Catalano v Managing Australia Destinations Pty Ltd

Date of hearing: 15, 16, 17, 18, 19, 22, 23, 24, 26 April 2013

Date of last submissions: 6 May 2013

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 287

Counsel for the Plaintiffs and the First, Second, Fourth and Fifth Cross-Respondents: Mr M Bennett

Solicitor for the Plaintiffs and the First, Second, Fourth and Fifth Cross-Respondents: Shaw McDonald

Counsel for the Defendants and Cross-Claimants: Mr M B Evans

Solicitor for the Defendants and Cross-Claimants: Norton Gledhill

Counsel for the Third Cross-Respondent: Mr R Notley

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 715 of 2012

MAUREEN & NATHAN CATALANO AS TRUSTEES OF THE EQUICAP PTY LIMITED PROVIDENT FUND (ABN 70 739 750 546)

AND: MANAGING AUSTRALIAN DESTINATIONS PTY LIMITED

THE GOURMET DIM SIM COMPANY PTY LIMITED (ACN 156 541 712)

AND FINE FOOD SOLUTIONZ PTY LTD (ACN 134 923 005)

JUDGE: FLICK J DATE OF ORDER: 10 JULY 2013 WHERE MADE: SYDNEY

1. The parties bring in Short Minutes of Orders to give effect to these reasons within 28 days. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 715 of 2012

MAUREEN & NATHAN CATALANO AS TRUSTEES OF THE EQUICAP PTY LIMITED PROVIDENT FUND (ABN 70 739 750 546)

AND: MANAGING AUSTRALIAN DESTINATIONS PTY LIMITED

THE GOURMET DIM SIM COMPANY PTY LIMITED (ACN 156 541 712)

AND FINE FOOD SOLUTIONZ PTY LTD (ACN 134 923 005)

JUDGE: FLICK J DATE: 10 JULY 2013 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The present proceeding was commenced by way of an Originating Application filed on 24 May 2012. A Statement of Claim was subsequently filed on 20 July 2012. Thereafter there have been a series of amendments to the pleadings. 2 As at the date of final hearing, there is a Further Amended Originating Process filed on 15 April 2013 and a Further Amended Statement of Claim filed on 23 April 2013. The First Plaintiff is Mr Nathan Catalano. Mr Nathan Catalano and his step-mother (Ms Maureen Catalano) are also Plaintiffs in their capacity as trustees of a superannuation fund (Equicap Pty Limited Provident Fund, "Equicap"). Mr Nathan Catalano's father (Mr Samuel Catalano) is joined to the proceeding as the Fourth Cross-Respondent to the Cross-Claim. These parties can conveniently be referred to as "the Catalano camp". 3 The Third Plaintiff is the company at the heart of the present dispute, Fine Food Solutionz Pty Limited ("Fine Food Solutionz"). 4 Included as Defendants are Managing Australian Destinations Pty Limited ("Managing Australian Destinations"), Mr Juy Hepner and his step-father, Mr Byron Kurth. These parties can conveniently be referred to as "the Kurth/Hepner camp". 5 The Cross-Claimants in the Amended Notice of Cross-Claim filed on 15 April 2013 are Mr Juy Hepner and Kurth Management Pty Ltd. Included as Cross-Respondents are Messrs Nathan and Samuel Catalano and Ms Maureen Catalano. Also included as a Cross-Respondent is Innova Foods Pty Ltd ("Innova Foods"), a company associated with the Catalano family and through which it was argued that the Catalano camp diverted the profits of Fine Food Solutionz. It should be noted that the Amended Notice of Cross-Claim was dismissed as against Innova Foods at the outset of the hearing. 6 The principal issue in dispute is the fate of the company Fine Food Solutionz. In very summary form, that company carries on the business of supplying Asian food products to a number of retailers, including Woolworths and Coles. A business operated by Mr Peter Broadbent called WonSum had long supplied Fine Food Solutionz with a product known as shu mai and also meat balls. Mr Broadbent's manufacturing facility was located at Hoppers Crossing in Victoria. Fine Food Solutionz has also been supplied with food products (including gyoza and dumplings) from Barramundi Gardens in Port Douglas, in northern Queensland. 7 The 1000 shares in Fine Food Solutionz are held by Equicap (500 shares), Kurth Management Pty Ltd (200 shares) and Mr Hepner (300 shares). There are currently two directors of Fine Food Solutionz - Mr Byron Kurth and Mr Nathan Catalano. But they are unable to agree on the future direction of the business. One of the issues - but only one of the issues - upon which they have been divided is the prudence of "vertically integrating" the manufacture and supply of its product by establishing a manufacturing and distribution factory in Sydney. Freight and storage costs, so it is said, could thereby be minimised. 8 The issues dividing the parties have previously been the subject of proceedings before this Court, namely: an interlocutory hearing before Middleton J in Victoria on 9 March 2012; and a further interlocutory proceeding before Yates J in Sydney on 13 June 2012: Catalano v Managing Australian Destinations Pty Ltd [2012] FCA 632. There has also been a proceeding before: the Fair Work Commission in respect to the termination of the services of Mr Hepner: Hepner v Fine Food Solutionz [2013] FWC 1523. 9 Orders sought by the Plaintiffs in the Further Amended Originating Process include an order pursuant to s 233(1)(d) of the Corporations Act 2001 (Cth) ("Corporations Act") for the purchase of the shares. The Claimants in the Amended Notice of Cross-Claim, who are both Defendants to the original proceeding, seek a like order that they be entitled to purchase the outstanding shares. Those in each camp claim that for the purposes of s 232(e) of the Corporations Act, those in the opposing camp have conducted the business of Fine Food Solutionz in a manner which is "oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members…". A variety of declaratory relief is also sought, together with orders claiming damages. 10 The divergence of views as to the future conduct of the business of Fine Food Solutionz is such that the only way of bringing finality to the dispute is by way of judicial resolution. Prior attempts to mediate the dispute have proved unsuccessful. 11 It is concluded that the conduct of the business of Fine Food Solutionz by Mr Nathan Catalano and those in the Catalano camp is such that it falls within s 232(d) and (e) of the Corporations Act and that an order should be made (inter alia) for the purchase of their shares by members of the Kurth/Hepner camp pursuant to s 233(1)(d) as sought in the Cross-Claim. 12 It should also be noted that the Further Amended Originating Application includes causes of action relating to breaches of directors duties and breaches of the Competition and Consumer Act 2010 (Cth). Despite the myriad of causes of action there relied upon, the focus of attention during the course of both the hearing and the oral and written submission centred upon the competing claims of oppression. Other claims for relief fell by the wayside. If any other particular and discrete claim for relief requires further consideration, a limited liberty is reserved to the parties to apply to advance such further submissions as is considered appropriate.

FINE FOOD SOLUTIONZ & THE ARRIVAL OF THE CATALANOS 13 The origins of the business of Fine Food Solutionz can be traced back to a business primarily operating out of Port Douglas. Mr Juy Hepner had developed a series of recipes for Asian food products, which were being distributed under the name "Crazy Dragon Gourmet Foods". 14 Consideration as to the means whereby the business could be progressed was being undertaken from at least late 2009. In September 2009 Mr Kurth had retained persons to conduct a Process Review of the "Crazy Dragon Business". That Process Review identified a number of deficiencies in the business. In June 2010 a Business Information Memorandum was prepared largely by Mr Hepner with input from Mr Kurth on financial aspects. It set forth an analysis (inter alia) of the business of Fine Food Solutionz and a "vision" for the future. When addressing what it described as an "Investment Opportunity", the review contemplated an investor providing $850,000 for a 20% equity.

