Q You had two starts?
A Yes."
53 I should at this stage refer to the accounts of the various entities. Whilst accounts can provide valuable contemporaneous evidence, the problem with these accounts is that the versions available were printed out in 2005, long after this litigation commenced. Furthermore, it is clear that at least some alterations had been made to them. For example, an item was shown as a loan to the fourth defendant at a time when the fourth defendant had not been incorporated. In these circumstances, little reliance can be placed on the accounting records.
54 Subsequently, the business previously conducted by the first defendant was conducted by the fourth defendant. Furthermore, the business of the partnership, whether or not it had been vested in the first defendant, was vested in the fourth defendant. It may be that the businesses were not conducted under the fourth defendant's ABN and TFN until late 2004. However, the accounts were made showing the income as the fourth defendant's and the income was returned for taxation purposes as the fourth defendant's.
FINDINGS OF FACT
55 I find that Mr Bessounian never was a member of the Australian Wholesale Mortgages partnership. I do not accept his word that he was in 2000 invited to work with Mr Sengoz and Ms Pireh on the basis that he was a partner. It may be that the possibility of future partnership was mentioned. But they were the sole owners of the business name (as Mr Bessounian knew); they provided the premises in which the business was carried on; and they, not he, bore the losses of the partnership. Certainly in the year ended 30 June 2002 he was treated as an employee of the partnership and a group certificate records the payment to him of wages and allowances of more than $43,000 in that year. Previously cheque butts record various payments to him by the Willow Group, some attributed to commission. All these matters conduce to the conclusion that he was not a partner.
56 I find that in late 2001 there were discussions among the three as to when the business should be incorporated and in early 2002 there was an agreement that a company would be incorporated with the three as directors and equal shareholders and that a mortgage origination business would be conducted in the company. I find that this agreement was reached on the basis that all three, and certainly Mr Bessounian, would work in and devote their time to the business of the company. I find that it was decided that business would commence in the company in the new financial year, that is, in July 2002. Everybody proceeded on this basis, the business continuing to be conducted in the partnership, until the events of April 2002.
57 There is not a great deal of disagreement about what passed in the conversations of 2 and 26 April 2002. The principal disagreement is as to whether a target or requirement of $5,000,000 loans per month had been imposed on Mr Bessounian prior to April 2002. I do accept that in 2000 or 2001 Mr Sengoz and Ms Pireh had calculated $5,000,000 per month as the break even point for the business and had had conversations with each other concerning this. But I find difficult to determine the question of whether this figure had been stipulated to Mr Bessounian prior to the beginning of April 2002 as a target which he must reach for their arrangements to be put in place or to continue. On the one hand it is strange, if no such stipulation had been made, that he did not make a protest to that effect in April 2002 (which on all accounts of those conversations he did not). On the other hand, it is strange that, if there were such a term in the arrangements, Mr Sengoz and Ms Pireh proceeded to put the arrangements including Mr Bessounian concerning the first defendant into effect in February 2002, when it was already clear that Mr Bessounian was not meeting this target. I have already commented on the dubious quality of the evidence of all three participants. I am unable to find on the uncertain evidence before me that $5,000,000 per month had been stipulated to Mr Bessounian prior to the beginning of April 2002 as a target which he must reach for their arrangements to be put in place or to continue.
58 The long and the short of it is that, upon his dismissal, Mr Bessounian left the organisation as it then existed and subsequently set up a mortgage origination business for himself. On 26 June 2002 he resigned as a director of the first defendant as of 1 May 2002, expressing a wish no longer to hold that position in the company.
59 He was offered $75,000, apparently calculated by reference to trail commissions on the transactions he had written. It would seem this offer was made as a gesture of good will towards him and his brother Raphael. It would seem he was expected in return to transfer his shares in the first defendant, but at that stage they were in effect of no commercial value as the company had not commenced operations.
