• Lawyers in Sydney
• Lawyers in Melbourne
• Lawyers in Brisbane
• Lawyers in Perth
• Family lawyers
• Employment lawyers
• Criminal lawyers
• Wills and estates lawyers
• Find a lawyer

Judgment - ex tempore (revised 8 december 2016)

1. By Further Amended Interlocutory Process filed 1 December 2016, the Applicant, Mr Brian Murdoch, and potentially also Mudgee Dolomite & Lime Pty Ltd ("Company"), to the extent that leave may be available to Mr Murdoch to pursue a claim on the Company's behalf, seek several orders in respect of the conduct of these proceedings, which are brought by Mr Robert Murdoch to wind up the Company. Two of those orders were pressed at the hearing today. The first, being the primary form of relief sought by Mr Brian Murdoch, is an order under r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) dismissing the proceedings. The alternative form of order sought was an order staying the proceedings until such time as the fair value of Mr Robert Murdoch's shareholdings in the Company can be agreed by Mr Brian Murdoch and Mr Robert Murdoch or otherwise determined by a binding valuation process, so as to give effect to an unconditional offer made by Mr Brian Murdoch by letter dated 11 November 2016 from his solicitors to Mr Robert Murdoch's solicitors for the purchase of Mr Robert Murdoch's shares in the Company. I interpolate that subsequent versions of that offer have been made, the latest relied upon being made by a letter dated 2 December 2016.
2. The parties relied on extensive affidavit evidence in respect of the application, particularly Mr Robert Murdoch in defence of the application. However, the issues raised by the application ultimately seem to me to be narrow ones, and the application should be determined on a narrow basis. For that reason, it has not been necessary for me to hear Mr Insall, who appears with Mr Mantziaris on behalf of Mr Robert Murdoch in the application.
3. The first and primary relief sought by Mr Brian Murdoch is an order under r 13.4 of the Uniform Civil Procedure Rules dismissing the proceedings. That rule provides, relevantly, that the court may order that proceedings be dismissed generally or in relation to a claim if it appears to the court that the proceedings are frivolous or vexatious, or no reasonable cause of action is disclosed, or the proceedings are an abuse of process of the court.
4. Ultimately, Mr Brian Murdoch's submission in support of that relief reduces to a straightforward proposition, namely that the proceedings for winding up of the Company are frivolous or vexatious, or no reasonable cause of action is disclosed, or the proceedings are an abuse of the process of the Court, because Mr Robert Murdoch seeks an order that the Company be wound up on the just and equitable ground, and Mr Brian Murdoch has made an offer to buy out Mr Robert Murdoch on terms that are said to represent fair value. That proposition has the corollary that generally, or at least in this particular case, it is a complete answer to a winding up application for one shareholder to offer to buy the other out at fair value. As will emerge below, it does not seem to me that that proposition is well-founded, either generally or in this particular case.
5. I have been taken, by Mr Bedrossian who appears for Mr Brian Murdoch, to matters which disclose that the winding up application is sought, on the just and equitable ground, on several bases. In substance, the evidence led by Mr Robert Murdoch, an affidavit of whom was tendered as an exhibit to his solicitor's affidavit (Ex R1) refers to difficulties within the corporate governance of the Company, including the alleged absence of meetings and an alleged refusal to agree to a succession plan, and indicates Mr Robert Murdoch's belief that the appointment of a liquidator with the skills and independence to review the affairs of the Company is the only effective way both to prosecute litigation that is currently before the Court, as derivative proceedings commenced by Mr Brian Murdoch, and to effect a realisation of shareholder interests in the Company and other associated group entities. There is also evidence that Mr Robert Murdoch, and possibly also Mr Brian Murdoch, have age and health issues which impact on their future roles in the Company.