The arrival of the Catalanos & the Heads of Agreement 15 The involvement of the Catalano family can be traced back to Mr Nathan Catalano looking for business opportunities and his coming across the website for Crazy Dragon. On 5 July 2010, Mr Nathan Catalano sent an email to Mr Hepner, expressing an interest in becoming involved in the Crazy Dragon business. 16 The fate of the two family interests was ultimately sealed with the execution of a Heads of Agreement on 23 November 2010. There was a variation of the Heads of Agreement on 3 June 2011. 17 In contrast to the content of the Business Information Memorandum stands the Heads of Agreement. 18 The Heads of Agreement as executed on 23 November 2010 contained a variety of provisions, including provision for the conduct of due diligence by Equicap (cl 1); the transfer of the Crazy Dragon "business name" to Fine Food Solutionz (cl 3); the sale of shares as between existing shareholders (cl 11); the sale of shares to third parties (cl 13); and warranties by Mr and Ms Kurth and Mr Hepner (cl 14.). 19 The Heads of Agreement also provided as follows for the provision of $250,000 by Equicap and the payment of monies to Managing Australian Destinations, referred to in the Heads of Agreement as "MAD" : 5. Equicap Loan Equicap will lend [Fine Food Solutionz] the sum of $250,000 by way of five monthly advances of $50,000 commencing on the 49 days after the date of this Agreement and subject to a satisfactory outcome to the due diligence investigations (as provided in clause 1 hereof) and the transfer of half of the shares in [Fine Food Solutionz] and the transfer of all of the shares in [Good Food Solutionz] to [Fine Food Solutionz]. Each subsequent advance shall be conditional on the performance of this agreement and the adherence of the Companies to the business plan but not on any deviation from the business plan caused by the default of Equicap. The loan shall from the date of the first advance by Equicap bear interest at the rate of 10% per annum to be paid or accrued monthly. 6. MAD Loan and Second Mad Loan [Fine Food Solutionz] shall pay the MAD Loan in the sum of $250,000 and pay (or alternatively accrue) to MAD interest on the MAD loan calculated at the rate of 10% per annum, to be paid or accrued monthly as from 49 days after the date of this agreement. The parties acknowledge that MAD is owed by [Fine Food Solutionz] a further $150,000 (the Second MAD Loan). The parties agree that the total to be paid to MAD in respect of the MAD Loan or the Second MAD Loan will not exceed in total $400,000 in any event and that the parties other than Equicap will provide a release from any of them to each of the companies for any loan other than the MAD Loan and the Second MAD Loan. The Second MAD Loan shall not bear interest if and to the extent MAD and [Fine Food Solutionz] agree the Second MAD Loan may be repaid by paying MAD the sum of $150,000 or part thereof for strategic marketing services provided to [Fine Food Solutionz] by MAD. Clause 11 provides for the "Sale of Shares between Existing Shareholders", and states (in part): Subject to paragraph 11, in the event of serious default by any shareholder or a deadlock at a meeting of directors in relation to a substantial issue, which default or deadlock continues for 14 days after written notice of the same is given by a shareholder (not relying on his own default) to all other shareholders, the parties agree that any shareholder in the Companies may acquire the shareholdings of any other shareholder in the following way … That power was limited by Clause 12, which provided as follows: Conditions of Exercise of Power to Purchase Shares from Other Shareholders The power set out in paragraph 11 may only be invoked by a shareholder and/or director after all of the following has occurred, namely: (a) 30 June 2011; and (b) the discharge of the security that has been given over 22 Beachfront Mirage, and Lot 7, Bilkey Ct, Echuca; and (c) the release of Byron and Vicki [Kurth] from any liability (other than as an equal guarantor with the director appointed by Equicap) to the Bank of Queensland in relation to the loan from that Bank. Clause 16 provided as follows: Employees Nathan Catalano and Juy [Hepner] shall each be salaried employees of [Fine Food Solutionz] on terms and conditions and salaries to be determined by the directors. 20 The Deed of Variation to the Heads of Agreement executed on 3 June 2011 recited that Equicap had completed its "due diligence" and had paid "3 instalments totalling $158,434.62 in respect of the Equicap Loan and will pay a further $43,565.38 on signing of this Amending Agreement and the fifth and final instalment on 9 June 2011". The relevant amendment to the earlier agreement was to delete from clause 6 the acknowledgment of the second MAD loan and the reference to the agreement as to the second MAD loan. The second to fourth sentences in clause 6 were thus deleted. 21 After the execution of the Heads of Agreement difficulties quickly emerged. 22 One matter fundamental to these competing accounts was the outcome that each camp envisaged as being achieved by the execution of the Heads of Agreement. 23 The expectations of those in the Kurth/Hepner camp and those in the Catalano camp were, accordingly, pursued in cross-examination. Relevant to whether one camp or the other was being oppressed was a consideration as to what each camp sought to achieve by executing the Heads of Agreement. 24 In the Kurth/Hepner camp, the expectation was that they would gain the "retail connections" of Mr Nathan Catalano and the management skills of both Mr Nathan Catalano and Mr Samuel Catalano. The expectations of Mr Kurth assumed particular significance. In cross-examination, he was taken to the manifest discrepancy between seeking $850,000 for a 20% share in the company as suggested by the Business Information Memorandum to the deal effected by the Heads of Agreement. The explanation provided by Mr Kurth was as follows: There's a significant difference between $850,000 for a 20 per cent stake, and $250,000 for a 50 per cent stake; do you agree with that?---Yes. What changed between early 2010 and November 2010 that caused you to agree to the lower of the two purchase prices?---Well, at this stage I think we were just looking for venture capitalists so that we could get the funding to put in place the right structures, as outlined in that document that you just showed us before. Obviously to put in a lot of those processes, and the process review needed capital injection, and we were hopeful that maybe we could sell the dream to someone, but that was as an equity partner, buy-in, whereas when the Catalanos came, we saw potentially the benefit that they brought to the business with their experience in the marketplace, and so, therefore, we felt that they would help us move forward. The - do you agree that a 20 per cent stake valued at $850,000 would value the business in total at [$]4.5 million?---I believe that's probably the calculation. But a 50 percent stake for [$]300,000 - for [$]250,000 would value the business at [$]500,000?---Again, it's - yes, that's the right math. Well, the difference between those is [$]3.75 million. Are you saying that that difference was justified because of the management skill that Nathan Catalano was bringing to Fine Food Solutionz?---No. Well, what other differences - - -?---It was the skills of Sam Catalano. Sam Catalano?---Yes. And Nathan. And what - - -?---The two of them as a package. What skills were those?---Well, I believe Nathan had the sales skills and the retail connections, and Sam had the management and accounting skills, and the knowledge of running large companies. So you knew - or you considered Sam had management and accounting skills; is that right?---Absolutely. And you were looking to take advantage of those skills in the business?---Well, that was - yes, part of the reasons we went into partnership with them. The role to be played by Messrs Nathan and Samuel Catalano after their services were secured was thereafter pursued as follows: And you say that Nathan's skills and Sam's skills were a combination for which you were willing to take less capital?---Yes. Because you wanted the Catalano input into the Fine Foods Solutionz business?---Yes. ... Prior to the entry of the heads of agreement, was it your intention, in relation to your investment in Fine Food Solutionz, to hold onto that long term, that is, hold your shareholding through various entities or directly, for the longer term?---In Fine Food Solutionz? Yes?---The - the discussions that we had prior to the heads of agreement, with the Catalanos, was to get it to a point - the business to a point where it could potentially be an attractive offering for a larger company to buy out. So ---- ?----That was my - that was my anticipation, so to hang on to the shares until that buyout occurred. Yes. So the - I will paraphrase it, and we can just agree with my description - the intention was to build up the value of the business to the point where it could be sold - - - ?---Yes Mr Kurth intended to allow Mr Nathan Catalano "some free rein" in carrying out the functions as initially envisaged - but he denied that he intended to "sit back". He explained this position as follows: After the heads of agreement was executed, did you sit back and allow the Catalanos free rein in the business?---I allowed them some free rein. Why did you - - -?---But I didn't sit back. Why did you do that if it wasn't your intention before the heads of agreement were signed?---Because they were bringing expertise that I wanted in the business, and I gathered that that's what their roles were. We provided all the recipes, the equipment, the contacts, and lots of other things. We were expecting them to fulfil their obligations into bringing together the different areas of administration that they said they would bring to the business. So I wasn't going to overrule them on that. And did they end up bringing the contacts and levels of administration you anticipated?---Well, they brought their levels of - as I said, we provided the contacts and the recipes and the machinery. They brought the administration in that they - yes, they did. The explanation provided by Mr Kurth is accepted. 25 The Kurth/Hepner camp, in very summary form, claimed that there had been misrepresentations by the Catalano camp and that the manner in which that camp sought to conduct the business was oppressive to their interests. Conversely, the Catalano camp maintained that there had been misrepresentations on the part of the Kurth/Hepner camp and that it was the Catalano interests that were being oppressed.

The development of the business of Fine Food Solutionz 26 Whatever may be the merits of the competing claims by those in the opposing camps, there can be no doubt that the business of Fine Food Solutionz improved, particularly if a comparison is made between the years preceding 2010 and thereafter. 27 A snapshot of the evolution of the business of Fine Food Solutionz is provided by the following table setting forth the quantum of gross sales from 2006 to 2012: Year Gross Sales Tra[d]e creditors owed Net Profit Net Equity 2006 $56,149 Unknown -$112,840 Unknown 2007 $183,569 Unknown -$180,311 Unknown 2008 $355,542 Unknown -$39,814 Unknown 2009 $77,844 $93,217 -$74,504 -$73,504 2010 $615,038 $245,867 -$174,734 -$248,238 2011 $687,153 $306,415 -$216,754 -$464,992 2012 $3,154,986 $445,010 $66,824 -$405,669

It was further an agreed fact that the turnover of Fine Food Solutionz for the financial year ending 30 June 2012 was $3,206,739 compared with $756,212 for the year ending 30 June 2011. It may be further noted that Messrs Nathan and Samuel Catalano commenced their involvement with Fine Food Solutionz in December 2010. 28 Those in the Catalano camp seize upon this "turnaround" in the business of Fine Food Solutionz in support of a final proposition that it is they - and they alone - who can successfully carry forward the business. To grant the relief sought by the Kurth/Hepner camp in the Amended Notice of Cross-Claim, they submit, will only bring about the downfall of the business.