DEFENDANTS' CONTENTIONS
60 The defendants contend that for a transaction or a course of conduct to be oppressive it must involve unfairness. The unfairness must be judged in the context of all relevant circumstances. Here the plaintiff had not been a member of the partnership and had no interest in the business of Australian Wholesale Mortgages as conducted by the partnership. When he pressed in late 2001 to be given an interest in the business, this was acceded to by Mr Sengoz and Ms Pireh. However, the interest agreed to be given was by way of a shareholding in the first defendant. Business was not to commence in the company until the following July. Whilst the shares were issued, by the time business commenced in the company the association between Mr Bessounian and Mr Sengoz and Ms Pireh had ended. Mr Bessounian never in any way participated in the business conducted by the first defendant. In those circumstances, there was no unfairness in removing that business from his purview.
PLAINTIFF'S CONTENTIONS
61 At first, the main thrust of the plaintiff's case was that he was a member of the partnership which initially conducted the business of Australian Wholesale Mortgages and that this business was from July 2002 conducted and owned by the first defendant. Mr Sengoz and Ms Pireh in late 2002 and early 2003 attempted to devalue his shares by "flooding" the company by the capital raising then entered upon. Although they desisted from the issue of those shares, they thereupon incorporated the fourth defendant and subsequently moved the business or businesses conducted by the first defendant under the name Australian Wholesale Mortgages to the fourth defendant in which the plaintiff had no interest. This was said to be a classically oppressive action.
62 As the case progressed, it became plain that Mr Bessounian's case that he was ever a member of the partnership was very weak. He thereupon shifted the focus of his submissions and submitted that, as Mr Sengoz and Ms Pireh chose from July 2002 to conduct the Australian Wholesale Mortgages business in the first defendant of which Mr Bessounian was undoubtedly a shareholder, from the commencement of the conduct of that business Mr Bessounian had an interest in it through the company. Whatever the previous dealings between the parties, it was oppressive to him for that business to be removed from the first defendant into a company in which he had no interest.
CONCLUSIONS
63 Essentially I accept the defendants' contentions. For the Court to make an order under s 233 of the CA, the transactions or the course of conduct proved would need to involve commercial unfairness in the context of all the relevant circumstances, the plaintiff bearing the onus of establishing the unfairness. The circumstances of this case lead me to conclude that he has not established that the defendants' conduct was commercially unfair at any time.
64 The plaintiff was not a member of the partnership and had no interest in the business of Australian Wholesale Mortgages as conducted by the partnership. Although the partnership was still entitled to trail commissions arising from transactions negotiated by the plaintiff, those trail commissions were the property of the partnership. He had no interest in or entitlement to those trail commissions unless through the arrangements for his remuneration, which are not entirely clear. But it does appear that he had in fact been remunerated or was entitled to be remunerated for his work in effecting those transactions by the payment of salary or commission and allowances. However, the plaintiff was never made a partner or given an interest in the business.
65 In late 2001 the plaintiff pressed to be given an interest in the business. Mr Sengoz and Ms Pireh responded by agreeing to the commencement of business in the first defendant, of which Mr Bessounian was to be a director and in which he would hold one third of the shares. The first defendant was incorporated in February 2002, but was not to commence business until July 2002. The company was to embody a partnership among Mr Bessounian, Mr Sengoz and Ms Pireh, on the terms usual in such circumstances that all would work in and contribute to that business and, in particular, that Mr Bessounian would work in and contribute to that business. But, before that business could commence, the relationship between the three broke down. Mr Bessounian ceased working for the partnership. He resigned as a director of the first defendant. He never engaged in or contributed to the business that was subsequently conducted by the first defendant. Whoever was at fault (if anyone) in the termination of the relationship, it simply had ceased to exist before the first defendant commenced in operation.
66 It is no doubt unfortunate that, whatever Mr Sengoz and Ms Pireh's belief as to whether or not Mr Bessounian continued as a shareholder after 20 June 2002, they chose to commence business in a company of which he was in fact a shareholder. It is also unfortunate that they commenced what could be interpreted as a "flooding" operation in a way which is often an instrument of oppression. Nonetheless, I have come to the conclusion that, viewed objectively, their removal from the first defendant of the business ought not be regarded as commercially unfair, because Mr Bessounian did not ever participate in that business and because the relationship which was to operate between Mr Bessounian, Mr Sengoz and Ms Pireh was terminated before it came into operation.
67 The first issue is therefore determined in favour of the defendants. In these circumstances, the second and third issues do not arise for decision. The proceedings must be dismissed.