6. Mr Bedrossian relies on these matters to establish that Mr Robert Murdoch does not have a continuing wish to have an interest in shares in the Company. There seems to me to be two difficulties with that proposition. The first is that what Mr Robert Murdoch indicates, in his affidavit evidence, is that he considers that in the relevant circumstances the Company is presently dysfunctional, and ought to be wound up, and that the appointment of a liquidator will be the best means of realising its assets. The second is that Mr Robert Murdoch indicates, in correspondence between the parties, in response to the offers which have been made by Mr Brian Murdoch, that an alternative to Mr Brian Murdoch's acquisition of Mr Robert Murdoch's shares would be Mr Robert Murdoch's acquisition of Mr Brian Murdoch's shares. It seems to me that a shareholder whose primary position is that the Company should be wound up may properly take an alternative position of that character, because he or she, having acquired the shares of the other shareholder, could then sell the assets of the Company, bringing about the same result as would likely result from a liquidation. That is, of course, not the same result as a position where Mr Brian Murdoch acquires Mr Robert Murdoch's interest in the shares, whether at fair value or otherwise.
7. I have also been taken by Mr Bedrossian to a series of offers made by Mr Brian Murdoch in respect of the relevant shares. Those offers started, relatively recently, on 11 November 2016, with an offer to purchase Mr Robert Murdoch's shares for a specified sum, or an alternative offer to purchase those shares at the fair value of the shareholding (Ex R3, 192-193). That offer was rejected, by letter dated 18 November 2016, from Mr Robert Murdoch's solicitors, on the basis that it failed to reflect fair market value for Mr Robert Murdoch's shares and failed to address the chose in action reflected by the derivative proceedings commenced by Mr Brian Murdoch on behalf of the Company (Ex R3, 195). A further offer was made by Mr Robert Murdoch's solicitors dated 18 November 2016, by which Mr Robert Murdoch in turn offered to purchase Mr Brian Murdoch's shares, albeit that form of resolution is inconsistent with the winding up order sought in the proceedings, but consistent with the fact, to which the letter refers, that Mr Robert Murdoch claims to have previously made other proposals for the resolution of a deadlock, formally and informally since October 2016, which he contends have not been accepted.
8. By letter dated 21 November 2016, Mr Brian Murdoch's solicitors in turn confirmed that Mr Brian Murdoch's offer to acquire Mr Robert Murdoch's shareholding remained open, and foreshadowed the relief that is now sought in the proceedings. By letter dated 24 November 2016, Mr Robert Murdoch's solicitors in turn explained the basis of the rejection of the offer previously made by Mr Brian Murdoch, including identifying the issue as to the value attributed to the Company's chose in action, being the proceedings brought by Mr Brian Murdoch on the Company's behalf. By a further letter dated 24 November 2016 Mr Brian Murdoch's solicitors responded that the fair value of Mr Robert Murdoch's shares in the Company would include a proportion of all of its assets, including the derivative proceedings, and therefore asserted, in effect, that the offer that was made guaranteed the result of fair value. That proposition, perhaps, did not entirely recognise the difficulties that may arise in a valuation of shares, so far as there will never be one single, self-evidently correct, fair value of shares, which will often be the result of contested issues, a valuer's judgment, and, to some extent, the result of the methodology adopted by the particular valuer and the basis on which he or she proceeds. Further correspondence followed, including, more recently, a further offer by Mr Robert Murdoch to acquire Mr Brian Murdoch's shares, allowing a margin of five percent to reflect the value of the derivative action and a counter-offer made by Mr Brian Murdoch on the same basis.
9. I have dealt with this correspondence at some length, although it seems to me that its detail is ultimately not relevant to the determination of the application brought by Mr Brian Murdoch. Dealing with the steps in that application in turn, it does not seem to me that it could properly be found, on any basis, that the proceedings are frivolous or vexatious or that no sensible cause of action is disclosed, by reference to the fact that Mr Brian Murdoch has offered to purchase Mr Robert Murdoch's shares at fair value. It appears, on the face of the proceedings, that Mr Robert Murdoch seeks a winding up order on the just and equitable ground, where there is evidence, relied on in this application, that may establish that there has been, to a substantial extent, a breakdown of the relationship between the parties. The application for winding up of the Company may face formidable obstacles, to which Mr Bedrossian refers, including the fact that the Company is apparently solvent, and a winding up order will ordinarily be a last resort in those circumstances, and the fact that the offers made by Mr Brian Murdoch may, on one view of them, offer an alternative means of Mr Robert Murdoch exiting the Company. Each of those matters may be strong discretionary considerations in respect of a winding up order, and may suggest that relief other than a winding up order will ultimately be appropriate: see for example, Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 348 343 at [109]-[110]; Belgiorno-Zegna v Exben Pty Ltd [2000] NSWSC 884; (2000) 35 ACSR 305; ASIC v Planet Platinum Ltd [2015] VSC 682 at [17]ff. Mr Bedrossian also referred to the decision in Vinciguerra v MG Corrosion Consultants Pty Ltd [2010] FCA 763; (2010) 79 ACSR 293; however, that decision dealt with an application for leave to bring derivative proceedings under s 237 of the Corporations Act, although in aid of a winding up application, and in any event recognised (at [87]) that a proposal by a shareholder to sell his shares for a satisfactory price and a winding up application could coexist.