OPPRESSION - GENERAL PRINCIPLES 29 It was common ground that the very real difficulty in the present proceeding was the resolution of the many competing factual claims. There was limited diversion between the competing camps thereafter as to the application to those facts of the relevant statutory provisions and the range of available relief. The opposing camps were even in agreement in advancing a joint submission that an order for the winding up of Fine Food Solutionz should not be made. 30 Notwithstanding the absence of disagreement as to the general principles to be applied, the statutory provisions of central relevance and the applicable principles should be briefly set forth. 31 Section 232 of the Corporations Act provides as follows: Grounds for Court order The Court may make an order under section 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. For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company. Section 233(1) provides as follows: The Court can make any order under this section that it considers appropriate in relation to the company, including an order: (a) that the company be wound up; (b) that the company's existing constitution be modified or repealed; (c) regulating the conduct of the company's affairs in the future; (d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law; (e) for the purchase of shares with an appropriate reduction of the company's share capital; (f) for the company to institute, prosecute, defend or discontinue specified proceedings; (g) authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company; (h) appointing a receiver or a receiver and manager of any or all of the company's property; (i) restraining a person from engaging in specified conduct or from doing a specified act; (j) requiring a person to do a specified act. Section 234 outlines who can make an application under section 233 as follows: (a) a member of the company, even if the application relates to an act or omission that is against: (i) the member in a capacity other than as a member; or (ii) another member in their capacity as a member; or (b) a person who has been removed from the register of members because of a selective reduction; or (c) a person who has ceased to be a member of the company if the application relates to the circumstances in which they ceased to be a member; or (d) a person to whom a share in the company has been transmitted by will or by operation of law; or (e) a person whom ASIC thinks appropriate having regard to investigations it is conducting or has conducted into: (i) the company's affairs; or (ii) matters connected with the company's affairs. 32 "The statutory jurisdiction created by ss 232 and 233 … provides a means by which the court can look beyond legal rights and do what is just and equitable in the particular circumstances": Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342 at [85], 71 ACSR 343 at 357 per Barrett J. Once the discretion conferred by s 233 "has been enlivened by a finding of oppression under s 232, the court has a wide discretion as to both the appropriate remedy and, if it orders compulsory purchase of shares, as to the mode of valuation of the shares": Smith Martis Cork v Benjamin Corporation Pty Ltd [2004] FCAFC 153 at [70], 207 ALR 136 at 145-146 per Wilcox, Marshall and Jacobson JJ. 33 The expression "company's affairs" in both s 232 and s 233 includes - by reason of s 53(a) and (c) - "the promotion, formation, membership, control, business, trading, transactions and dealings" of the company and also its "internal management and proceedings…". 34 Although there has been some academic and judicial discussion as to the manner in which s 232(d) and (e) are to be construed, it seems to be now recognised that: section 232(d) provides a ground of relief separate from s 232(e); and the expression "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" in s 232(e) is a "compound expression." See: Ford's Principles of Corporations Law at para [11.450] (14th ed., 2010). In Szencorp Pty Ltd v Clean Energy Council Ltd [2009] FCA 40, 69 ACSR 365, Goldberg J summarised the present position as follows: [59] The "contrary to the interests" provision now contained in subpara (d) of s 232 has a separate and distinct area of operation from the "oppression" provisions in subpara (e) of s 232. The manner in which a company is being administered and in which its affairs are conducted may fall within the category of conduct contrary to the interests of the company's members as a whole although it may not be described as oppressive, unfairly prejudicial to, or unfairly discriminatory against members of the company … An example of such conduct may be found where a company is formed for the purpose of undertaking particular activities but the directors and management disregard those activities and direct the company into different commercial areas. [60] An essential feature of the "oppression" provisions in subpara (e) of s 232 is whether or not there has been commercial unfairness. … 35 The term "oppression" embraces a width of conduct and it is neither desirable nor possible to give an exhaustive account of that conduct which will or will not amount to oppression: Shelton v National Roads and Motorists' Association Ltd [2004] FCA 1393, 51 ACSR 278. Tamberlin J there observed: [23] It is not practicable to delineate the numerous ways in which oppressive conduct may be established. The Court will generally look at the overall course of conduct and consider whether it is so unfair that reasonable directors would not consider it fair. If directors exercise a power so as to impose a disability or burden on a member that is unfair according to ordinary standards of reasonableness and fair dealing, then such conduct may be described as oppressive. The question is one of fact and degree for the Court to determine, having regard to the view the directors have formed themselves, and allowing for any special skill or knowledge possessed by the directors. The test of unfairness is objective … Conduct, for example, which is "inconsistent with arrangements and understandings between shareholders may be so unfair that it amounts to oppression": Weatherall v Satellite Receiving Systems (Aust) Pty Ltd [1999] FCA 218 at [13], 30 ACSR 698 at 701 at per Whitlam J. 36 One of the many ways in which oppression may emerge is where salaries and emoluments are paid to those who run a business at the expense or to the detriment of the members as a whole. Thus, by way of example, in Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549 at 560 Waddell CJ in Eq concluded: In a general sense the evidence, in my opinion, justifies the conclusion that the second defendants are providing themselves with a salary and emoluments which are above the level which can be justified having regard to the plaintiff's position as a one-third shareholder. The 1984 year is, I think, significant in this respect. The adjusted profit after income tax was $9,714, out of which a dividend of $3,000 was paid, thus providing the plaintiff with $1,000 as his share of the profits. The total of the second defendants' salary and emoluments was $169,000 approximately. There would not appear to be very much room for providing the plaintiff with similar salary and emoluments had he remained as a director and done the work which Mr Moynihan was engaged to do. This consideration indicates that the dividend which was declared was not fair to him in that year. In the 1985 year the remuneration provided for the second defendants seems to me to be plainly more than could be justified having regard to the interests of the plaintiff. In these circumstances it should, I think, be concluded in a general sense that the defendants have conducted the affairs of the company in respect of their own salaries and emoluments in their own interests and not in the interests of the members as a whole and that the affairs of the company are being conducted in a manner which is oppressive to the plaintiff. The extent of the unfairness to the plaintiff remains to be determined and is bound up with the question of what is an appropriate valuation to place on his shares, which is considered below. 37 Whatever the conduct relied upon to make out a claim of "oppression", that conduct is looked at - as repeatedly acknowledged - objectively and through the eyes of a commercial bystander: Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704. Young J there summarised the position as follows: … it has been accepted that one no longer looks at the word "oppressive" in isolation but rather asks 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… See also: Zomojo Pty Ltd v Hurd (No 2) [2012] FCA 1458 at [509] per Gordon J. See also: Dynasty Pty Ltd v Coombs (1995) 138 ALR 64 at 72, 13 ACLC 1290 at 1296 per Spender, O'Loughlin and Branson JJ; Shelton v National Roads and Motorists Association Ltd [2004] FCA 1393 at [23], 51 ACSR 278 at 284-285 per Tamberlin J. Whether conduct is oppressive "is based on the objective facts": cf. Fitzpatrick v Cheal [2012] NSWSC 261 at [180], 264 FLR 313 at 366 per Ward J. 38 Section 232 and its predecessors are thus concerned with "commercial unfairness": Harding Investments Pty Ltd v PMP Shareholdings Pty Ltd [2011] FCA 567 at [9], 282 ALR 229 at 232 per Gordon J; Ample Source International Ltd v Bonython Metals Group Pty Ltd [2011] FCA 1484 at [41], 285 ALR 488 at 494 per Robertson J. And, when considering "unfairness", a Court should not take "a narrow view": Edwards v Idaville Pty Ltd (1996) 22 ACSR 1 at 3 per Burchett and Ryan JJ. But a mere allegation of discrimination against a member is insufficient to attract the Court's jurisdiction: Valda Pty Ltd v Macarthur Coal Limited [2012] FCA 1264 at [16] per Kenny J. 39 An incident of "fairness" is the honesty with which an act has been performed: Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1 at 26. Cohen J there said of the predecessor provision to s 232: It is a requirement of s 260(2)(b) that acts must be not only prejudicial to or discriminatory against a member but must also be unfairly so. Fairness must be related to what is known at the time. In my opinion, to take a step in the honest belief of it being a correct one would not amount to acting unfairly. To be fair is to act free from bias, dishonesty or injustice (Macquarie Dictionary)… But "want of probity is only one of the ways in which oppression can manifest itself": Re M Dalley & Co Pty Ltd (1968) 1 ACLR 489 at 492 per Lush J. See also: Re Quest Exploration Pty Ltd (1992) 6 ACSR 659 at 669 per Mackenzie J. "Fairness" is not to be assessed in a vacuum: Thomas v H W Thomas Ltd [1984] 1 NZLR 686 at 694, 2 ACLC 610 at 618 per Richardson J. Although subjective intention or purpose may not be a necessary ingredient in determining improper use of a position, the presence of such an intention may nevertheless be relevant in assessing impropriety: cf. Doyle v Australian Securities and Investments Commission [2005] HCA 78 at [41], 227 CLR 18 at 29 per Gleeson CJ, Gummow, Kirby, Hayne and Callinan JJ; Vadori v AAV Plumbing [2010] NSWSC 274 at [164], 77 ACSR 616 at 646 per Ward J. 40 Even a decision taken by a director in good faith and a decision which is genuinely believed to be in the best interests of the company may nevertheless fall within the concept of oppression: Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459. When addressing the terms of s 320 of the Companies (New South Wales) Code, Brennan J there observed: It is not necessarily unfair for directors in good faith to advance one of the objects of the company to the prejudice of a member where the advancement of the object necessarily entails prejudice to that member or discrimination against him. Prima facie, it is for the directors and not for the Court to decide whether the furthering of a corporate object which is inimical to a member's interests should prevail over those interests or whether some balance should be struck between them. The directors' view is not conclusive, but an element in assessing unfairness to a member is the agreement of all members to repose the power to affect their interests in the directors [see s 78 of the Code]. Nevertheless, if the directors exercise a power - albeit in good faith and for a purpose within the power - so as to impose a disadvantage, disability or burden on a member that, according to ordinary standards of reasonableness and fair dealing is unfair, the court may intervene under s 320. The question of unfairness is one of fact and degree which s 320 requires the court to determine, but not without regard to the view which the directors themselves have formed and not without allowing for any special skill, knowledge and acumen possessed by the directors. The operation of s 320 may be attracted to a decision made by directors which is made in good faith for a purpose within the directors' power but which reasonable directors would think to be unfair. The test of unfairness is objective and it is necessary, though difficult, to postulate a standard of reasonable directors possessed of any special skill, knowledge or acumen possessed by the directors. The test assumes (whether it be the fact or not) that reasonable directors weigh the furthering of the corporate object against the disadvantage, disability or burden which their decision will impose, and address their minds to the question whether a proposed decision is unfair. The court must determine whether reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision will impose on a member on the other, would have decided that it was unfair to make that decision: (1985) 180 CLR at 472-473. Oppression may thus occur "despite the absence of any transgression of the fiduciary requirements of good faith, proper purpose and subordination of personal interest": Gerrard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [49]. Barrett J there went on to observe that a "director may act oppressively in the sense relevant to the operation of s 232 of the Corporations Act and its statutory predecessors yet not breach any fiduciary or other duty owed as a director". 41 Commercial decisions, however, are - again as repeatedly acknowledged - best left to those managing the affairs of a company. A court should be hesitant in attempting to evaluate the competing merits of divergent commercial judgments. That process of decision-making is best left to the company to resolve: Zephyr Holdings Pty Ltd v Jack Chia (Australia) Ltd (1988) 14 ACLR 30 at 37. Brooking J there observed: … Where, as in the present case, bad faith is not established and where, as in the present case, the allegation is that the proposed course of action is detrimental to the members as a whole, the court must take care that it does not too readily intervene in the affairs of a company under s 320. Compare Thomas v H W Thomas Ltd [1984] 1 NZLR 686 at 697; Wayde v New South Wales Rugby League Ltd, 61 ALR 225 at 231. It is only stating the obvious to say that, under s 320, the court does not sit as an appellate tribunal to review the decisions of the organs of a company or of a class of its members on the footing that the court will, as it were, automatically reverse the decision if it disagrees with it. See also: Wilson v Meudon Pty Ltd [2004] NSWSC 1183 at [119] per Gzell J; HNA Irish Nominee Ltd v Kinghorn [2012] FCA 228, 290 ALR 372 at 489 per Emmett J. 42 "The mere fact that a member of a company has lost confidence in the manner in which a company's affairs are conducted does not lead to the conclusion that he is oppressed; nor can resentment at being outvoted…": John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'Asia) Pty Ltd (1991) 6 ACSR 63 at 66 per Young J. See also: Re G Jeffery (Mens Store) Pty Ltd; Re G Jeffery Ltd (1984) 9 ACLR 193 at 198 per Crockett J.

THE CONDUCT OF THE PARTIES 43 Unravelling the many factual disputes that engulfed the competing camps during the period from August 2010 through to the present day has not proved an easy task. On some occasions there was some measure of agreement as to the primary facts but a real division of opinion as to the best commercial way forward. On many other occasions, the primary facts were disputed. On other occasions it was also said that the contents of documents were written with a view to enhancing the position of the author rather than disclosing the objective facts. Reliance, so it was said, could not be placed upon the "written word" without some considerable measure of caution. 44 It is not practicable - nor necessary - to resolve each of the competing myriad of disputed evidence, facts and accusations. It is necessary, however, to address some of the principal factual disputes between the competing camps with a view to determining where the competing merits of each claim ultimately fall. 45 In very summary form, the Catalano camp submitted that it had been oppressed by the conduct of the Kurth/Hepner camp, that conduct being: the failure to agree to the sale of shares; the failure to agree proposals for business growth; the wrongful diversion of money and assets from Fine Food Solutionz; conduct that adversely affected the Crazy Dragon business; and their participation in the proceeding before the Fair Work Commission. Mr Samuel Catalano is not a "member" of Fine Food Solutionz for the purpose of section 234 of the Corporations Act. The oppression claim is therefore brought by Mr Nathan Catalano, and by the trustees of Equicap, being Mr Nathan Catalano and Ms Maureen Catalano. It is noted, however, that the conduct of Mr Samuel Catalano is relevant to the alleged oppression of the Kurth/Hepner camp under the terms of section 232. 46 The Kurth/Hepner camp submitted that it had been oppressed by the conduct of the Catalano camp. Their Further Amended Statement of Cross-Claim grouped a variety of allegations under the headings of: "misrepresentations and failure to make adequate disclosure"; "wrongful diversion of business opportunities"; "supplier wrongdoing"; and "purporting to take control of FFS". It was admitted that Messrs Hepner and Kurth were "members" of Fine Food Solutionz for the purposes of s 232 of the Corporations Act. No distinction was sought to be drawn between Mr Kurth as an individual and Kurth Management Pty Ltd. 47 The evidence as to these competing complaints extended over a considerable period of time and a considerable variety of business relationships as between the members of each competing camp and commercial relationships with (for example) suppliers to Fine Food Solutionz. 48 It is concluded that the claim of oppression advanced by the Catalano camp should be rejected. It is further concluded that Cross-Claim claiming oppression of Messrs Hepner and Kurth at the hands of the Catalano camp should prevail. 49 When characterising the conduct of those in one camp or the other as "oppressive", that term is used as a shorthand reference to the terms of s 232(d) and (e). 50 In reaching this conclusion it is prudent to make some preliminary observations as to the credit of some of those witnesses who gave evidence.

