 3. I direct the parties to bring in agreed short minutes of order to give effect to this judgment within 14 days or, if there is no agreement, their respective draft short minutes of order and submissions not exceeding 10 pages, in one and a half spacing, as to any differences between them. ********** Amendments 02 October 2018 - Correct typographical errors paras [103], [220] 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. Decision last updated: 02 October 2018