10. Neither of the matters on which Mr Bedrossian relies is a complete bar to the success of a winding up order, but are merely matters that are circumstances, or important circumstances, or very important circumstances, to be taken into account in the exercise of the Court's discretion as to the form of relief which should be granted. It could not be said that, because the Company is solvent, or because one shareholder has offered to buy out the other, a winding up application will necessarily fail. It also could not be said, because of those matters, that the pursuit of that winding up application is an abuse of process. It is readily conceivable, whether or not it is a likely result, that the Court might find that in particular factual circumstances, the issues surrounding the breakdown in the parties' relationships, or the difficulties involved in a valuation process, are such that a winding up order is the proper course in the particular circumstances. Alternatively, if each party seeks to buy out the other, as the correspondence suggests, then the Court may find that there is a question of which party should be permitted to buy out the other, or that neither party should be permitted to buy out the other, and that a sale of the Company's assets on market, undertaken by a liquidator, is the best result. Where all of those results are open results, at a hearing on the merits, then it could not be said that the pursuit of the winding up is either frivolous or vexatious, or that no reasonable cause of action is disclosed, or that the proceedings are an abuse of the process of the Court. Importantly, the Court does not, at the point that it deals with applications for summary dismissal of this kind, prejudge matters, which must ultimately be determined on the merits, in the light of the evidence that is available in a final hearing.
11. An alternative submission was put by Mr Bedrossian that the Court should stay these proceedings until such time as the fair value of Mr Robert Murdoch's shares in the Company is determined in oppression proceedings, which have only recently been commenced by Mr Brian Murdoch. This appears to reflect essentially the same line of reasoning, which tends to assume that Mr Brian Murdoch should be permitted to buy out Mr Robert Murdoch, rather than vice versa, and assume that a buyout will necessarily be ordered, to the exclusion of a winding up, and then, on that assumption, seeks to defer the winding up proceedings so that that valuation can be determined for that purpose. It seems to me that that order also should not be made, for the same reasons, because both of the assumptions underlying it should not be accepted. Even where the primary relief, or the only relief, sought by Mr Robert Murdoch is a winding up order, it does not follow that the only alternative to a winding up order is Mr Brian Murdoch buying out Mr Robert Murdoch, rather than the reverse. It also does not follow that, even if a buyout at fair value were available, the Court would necessarily not, as distinct from would likely not or probably not, wind up a solvent company in the relevant circumstances.
12. No doubt, issues of case management may arise if both the winding up proceedings and the oppression proceedings are on foot. I raised with the parties the possibility that an order should properly be made that those proceedings be heard together, although Mr Bedrossian, for Mr Brian Murdoch, did not immediately accede to that proposition, on the basis that the winding up proceedings could be heard at an earlier date than the oppression proceedings. That will be one relevant factor. Another relevant factor will be the risk of inconsistent findings in the two proceedings, unless identity of parties has the consequence that the findings made in the winding up proceedings will bind the parties in both proceedings. This is an issue that ought to be determined, as a matter of case management, and it is at least to be hoped that all of the proceedings are in the same place, that is the same division or list of the Court, such that all matters can be addressed by a judge having the capacity to make directions in them. Those are not matters that I need address now, where the parties did not seek to be heard about them, and it appears that at least some of the proceedings are in the General Equity List, rather than in the Corporations List.
13. It is sufficient, that I indicate that, for present purposes, the Further Amended Interlocutory Process filed on 1 December 2016 should be dismissed with costs.