Findings as to credit 51 As with many cases, findings of fact have been made in the present proceeding by reference to both the documents relied upon and the oral evidence. 52 Those findings of fact have been made in many instances against the background of an assessment as to the credit of the principal witnesses who were called and cross-examined, namely: Mr Juy Hepner; Mr Byron Kurth; Mr Samuel Catalano; and Mr Nathan Catalano. Mr Kurth was accepted by Counsel on behalf of the Catalano camp as a witness who was honest and frank. The major challenge to credibility was directed to Mr Hepner (on the one hand) and Mr Nathan Catalano (on the other hand). 53 Considerable reservation, it is respectfully considered, should be exercised before making any observation reflecting adversely on the credit of any witness. Such observations should be made, however, where it is necessary to fully explain - or more fully explain - the basis upon which a Court has approached its task in making findings of fact. 54 The present case is one in which brief observations as to credit should be made. 55 In large part, the ultimate conclusions that have been reached in the present proceeding are very much driven by the conclusion that the evidence of Messrs Hepner and Kurth should generally be accepted and the separate conclusion that the evidence of Messrs Samuel and Nathan Catalano is open to serious reservation. 56 Subject to expressing a cautious reluctance to make adverse findings except where necessary to more fully explain the basis upon which findings have been made, considerable reservation is expressed in respect to accepting the evidence of Mr Nathan Catalano. In very general terms, his evidence was characterised by: a recollection in considerable detail as to the facts pertaining to the business and the development of the business of Fine Food Solutionz; and an absence of any recollection as to other matters in respect to which either some recollection or some considerable recollection of events was otherwise to be expected. To some extent, the better recollection on the part of Mr Nathan Catalano of the business affairs of Fine Food Solutionz may readily be understandable. He has unquestionably spent a great deal of his time in developing the business. But that is, with respect, no satisfactory explanation for other aspects of his evidence. With greater particularity, the evidence of Mr Nathan Catalano was characterised on many occasions by: his answers to questions not being responsive to the questions being put and on many occasions being more in the nature of self-justification; and his answers being more in the nature of an attempt to advocate his own case than an attempt to simply set forth a factual account. On other occasions: his evidence is simply not accepted. 57 In making some findings of fact it is unnecessary to take into account such reservations as to the reliability of the evidence of Mr Nathan Catalano. Thus, for example, when it comes to considering his account of steps being taken to develop the business and the steps being taken to secure contracts with both Woolworths and Coles, no question as to his credit arises. But in other respects, the evidence he gave has to be considered against the background of an adverse view as to the reliability of that evidence. In particular, that adverse view necessarily impacts upon findings to be made in respect to: whether he had the objective either from the outset or from mid-2011 to develop the business of Fine Food Solutionz for his own interests or whether his undisclosed objective was to exclude the involvement of Messrs Kurth and Hepner; his commitment to work with Messrs Kurth and Hepner; the non-disclosure at the outset of the bankruptcies of his father, the non-disclosure of his father's financial circumstances and the reasons for that non-disclosure; and the actual involvement of his father, Mr Samuel Catalano, in the decision-making processes affecting Fine Food Solutionz. 58 As opposed to these findings concerning the credibility of Mr Nathan Catalano's evidence stand the findings to be made in respect to the challenge made to Mr Juy Hepner's credibility. 59 Like Mr Nathan Catalano, the answers provided by Mr Hepner were on many occasions more characteristic of a witness who set out to explain or advocate his cause rather than a witness who confined himself to answering the questions asked. He was also, on occasions, reluctant to answers questions directly. By way of example only, an issue emerged in the proceeding as to the exercise of the power conferred by cl 11 of the Heads of Agreement to purchase the shares from "the other shareholder". A condition to the exercise of the power was imposed by cl 12(b), being the discharge of a security that had been given over a property owned by Mr Hepner at Echuca in Victoria. When cross-examined about this property and cl 12(b), the following exchange occurred: Do you agree with me that clause 12 sets out three conditions that have to be satisfied before clause 11 can be effected?---Yes. I'm familiar with this clause. But do you agree with me that the existing shareholders cannot sell their shares to each other until clause 12 is satisfied?---Yes. And you've mentioned Echuca property previously. Is that the property referred to there in clause 12(b)?---Yes. Have you discharged the security over that property?---Like I said, it wasn't for me to do. Who owns the Echuca property?---Me. Well, if you own the property - I withdraw that - what security was on the property? Was there a mortgage in relation to the property?---The equipment - the property's held as collateral against the equipment finance for the spring roll machine. And as the owner of the property you are the person who can sign the necessary documents?---Well, it's up to the bank. Are you saying the bank can discharge that security without your - - -?---No, I don't think so. - - - signature?---I don't think so. No. The reluctance on the part of Mr Hepner to answer these questions more directly is a source of some reservation when considering the reliance to be placed upon his evidence. Mr Hepner had also taken steps to support his own claims to relief by obtaining evidence which he knew he could not obtain himself. He thus requested a friend he had met in Port Douglas, Mr Andrianopolous, to make inquires of Yael's Cakes of Distinction as to the supply of products to Innova Foods. Mr Andrianopolous also contacted the San Diego Tortilla Company because that company "wouldn't actually answer Juy's calls…". 60 Of even greater concern is the fact that Mr Hepner was a person who was prepared to misrepresent himself to achieve a desired outcome. His conduct is certainly not without blemish. An instance where criticism can unquestionably be directed at his conduct is in respect to a telephone number which Mr Nathan Catalano had caused to be disconnected. Mr Hepner had long had the telephone number as a personal mobile phone number. A judge of this Court had previously ordered (inter alia) that that telephone number be transferred to Fine Food Solutionz. That transfer took place and Mr Nathan Catalano then "cut it off". To regain the number Mr Hepner falsely represented himself to be Mr Nathan Catalano. In explaining this sequence of events Mr Hepner gave the following evidence: Are you suggesting that someone at the Vodafone office suggested to you that you and he together call Telstra and represent yourselves as Nathan Catalano in order to have access to certain accounts?---To get my number back, yes. And did you call Telstra and pretend to be Nathan Catalano?---Yes. … … After you approached Telstra, was the number transferred into your control or your name?---It was, yes. I created another account and I kept my phone number, yes, for - for a time, and then - until the - until the injunction, which happened while I was overseas, where they convinced Yates J to take my number away, yes, the whole time was Sam was using his number for Innova. Just so I have the timeline right, you had approached Telstra on or before 21 May and Yates Js orders were in June; is that correct?---Yes. I can't remember when it was. All I remember is that Nathan cut off my phone. I was distraught. I misrepresented myself to be Nathan and got my phone put back on in another account. I know it was dishonest of me to misrepresent myself to be him, but I didn't know what else to do. Byron had no say on the Telstra account. It was just Nathan. This particular event, obviously enough, reflects very poorly upon Mr Hepner. The evidence, however, assumes a more broadly expressed relevance. This evidence exposes the steps which Mr Hepner would pursue in order to achieve an objective. It provides a real reason to question the reliability of Mr Hepner in respect to the balance of his evidence. 61 Such considerations must necessarily be borne in mind when assessing the evidence given by Mr Hepner. Many aspects of his evidence, like the evidence of Mr Nathan Catalano, can be accepted and no question of considering that evidence against the backdrop of reliability arises. Other aspects of his evidence, however, do require more careful consideration. One example is his evidence as to his reasons for establishing the Gourmet Dim Sim Company Pty Ltd ("Gourmet Dim Sim Company"). Unlike the position of Mr Nathan Catalano, however, it is concluded that Mr Hepner had the best interests of Fine Food Solutionz at the forefront of his mind when taking the steps that he did. Another example is whether he was taking steps to preclude those in the Catalano camp invoking their right to purchase the shares of "the other shareholder" by refusing to remove the security over the Echuca property. 62 As a very general observation, it is concluded that Mr Hepner gave his evidence in an honest and forthright fashion. There is far less reason, it is concluded, to question Mr Hepner's evidence as opposed to that of Mr Nathan Catalano.

Observations as to demeanour - but not whilst giving evidence 63 On many occasions findings as to credit are founded, in part, upon a trial judge's observations of a witness whilst in the witness box. 64 On few occasions, reference is also made by a trial judge to observations of a witness whilst in court when another is giving evidence. 65 Such a question arose in the present proceeding. Observations were made as to the reaction (for example) of Mr Nathan Catalano to some of the evidence being given by Mr Hepner. Those reactions included obvious rejection and perhaps disbelief as to the evidence of Mr Hepner. 66 Whether reliance could be placed upon such observations was a question raised with Counsel during the course of submissions - it then being uncertain whether such observations may or could assist in resolving the submissions otherwise being made as to the credit of witnesses. 67 Both Counsel expressed a degree of caution as to the reliance that should be placed upon such observations. One factor alone which would support an approach of caution is the fact that a trial judge may well observe conduct occurring behind the bar table and hence not observed by either the instructing solicitors or Counsel. An ability to make meaningful submissions, except possibly on instructions, would thus be limited. 68 The difficulties in such circumstances were canvassed in part by Kirby P (as his Honour then was) in Government Insurance Office of New South Wales v Bailey (1992) 27 NSWLR 304 at 313-314 as follows: 6. By conventional theory, the observations made by a trial judge of the appearance and demeanour of a witness giving evidence are not only available to be used in the determination of a dispute but amount to important ingredients of the decision-making process. They normally provide the primary decision-maker a distinct advance which controls, and even limits, the exercise by the appellate court of its statutory functions in an appeal by way of re-hearing … Justice is not truly blind. A decision-maker (whether judge or magistrate), sitting in a courtroom is not blinkered. The decision-maker observes the drama which is played out in the well of the courtroom. As Jacobs J remarked in [Jobst v Inglis (1986) 41 SASR 399] parties and witnesses frequently sit in court and grimace, frown, laugh and otherwise display facial and body language which it is virtually impossible for the decision-maker to fail to see. Burt CJ said, on his retirement, that he had whiled away the boring parts of cases by counting the panels at the back of his courtroom. Judges without panels are usually confined, when attention strays from parties, witnesses or their representatives, to observing those seated before them. It is impossible, in the geographical layout of a courtroom to do much else. The appearance of a witness as he or she approaches the witness-box may properly be taken into account where agility and ease of movement are in contest. To require otherwise would be to require a division of the mind quite unrealistic in the case of a jury and equally artificial for judicial officers. In this modern age, the suggestion that a form of transmogrification of the witness occurs by administration of the oath (or taking the affirmation) so that body language and facial features or other elements of the demeanour can be taken into account thereafter but not a moment before, would involve a rigidity and artificiality which the law should reject. So long as the conventional theory reigns that observations of a party or other witness are an important and legitimate element in curial decision-making, it is appropriate to permit at least the observations to be taken into account which occur inside the courtroom. However this conclusion leaves the question of notification to the parties and their representatives where the observations have occurred, as here, outside the actual period of the trial and when the person being observed is at the back of the court behind the representatives of the parties who thus have no opportunity to observe the features in question and by interrogation, evidence or advocacy, to persuade the decision-maker to a different view about them than has been formed; 7. So far as the duty to alert the parties or their representatives of such matters is concerned, it involves, as Davidson J acknowledged in Hodge v Williams [(1947) 47 SR (NSW) 489 at 492], the drawing of "a very fine line between what is proper and improper". Or between what is essential and unnecessary. Inevitably, the point at which that line will be drawn depends upon the circumstances of the case. Matters relevant will include the opportunity which the parties have had to respond to the considerations in question; the significance of those considerations for the decision under challenge; and the apparent importance which the decision-maker attaches to the undisclosed material in reaching the decision. Courts have offered various formulae to describe the way in which the "fine line" is to be drawn in a hard case … 69 The need for parties to have an opportunity to make submissions in respect to the conduct of a witness which the legal representatives may not themselves have had an opportunity to observe was emphasised by Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services [2011] HCA 11, 243 CLR 361 at 387. Their Honours there referred to the decision in Bailey and observed: [69] … Judges are entitled to take into account the demeanour of party-witnesses, not only in the witness box, but while they enter and leave it, and also while they are sitting in court before and after giving evidence; but observations by the judge of conduct outside the witness box which the representatives of the parties may not have observed, should, if they are influential in the result, be drawn to the attention of the parties so that they may have an opportunity of dealing with the problem… See also: Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 at [31] per Basten JA; Lindsay v Health Care Complaints Commission [2010] NSWCA 194 at [233] to [237] per Sackville AJA (Giles and Young JJA agreeing). 70 The observations made by Kirby P in Bailey and by Heydon, Crennan and Bell JJ in Kuhl are, with great respect, eminently sensible and founded upon good common sense. 71 The caution urged by both Counsel is thus acceded to. Indeed, it has been concluded that no reliance at all should be placed upon what the Court itself may have observed but what those appearing for the parties were denied the opportunity to observe. Such findings of credit as have been made in respect to Messrs Nathan Catalano and Juy Hepner are confined to observations as to their demeanour in the witness box whilst giving evidence.

The Catalano claims of oppression 72 It is unnecessary to resolve in detail each of the claims of oppression advanced on behalf of the Catalano camp. The submissions, including both the oral and written submissions advanced in support of the claims to oppression, have been considered. 73 It is nevertheless prudent to address in summary form some of the more detailed claims made in support of the proposition that the Kurth/Hepner camp have acted in a manner which is oppressive of the interests of those in the Catalano camp. 74 Those claims and the submissions as to the oppression of the Catalano interests are rejected. In rejecting those claims, each of the instances of claimed oppression has been separately considered and each claim has also been considered as forming potentially part of a broader and more cumulative claim of oppression. The manner in which Counsel advanced the claim of oppression in the written submissions was to: identify a series of specific factual events; and thereafter to: address one or other of those factual events by reference to a more generally expressed rubric, such as "a wrongful diversion of money and assets". This was a convenient way in which to proceed. On some occasions one specific factual event was relevant to more than one generally expressed proposition. 75 Although expressed as separate propositions, it would nevertheless be an erroneous approach to consider each of the propositions separately and not also to consider the propositions as a whole. One series of events may not constitute oppression; taken together with other facts, however, a claim in oppression may be established. This is the approach that has been pursued in the present proceeding.

The sale of shares - the Catalano offers to purchase 76 One instance of oppression relied upon by the Catalano camp is said to emerge from the series of offers it made to purchase the outstanding shareholding of the Kurth/Hepner camp. 77 Each of these offers need not be recounted in detail. It is sufficient to observe that the Catalano camp on a number of occasions sought to either purchase the shares held by the Kurth/Hepner camp, or sell their shares to the Kurth/Hepner camp, in order to break the deadlock between the parties. 78 The proposition advanced on behalf of the Catalano camp was that the failure to accept a reasonable offer to buy shares, together with the resultant consequence that capital was otherwise "locked up" in the ongoing business, either constitutes oppression or at least is one factor which assists in reaching such a conclusion: Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104, 84 ACSR 121. Campbell JA (with whom Macfarlan JA agreed) there observed: [235] Further, it is not as though "exclusion from management" and "absence of a reasonable offer" are elements of a cause of action, so that a plaintiff in an oppression suit (or, perhaps, in the sub-species of oppression suits in which exclusion from management is a prime element in the oppression alleged) has the onus of proving absence of a reasonable offer. Rather, the making of a reasonable offer is merely one factor that, in some (but not all) types of situations where oppression is alleged can be relevant to whether oppression is made out. A party who wished to assert that a reasonable offer had been made would bear an onus of adducing evidence of the making of an offer, and an onus of persuading the court that it was reasonable, and that because it had been made there was no oppression. His Honour went on to further conclude as follows that an offer for present purposes need not be an offer capable of acceptance such as to form an enforceable contract: [242] … [Counsel] accepted that it may not be necessary for an "offer" to be an offer in the sense that is relevant for contract formation before it could be capable of affecting a conclusion about whether oppression had been made out. In my view, he was right to make that concession. There might be situations in which, for example, a bona fide buyout offer was made, but subject to contract. Such an offer might be held open for long enough to justify a court in concluding that, when ignored or not accepted, any disadvantage that the addressee of that offer thereafter came to be in, concerning the affairs of the corporation to which it related, was not in itself oppression or the result of oppression. Other less concrete indications of a preparedness to negotiate and discuss a fair exit mechanism might also bear upon whether oppression was established. It is, however, very much a matter of the court forming a judgment about the facts of the individual case, and the role that the "offer" plays in them, as to whether that result follows. Whether a statement of preparedness to consider buying out a shareholder takes the form of a contractual offer might affect the weight that is given to it, in deciding whether there has been oppression. In Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343 ; [2009] NSWSC 342 at [103] Barrett J, correctly in my view, rejected the proposition that a relevant "offer" had to be an offer in the contractual sense. And, in Byrne v A J Byrne Pty Limited [2012] NSWSC 667, Black J observed: [63] … there are several cases in which oppression has not been established where a party was willing to buy out the other party for fair value. In Tainsh v Barber (1997) 23 ACSR 158 at 177, where the exclusion of a partner was necessitated by her failure to cooperate in the business, Foster J appears to have accepted that a willingness to buy that partner's share in accordance with a valuation arrived at by an expert was sufficient to avoid oppression. (It is not clear from the report of that decision whether the valuation undertaken by the accountants in that case had applied a minority discount). In Belgiorno-Zegna v Exben Pty Ltd [2000] NSWSC 884; (2000) 35 ACSR 305, Hodgson CJ in Eq referred to the entitlement of a minority shareholder "to expect a reasonable approach to a negotiated exit" (at [139]) and observed that it was not necessary for the defendants' offer to buy out a minority shareholder to satisfy the tests laid down in O'Neill v Phillips [1999] 1 WLR 1092 (to which I will refer below), where oppression was not otherwise established (at [150]). In Nassar v Innovative Precasters Group Pty Ltd above at [108], Barrett J observed that oppression was not established where parties showed a willingness to seek in good faith an agreed basis for buying out the remaining shareholder. This approach is consistent with the fact that the oppression remedy will often be directed to a situation where a person has "his or her capital locked up in a corporate enterprise under unfair conditions": Crawley v Short [2009] NSWCA 410; (2009) 76 ACSR 286 at [158]. 79 One offer relied upon in the present proceeding is set forth in an e-mail from Mr Nathan Catalano to Mr Kurth on 20 February 2012. That e-mail provided: Thanks for the discussion this afternoon. Just to recap, I see 3 solutions to the current issues that we have: 1) You become a silent partner, allowing us make the necessary decision to continue to grow the business profitably 2) You buy us out 3) We split the business, us taking retail and you taking foodservice If you can think of any others, that may solve the decision making and management issues that we discussed, then I am open to hear them. Mr Kurth could not remember what his response was to this e-mail but maintained that only the second option was "plausible". Thereafter, on 19 March 2012 a further e-mail from Mr Nathan Catalano to Mr Kurth requested Mr Kurth to "please send through the offer of $200,000, plus your requested term sheet in writing asap". The e-mail further stated that Mr Catalano wanted to "get this wrapped up before any further damage is done to the business…". 80 Without more, the failure to accept this offer - or to give it greater consideration - invites scrutiny. It is when this offer is considered against the factual background of what else was happening at the time, however, that the apparent reasonableness of Mr Nathan Catalano's position takes on a different complexion. When explaining this background, Mr Kurth was taken to the 19 March 2012 e-mail and said during his cross-examination: … The offer being discussed there was you purchasing the Catalanos' interest in the business for $200,000; would you agree with that?---That's right. And Nathan is chasing you up to try and resolve this issue before any damage is done to the business; would you agree with that?---Well, that's what he says, yes. But that would be a business in which they have no interest after the sale; is that right?---Sorry, rephrase that. If you had purchased their shares for $200,000, Equicap would no longer have an interest in the business; is that correct?---That's correct. So Nathan is chasing you up in an effort to protect the business you were going to own outright; do you agree with that?---Well, I agree with that, but you've got to take it in the context of the Innova action because we didn't know how much business was being built behind FFS, and we could have bought them out and they had another business ready to go in competition. The concern of Mr Kurth, it is concluded, was well-founded. 81 A further offer was made on 6 September 2011. 82 These offers, and in particular the offer made on 6 September 2011, are said to constitute "reasonable offers" and that the failure to accept these offers is evidence of oppression. 83 The 6 September 2011 offer received particular attention during the course of oral submissions. The offer was contained in an e-mail from Mr Samuel Catalano to Mr Kurth and provided in part as follows: Confirm our offer to acquire all the shares not held by Equicap Pty Ltd Provident Fund for the sum of $100,000 plus repayment of outstanding loans made [b]y MAD. There are a number of other conditions that will be met such as releasing Vicki, Juy and yourself from guarantees etc offered to banks or Bibby etc. These will be discussed with Lawyers etc at the appropriate time. It is regretful we have arrived at this point but differences in management style and growth strategy for the business have combined to force the issue. The fact that this e-mail left unspecified "a number of other conditions" that were to be "discussed with Lawyers" does not strip it of evidence upon which the Catalano camp can place reliance. 84 It is concluded, however, that neither this e-mail alone or in conjunction with other offers relied upon by the Catalano camp constitutes oppression. With specific reference to the 6 September 2011 e-mail, the fact is that it did leave "a number of other conditions" unspecified. The course of dealings between Messrs Samuel and Nathan Catalano (on the one hand) and Messrs Hepner and Kurth (on the other) had the necessary consequence that no confidence could be placed upon any real ability to reach agreement. The offers, for these reasons, were not "reasonable offers".

Steps taken to preclude Equicap extracting itself 85 Allied to the theme that those in the Kurth/Hepner camp were taking steps to frustrate or preclude those in the Catalano camp extracting themselves from the Heads of Agreement was the submission that steps were taken to ensure that cl 12 of the Heads of Agreement could not be satisfied. 86 One particular aspect of this submission should be expressly addressed. 87 Clause 12 of the Heads of Agreement contained conditions as to the "exercise of power to purchase shares from other shareholders". Clause 12(c) provided that any sale of shares could only take place if there had been a "release of Byron and Vicki from any liability (other than as equal guarantor with the director appointed by Equicap) to the Bank of Queensland in relation to the loan from that Bank". 88 One submission made on behalf of the Catalano camp was that steps had been taken by Mr Hepner on 10 August 2011, namely the day before the shareholders meeting on 11 August 2011, to ensure that the Bank did not release Mr and Ms Kurth from any liability. Reliance was placed on an e-mail forwarded on 10 August 2011 by Mr Hepner to the Bank of Queensland confirming three matters. The e-mail stated in part as follows: 1. … Please check with your contract financiers and confirm to me and Byron in writing that under NO CIRCUMSTANCES UNLESS OTHERWISE INSTRUCTED BY ME will you accept any money over and above the normal monthly payment plan… 2. That the Byron and Vicki overdraft be maintained and not paid out except with prior written permission from them. I don't want third parties paying out these loans… 3. … Mr Hepner requested in the e-mail that it be kept "confidential between yourself and Les", being officers within the Bank. 89 When confronted in cross-examination with this e-mail, Mr Kurth acknowledged that on its face the e-mail would "put in place a set of circumstances such that clause 12(c) could not be satisfied…". But he could not say why that was done and that an inquiry should be made of Mr Hepner. The evidence of Mr Hepner when questioned about the e-mail was as follows: Are you aware whether Nathan Catalano or Sam Catalano had contact with the Bank of Queensland employees before 10 August 2011?---I don't think anybody ever tried to make any extraordinary payments but I was so paranoid about their behaviour at the time that I was just like, let us know before anybody tries to do anything. So that Byron can make a decision on when the company can pay - make the - make any extraordinary payments. It's - - - Are you - - -?---The fact is, we were kept in the dark about everything. I was so paranoid. I contacted Les in that email and I said, don't let anything extraordinary happen until you consult with Byron. But as someone who's exposed under the security - the Bank of Queensland had, isn't it in your interests that this be paid out earlier rather than later?---Yes. So why were you trying to frustrate that?---I was just paranoid. I just didn't know what they were thinking. … … Isn't it the case, Mr Hepner, that you had taken this step in order to ensure that clause 12 could not be satisfied?---No, I took it because I was concerned about corporate [governance] and it's - we already found out that Sam was going around employing people, paying things without asking, and I just wanted to - Byron to be notified. You know, he didn't have any control of any of the money. I wanted to know what - I wanted the bank - our property was secured by this bank and I wanted to know what payments were being made, when, and Byron should be authorising what gets paid. Notwithstanding the need for caution when considering (in particular) this evidence of Mr Hepner, it is nevertheless concluded that the explanation provided by Mr Hepner is to be accepted. 90 This claimed aspect of oppression of the interests of those in the Catalano camp is also, albeit with some reservation, rejected. 91 Even greater reservation is expressed when consideration is given to: the failure on the part of those in the Kurth/Hepner camp to buy out the shares of those in the Catalano camp; together with: the steps taken to preclude an ability to comply with clause 12(c) of the Heads of Agreement. The written submission advanced on behalf of the Catalano camp was that the "failure to accept these offers, together with the conduct locking in Nathan, is oppressive". But even both of these events taken together, it is concluded, do not constitute oppression. Those events necessarily have to be assessed against the background of: the reasons for concluding that the offers being made for the sale of shares were not reasonable; and the reasons why steps were being taken, by Mr Hepner in particular, in respect to clause 12(c). Taken in their entirety, those reasons lead to the conclusion that these factual events relied upon - even taken together - do not constitute oppression.

The failure to agree to proposals for growth 92 Another instance of oppression on the part of the Kurth/Hepner camp which is said to be oppressive of the interests of those in the Catalano camp is the failure on the part of Mr Kurth (in particular) to agree to proposals for the growth of the business of Fine Food Solutionz. 93 It was self-evident that Mr Nathan Catalano wanted to take Fine Food Solutionz down a different path of commercial development to the more conservative path that Mr Kurth thought appropriate. 94 Differences emerged early. Mr Nathan Catalano dated the "numerous disputes between the shareholders and directors of the Company" back to June 2011. 95 A shareholders' meeting was held on 11 August 2011. A number of matters were discussed. Mr Samuel Catalano presented a proposed budget. One matter concerned a proposal to increase the remuneration package of Mr Nathan Catalano from $100,000 (excluding superannuation) to $144,000 (excluding superannuation). Mr Kurth saw the proposed budget as "inordinately high". But that observation can presently be left to one side. Of more immediate relevance was a proposal to curtail the substantial freight and storage costs that were being incurred with production occurring at both Hoppers Crossing in Victoria and in Port Douglas in Queensland. Messrs Nathan and Samuel Catalano proposed that Fine Food Solutionz could manufacture and store goods itself at a facility to be established in Sydney. The Catalanos considered that this would achieve savings in freight of approximately $250,000 per year. But Messrs Kurth and Hepner opposed the proposal. It was Mr Kurth's view that at that time Fine Food Solutionz was "still a long way from consistent profitability". Mr Kurth was also reluctant to sign a loan agreement with Bibby Financial Services that had been negotiated by Mr Samuel Catalano. Mr Kurth was also wary of the proposed guarantors to the loan: on the one side the guarantors were to be himself and his wife and Mr Hepner; on the other side, the sole guarantor was to be Mr Nathan Catalano. 96 On one view, the course being pursued by the Catalanos may well have been the one which ultimately proved to be that which was preferable. Mr Nathan Catalano had certainly been successful in developing the business of Fine Food Solutionz in securing contracts with both Woolworths and Coles. On another view, the more cautious view of Mr Kurth could not be summarily discounted. 97 On any view, however, it is concluded that this very process of decision-making is an instance where a Court should not intervene. The decision to be made, be it for good or for ill, is best left to the directors and shareholders to resolve. 98 A failure on the part of the Kurth/Hepner camp to agree to the proposed Sydney facility does not constitute evidence of oppression on their part.

The wrongful diversion of money and assets from Fine Food Solutionz 99 A further claim of oppression relied upon by those in the Catalano camp under the rubric of a claimed "wrongful diversion of money and assets" seized upon a number of discrete events. 100 Two events should be specifically addressed in order to give content to the nature of the claims being made, namely: a "breach" by Mr Kurth of what was described as the "banking protocol"; and the creation of a new corporate entity by Mr Hepner, namely the Gourmet Dim Sim Company. Neither of these events, nor the other events relied upon by those in the Catalano camp, it is respectfully concluded make out a claim as to the oppression of their interests. 101 As far as the former event is concerned, it was common ground that on 30 September 2011 a resolution was passed which required the signature of both Mr Nathan Catalano and Mr Byron Kurth in respect to a cheque account held with the Commonwealth Bank. Notwithstanding that resolution, Mr Kurth in February 2012 paid a sum of $25,910.86 to Mr Broadbent. The amount was in respect to an outstanding account. Mr Kurth had "urged Nathan on numerous occasions to pay that account". But the amount remained outstanding. 102 The amount outstanding and being claimed by Mr Broadbent was in respect to a very high volume of product that had been requested by Mr Samuel Catalano in July or August 2011. Mr Broadbent had to put on extra staff and buy extra ingredients. But when invoices were submitted for payment, Mr Broadbent maintained that arguments ensued from both Mr Samuel Catalano and Mr Nathan Catalano. Mr Samuel Catalano, according to Mr Broadbent, "began to cite low yield as an excuse for non payment". Mr Samuel Catalano, according to Mr Broadbent, "suggested that we were cheating them". Mr Nathan Catalano maintained in his cross-examination that Mr Broadbent "invoiced us three times for the one thing". It was then that Mr Broadbent telephoned Mr Kurth and it was then that the monies were paid. 103 The payment of this amount by Mr Kurth, without the signature of Mr Nathan Catalano, may well be accepted as a breach of the "banking protocol". Even though it is more likely the case that Mr Broadbent's evidence should be accepted and a conclusion reached that Mr Samuel Catalano and Mr Nathan Catalano were indeed wrongfully raising fictitious reasons as an excuse for non-payment, it is unnecessary to make any such finding. For present purposes it may be assumed that there was a genuine dispute as to at least some of the amounts outstanding. Of continuing concern to Fine Food Solutionz was its ongoing business. And it was in order to protect this business that Mr Kurth arranged for the payment to be made. In his cross-examination, Mr Kurth thus provided the following account as to the payment: Didn't you make a payment well over $3000 under that banking protocol?---Yes, I did. I - when I found out I paid Peter Broadbent the creditor that was threatening to take his lawyers to Woolworths for lack of payment. That was approximately a $25,000 payment; is that right?---Yes. And that was the payment that was being disputed by Nathan and Peter Broadbent via email?---The account in dispute was about five and a half grand, I believe, but they were withholding 30 grand or thereabouts. And you didn't seek Nathan's approval in paying that $25,000?---I urged Nathan on numerous occasions to pay that account. But you didn't seek his specific approval to transfer the $25,000?---No. 104 But this breach of the "banking protocol" and any pre-empting of the resolution of the disputed amounts outstanding to Mr Broadbent, it is respectfully concluded, do not constitute any evidence of oppression. All that is exposed is the growing divide between the two camps. 105 Nor does the establishment by Mr Hepner of a new corporate entity known as the Gourmet Dim Sim Company establish oppression. 106 A further part of this conduct relied upon by those in the Catalano camp was what they characterised as Mr Hepner "taking control of [Fine Food Solutionz's] shu machine at Hoppers Crossing" and the subsequent supply of products by the Gourmet Dim Sim Company to customers of Fine Food Solutionz. One contention was that the Gourmet Dim Sim Company had been established with a view to diverting to that company the business that should have been that of Fine Food Solutionz. 107 These submissions are rejected. 108 The Gourmet Dim Sim Company was indeed established by Mr Hepner. It was established at the instigation of Mr Kurth following a conversation between Messrs Hepner and Kurth in late February 2012. It was at that point of time when Mr Kurth became aware of Mr Samuel Catalano's involvement with Innova Foods. Mr Kurth asked Mr Hepner to establish a new corporate entity and to make arrangements to ensure that manufacturing could continue from Hoppers Crossing. 109 The Gourmet Dim Sim Company was registered on 28 March 2012; the name "The New Crazy Dragon" was registered as a business name on 29 March 2012. In March 2012 Mr Hepner had caused to be prepared a "Direct Pricing" list which disclosed a variety of products and the prices at which they could be supplied. 110 In April, May and June 2012 the Gourmet Dim Sim Company in fact supplied shu mai to Fine Food Solutionz. 111 But the explanation provided by Mr Hepner and by Mr Kurth as to the reasons for the establishment of this new company is accepted. That reason was not that they wanted to divert business to the new company; their objective was to ensure supply of product following the closure of the WonSum business. 112 The disruption to the supply of product and the need for some action to be taken to ensure continuity of supply if customers of Fine Food Solutionz were not to be forever lost is adequately exposed by the manner in which products were supplied to a major customer of Fine Food Solutionz, Alpha Flight Services Pty Ltd ("Alpha Flight Services"). 113 Mr Chris Mirams-Harrison of Alpha Flight Services had placed a purchase order for shu mai on 25 March 2012. On about 27 March 2012 Mr Mirams-Harrison told Mr Hepner that the Sydney office of Fine Food Solutionz had advised him that it could not process the order. After the establishment of the Gourmet Dim Sim Company, Mr Hepner advised both Mr Kurth and Mr Nathan Catalano that he would produce shu mai on a "not-for-profit" basis. The offer was rejected by Mr Nathan Catalano. The Gourmet Dim Sim Company supplied the product directly to Alpha Flight Services. 114 In April 2012 the only Fine Food Solutionz product that was produced by the Gourmet Dim Sim Company was the shu mai supplied to Alpha Flight Services. It had a total value of $7,391. 115 The reasons for the establishment of the Gourmet Dim Sim Company and the reasons for Mr Hepner taking over the WonSum facilities in Victoria were pursued in the cross-examination of Mr Hepner. It became apparent that the choices made by Mr Hepner were taken in a context where there was an impasse between the Catalano camp and the Kurth/Hepner camp as to the way in which the business of Fine Food Solutionz was to move forward. The Kurth/Hepner camp wanted to "vertically integrate" - but not by the establishment of what they perceived to be an expensive new facility in Sydney. 116 In attempting to lay the ground work for a suggestion that Mr Hepner had long planned to take over the WonSum facility, Mr Hepner was taken to a conversation with Mr Broadbent at a barbeque "long before" February 2012 in which he discussed "taking over the Won Sum facility…". Mr Hepner was also taken to an e-mail sent from him to Mr Kurth on 28 September 2011 which stated: Byron assuming you get the management issues sorted you need to crunch the numbers with Nathan regarding the Won Sum factory. I think it is a good, cheap option for us to take over management of it after new year. The overheads are $3000 per week, but we will cover that in half a day's production if you look at my costing sheet I did for Patties. Mr Hepner's cross-examination then continued as follows: So you're saying that that was not part of you - I withdraw that - you're saying this did not form part of a plan by you to open a new business?---No, no, I had no desire to open a business myself. It became apparent that Peter Broadbent was getting so tired of not being paid that he was - well, he said, that unless he got a proper contract again like the one that I had given him the previous year, that he was going to look at closing down and we didn't - we had not wanted to vertically integrate at that August meeting - certainly didn't want to spend a million bucks - but if Peter was going to close down because of what these guys had done to him, then the factory would just be sitting there with all the staff who knew how to make the product. It would have been commercially viable for the company to vertically integrate it. Then when we offered to vertically to integrate they said, "We don't want to vertically integrate any more." Well, wasn't the original proposal in August 2011 that the Catalanos put to you to vertically integrate a manufacturing facility within Fine Food Solutionz?---They put forward an unrealistic facility for that time. I mean, we had one month of profitability, to my knowledge, and I have limited knowledge of the accounts. But I did know this. We're only just getting - starting to get on top of things and it didn't make sense for us to go into a big whizz-bang new factory like that at that time, until we got some good trading. You know, another 12 months under the belt or whatever. And then as it happened we got forced into - Won Sum closed down then there was nowhere to put the equipment. So I said, "Let's - come on Nathan and Byron, let's vertically integrate this. There's no cost to us. Peter Broadbent will lease us his equipment. And we can just keep running it with the original staff and the good product that they've been making. The product was fantastic. We developed all the chicken shu mai in that factory. A little earlier in his cross-examination, Mr Hepner explained the difficulties he confronted by reason of this impasse as follows: Now, you agree, don't you, that Mr Kurth authorised you to secure the facility at Hoppers Crossing?---Yes. And he authorised you to use the machines at that facility to produce shu mai?---Yes, he did after - yes, he did. Yes. The whole idea was that there was nowhere to go. The Catalanos had rejected Rethink citing some issues about the contract. They'd forced Won Sum to close down. The only option was for the machines to go to their Sydney place and we didn't even know where it was or who was running it. So the only way we could guarantee supply for Woolworths was to keep the original production team, keep the original facility, keep everything in its place where it was, and try and run it in an interim fashion until we could sort out the management - you know, the nightmares between us and the Catalanos. This evidence and the explanation provided by Mr Hepner is accepted. 117 So, too, is the explanation provided by Mr Hepner in respect to the preparation in March 2012 of the "Direct Pricing" list. The inference sought to be advanced by those in the Catalano camp was that that list had been prepared as a tool for the development of the new Gourmet Dim Sim Company business. That suggestion was rejected by Mr Hepner. In his cross-examination on this issue Mr Hepner was taken to this "Direct Pricing" list (being Exhibit A15) and the following exchange occurred with his cross-examiner: And could the witness be shown a copy of exhibit A15. Do you see the first page of exhibit A15 is the Crazy Dragon direct pricing list for March of 2012?---Yes. And if you turn over the page do you [see] the list [which] appears to [be] a Gourmet Dim Sim company direct pricing list for April 2012?---Yes. Can I just tell you that this is not a - this might appear to be a price list, but all it was, was I had asked a person who was doing a part-time work for me to put together a list of stock that we had in the freezer, and dimis and some prices, so that we could - as I said, until we could get - start selling the shu mai I just had to sell products that Peter Broadbent was doing ..... WonSum. Well, if that's all you were doing why did you need all of the information that follows in the columns next to the description of the products?---Look, I never used this. This was just a draft that he made. It was incorrect. Empanadas shouldn't even be on it. He's obviously used a template out of my paperwork that had the Crazy Dragon stuff on it and that's what he used it for. But I can tell you that this - I don't know who gave this document to Nathan but it was just - would have been sitting on the computer. It was a mock-up of stock that we had. I'd asked him to put something together, so I could sell these dim sims for an interim period. And this was never given to a customer or a supplier. The explanation provided by Mr Hepner is accepted. 118 The acceptance of Mr Hepner's evidence as to those reasons has been assessed by reference to both the evidence given as to his reasons and by reference to a real need for caution for assessing the reliability of his evidence. Notwithstanding some reservation, it is nevertheless concluded that his explanation provided during his cross-examination should be accepted. 119 The evidence as to the reason for the establishment of the Gourmet Dim Sim Company was largely corroborated by Mr Kurth when he said during cross-examination: The Gourmet Dim Sim Company was formed as stop gap to prevent the machines being taken by the Catalano[s] and to, more importantly, to maintain supply to Woolworths. It was never our intention to run the facility ourselves. There was an intention to vertically integrate using the Catalano[s'] proposed experience in manufacturing. Again, this evidence is accepted. 120 Other examples of conduct assume a minor relevance within this heading. Included in the submissions of the Catalano camp are claims that the failure of the Kurth/Hepner camp to transfer the beneficial interest in certain equipment to Fine Food Solutionz, and failing to account for monies received in settlement of a claim relating to Fine Food Solutionz in January 2012, constitute oppression. These, and other, submissions did not assume any real significance in the course of the hearing. 121 Against the background of the strained business relationship of the parties, it is not considered that there has been diversion of money or assets such as to amount to oppressive conduct.

Conduct adversely affecting the Crazy Dragon business 122 A further rubric under which those in the Catalano camp advanced their claims in oppression was what they characterised as "conduct adversely affecting the Crazy Dragon business". 123 As their written submissions made express, some of the events relied upon could be addressed under one or other of their suggested "headings". Thus, under the present rubric, the written submissions also grouped that conduct relevant (for example) to: the establishment of the Gourmet Dim Sim Company; Mr Hepner passing himself off as Mr Nathan Catalano in respect to the transfer of the telephone number; and Mr Kurth's breach of the "banking protocol". Other factual events were also relied upon. 124 One such further event concerned the failure on the part of Fine Food Solutionz to file its 2011 income tax return. At least one reason for the failure to lodge that return on time was the failure on the part of Mr Kurth to "sign off". The reasons for Mr Kurth refusing to "sign off" on the return were somewhat obscure. One reason seems to have been a concern on his part to have the company independently audited; another reason seems to have been a concern as to the emergence of Innova Foods. So much seems to emerge from the following exchange during his cross-examination: Are you aware that as a result of your not having signed the income tax return, the company has now breached its obligations to the taxation office?---Yes. And there has now been a penalty imposed on the company?---Yes. $550, I believe. And that has put the company on an ATO audit watch list?---Yes. And you have been made aware of that by the company's accountant?---Yes. And you say that you won't sign them because you're having them audited. You've had the reports for the company for a long time, how long have you been in the process of selecting an auditor?---Well, the accounts after I said I would sign off on them, I became aware of the Innova conduct and then was unclear of what had happened in the early stage as a set up and basically auditing was going to cost a significant amount of money and at that stage we had sort of been toing and froing on the buyout of the company and I basically put it on the backburner until we sorted something out, which we haven't, obviously. Because didn't Nathan Catalano send you an email on 12 February 2013, that's this year, saying: Byron, you've been saying for the last couple of months that you will get the accounts forensically audited. I've suggested to you it is unnecessary, however if you wish to waste your own money then by all means go ahead and do it. If you have not done this and you are negligent in your duties to the business - this needn't be a difficult thing. If it ..... returns or organise your forensic audit immediately and then sign them. ?---Well, I waited for the MYOB accounts to be made available before I started the audit process. Is that audit process almost complete?---I haven't followed it up in the last week. So have you chosen - you've chosen an auditor but you haven't received the audit?---Yes. It may be accepted that Mr Kurth may well have wanted the financial affairs of Fine Food Solutionz independently audited. But why that process was not undertaken with greater diligence to ensure the return was lodged on time and the penalty avoided remained unanswered. 125 Again, there were a number of instances of conduct, assuming lesser significance, which are said to support the argument that the Kurth/Hepner camp had acted oppressively towards the Catalano camp. These include alleged inappropriate contact between Mr Kurth and suppliers of Fine Food Solutionz and the manipulation and removal of access from the Fine Food Solutionz website. It is unnecessary to set out each fact which it was submitted could go toward establishing this ground. 126 But all such conduct, it is concluded, is largely the product of the on-going division between the two camps. A failure to agree or to resolve ongoing sources of division may constitute oppression. And it may be necessary, in an appropriate case, to characterise the conduct of one participant as the source of the division and another participant as the party whose interests are being oppressed. In the present proceeding, the steps being taken by those in the Kurth/Hepner camp, being it, either: the conduct of Mr Hepner; and/or the conduct of Mr Kurth do not constitute oppression. They were largely responding to difficulties generated by Mr Samuel Catalano or Mr Nathan Catalano. Thus, and only by way of example, the conduct of both Mr Hepner and Mr Kurth in establishing the Gourmet Dim Sim Company was conduct generated by the conduct of those in the Catalano camp in respect to Innova Foods.

Conduct relating to the Fair Work Proceeding 127 The final rubric under which it was submitted the Kurth/Hepner camp oppressed the Catalano camp relates to the unfair dismissal proceeding instituted by Mr Hepner against Fine Food Solutionz in the Fair Work Commission. 128 On 30 April 2012, Mr Nathan Catalano terminated the services of Mr Hepner on the grounds of misconduct. On 28 May 2012, Mr Hepner challenged this decision. 129 Examples of conduct arising from this proceeding which are said to amount to oppression include: Mr Kurth assisting Mr Hepner by giving evidence in the proceeding and giving Mr Hepner advice; Mr Kurth attempting to "take over control" of the proceeding; and Mr Kurth failing to authorise the payment of the legal fees incurred by Fine Food Solutionz in defending the application. 130 But, again, such conduct does not constitute oppression. The termination of the services of Mr Hepner, it is concluded, reflects more adversely on those in the Catalano camp than it does on the conduct of Mr Kurth.

The claimed oppression - individually or cumulatively 131 It is not considered that the individual claims of oppression at the hands of those in the Kurth/Hepner camp have been made out - either individually or when considered together. 132 Some factual events are referred to in the written submissions advanced on behalf of the Catalano camp under a number of different "guises"; others are mentioned - but, thereafter, apparently seem to recede in significance. 133 One such instance is the reference to the removal of $35,000 by Mr Kurth from Fine Food Solutionz. That was a sum withdrawn on 20 December 2010 from the account of Fine Food Solutionz and paid to Mr Kurth's company, Managing Australian Destinations. The fact of the withdrawal and its effect on the relationship with Messrs Samuel and Nathan Catalano was accepted by Mr Kurth. There was thus this exchange during his cross-examination: What I want to put to you, Mr Kurth, is if you were so concerned about a relationship built on trust that the failure to disclose his bankruptcy in 1986 was a fault on the part of Sam in your eyes, a much larger fault is taking $35,000 out of the company without telling either of Sam Catalano or Nathan Catalano. There was an objection and the same issue approached again as follows: Were you worried that withdrawing $35,000 without telling, as you say, your new business partners, would sour the relationship?---Yes. And yet you did it anyway?---Yes. Such criticism as may be directed at the conduct of the parties to the present proceeding is, accordingly, not all one way. Criticism can certainly be directed at, for example, this conduct of Mr Kurth. As suggested by the cross-examiner, there was certainly a lack of consistency on the part of Mr Kurth. He sought a relationship founded upon trust and confidence and yet took a step which he knew would "sour" that relationship. Criticism can also be directed at Mr Hepner in respect to his dealings with Telstra in order to secure the transfer of his telephone number. 134 The fact that some events assumed greater rather than less significance in the written and oral submissions is only to be expected. But each of the facts referred to by Counsel has been considered. Some of the bases upon which the claim of oppression were advanced can be more readily rejected than others. Some of the factual events relied upon certainly do not reflect well upon the conduct of Mr Kurth or Mr Hepner. 135 On balance, however, it is concluded that the claim of oppression advanced on behalf of the Catalano camp is rejected.

The Kurth/Hepner claims of oppression 136 The claims of oppression advanced in the Further Amended Statement of Cross-Claim alleging oppression of Kurth Management Pty Ltd and Mr Hepner at the hands of those in the Catalano camp, it is further concluded, have been made out. In addressing these claims, it is again noted that neither the evidence nor the submissions sought to distinguish between Mr Kurth and Kurth Management Pty Ltd as legal entities. 137 Again, not all of the instances of oppressive conduct relied upon in that Cross-Claim need be addressed. In concluding that those in the Catalano camp have engaged in oppressive conduct, it is sufficient to address only some of those claims as follows - albeit not necessarily under the same "headings" as pleaded in the Cross-Claim.

The non-disclosure of prior financial difficulties 138 The Kurth/Hepner camp submits that an aspect of the oppressive conduct of the Catalano camp was the failure to disclose - or a misrepresentation - as to the financial circumstances surrounding Mr Samuel Catalano. 139 Certain objective facts were common ground, namely: the fact that Mr Samuel Catalano presented a Debtor's Petition on two occasions and was made bankrupt in December 1986 and again in February 2011; and the fact that Mr Samuel Catalano had been involved in a substantial corporate failure in what was called the Catcorp or Austruc Group of companies. The bankruptcy in December 1986 can be left to one side. Mr Kurth accepted that the non-disclosure of the fact of that bankruptcy would not have had any influence on his assessment of Mr Samuel Catalano. 140 The fact of non-disclosure - or a misrepresentation - as to circumstances surrounding Mr Samuel Catalano and the relevance or significance of any non-disclosure was, however, put in issue. 141 Counsel on behalf of those in the Kurth/Hepner camp disavowed the existence of any legal obligation on the part of Messrs Samuel or Nathan Catalano to disclose information as to either the bankruptcies or the circumstances surrounding the more widespread corporate collapse presided over by Mr Samuel Catalano. The proposition which was advanced was that the non-disclosure of this information formed part of the oppressive conduct towards Mr Kurth and Mr Hepner. Under the guise of bringing monies in to develop the business of Fine Food Solutionz, Messrs Samuel and Nathan Catalano - it was said - improperly failed to disclose information centrally relevant to any future business relationship. 142 Questions arose during the hearing as to the point of time at which any disclosure should have been made, including both: the period leading up the execution of the Heads of Agreement in November 2010; and the period leading up to the execution of the Deed of Variation of the Heads of Agreement in June 2011. There was some conflict in the evidence as to when the disclosure occurred. 143 The first occasion upon which there was a disclosure in writing to Mr Kurth (or Mr Hepner) that Mr Samuel Catalano was an undischarged bankrupt was an e-mail forwarded on 19 September 2011. That e-mail referred to Mr Nathan Catalano's belief that he was "quite certain [that Mr Kurth was] already aware of this, given I discussed this issue recently with Vicki Kurth", namely Mr Kurth's wife. 144 Not surprisingly, the opportunities when there could have been - or, on one view, should have been - disclosure of the prior financial difficulties confronted by Mr Samuel Catalano were thus pursued in cross-examination. 145 Prior to the execution of the Heads of Agreement on 23 November 2010, for example, there was the initial meeting that took place in Port Douglas in early August 2010 between Messrs Nathan and Samuel Catalano and Messrs Hepner and Kurth and Ms Kurth. An e-mail forwarded on 4 August 2010 foreshadowed that meeting taking place. Mr Nathan Catalano was first taken to the period prior to 4 August 2010 and the following exchange occurred with his cross-examiner: And in your discussions with Mr Hepner - either by yourself or when your father was present - in the period between 5 July 2010 and 4 August 2010, did you say anything to Mr Hepner about the Catcorp companies and what had happened to them?---Not - not to my knowledge. Not to my recollection. No. Mr Nathan Catalano was then taken to the e-mail of 4 August 2010 and the following exchange occurred: But you didn't tell them what had happened to your previous business, did you?---No[t] in this email. No. At any time up to and including this email on 4 August 2010, you didn't tell them about that, did you?---Up until this email, no. But on that visit, we did. In an affidavit sworn by Mr Nathan Catalano on 2 April 2013, he refers to a meeting which he says took place "in about September 2010". It was accepted that this meeting was the one which occurred in early August 2010. The account there given was that Mr Nathan Catalano said that "[d]uring the GFC, we were caught with a lot of unsold property and we had to sell". He was taken in his cross-examination to this passage and the following exchange then occurred: That's the disclosure that you're talking about, is it?---That's right. So you talked about your previous businesses, including construction, property development and manufacture and supply of products to major retailers, and then you said something to the effect of, "During the GFC we were caught with a lot of unsold property and we had to sell"?---Forced to sell, correct. You didn't say that the companies were placed in administration and subsequently went into liquidation, did you?---No, I said we were forced to sell. Suggesting that you had some properties that you needed to sell, which were then sold and while you might have taken a loss on those the business otherwise continued?---I made it quite clear that during the global financial crisis we were caught with a lot of unsold property and that as a result of that we were forced to sell the businesses, not just the property. Well, you don't say in your affidavit, "We had to sell the business," do you?---No, I do not. And in the context of what you were talking about you were referring to sales of property, not sales of business, weren't you?---No. I was referring to both. We were forced to sell the businesses because of cash flow. But you didn't sell the business, did you?---The words that I used --- But you didn't sell the businesses did you?---No I didn't sell the business, no. Nor did your father, did he?---No. Nor did the companies, did they?---No. The administrators and the liquidators sold them, didn't they?---Correct. You didn't tell Mr Kurth and Mr Hepner that the corporate empire that Mr Sam Catalano had run and of which you had been part had entirely collapsed and been placed under administration and subsequently in liquidation, did you?---No, I didn't. Don't you think that was something that it would have been important for them to know when you were asking to come into their company as a provider of capital and thus as a shareholder?---I would have thought if it was important they would have checked, and therefore I didn't feel the need to tell them. Well, isn't what you really mean by that last answer that you thought it was important to conceal the fact from them if you could?---No, I reject that. 146 Mr Nathan Catalano was later again taken to the 4 August 2010 e-mail but resisted a proposition that what was being communicated to Mr Hepner and Mr Kurth was either a "lie" or "misleading". That exchange was as follows: … If you can go back to the tender bundle, didn't you think it was important when talking to - particularly when writing an email to Mr Kurth and Mr Hepner in August 2010 and talking about injecting money into working capital to tell them that the previous corporations you had been involved in had collapsed and been placed into administration?---At the meeting that we had in Port Douglas I told them that we were [forced] to sell and they didn't ask any further questions. Well, I put it to you that if you said that to them that you were telling them a lie?---I reject that. You were putting to them information that created a false impression as to your previous working and business experience, weren't you?---No. By sending the email that you sent on 4 August 2010 you also represented to them that you and your father had the capacity to provide working capital. Correct?---Correct. At that stage you knew that your father was liable on a personal guarantee for the outstanding debts of the [Austruc] Group, didn't you?---In terms of - in terms of the extent of that - the extent of how much he was liable, it's not my area of expertise. You knew moneys were owing and outstanding from the collapse of the [Austruc] Group, didn't you?---I did. And that was knowledge you had had since about January of 2010 when the companies were placed in administration. Correct?---Correct. And you knew at the time the companies were placed in administration or shortly thereafter that there wasn't going to be enough money to pay all the debts, didn't you?---No - well, I believed that the secured creditors would be covered. All right. And the unsecured creditors?---There was likely not to be --- All right. So there would be money outstanding. Correct?---Correct. 147 Mr Samuel Catalano's account of that meeting held in Port Douglas in early August 2010 was somewhat different. He was "110 per cent" certain that there had been a disclosure by Mr Nathan Catalano of the corporate collapse of the Catcorp Group of companies. In giving his account, the following exchange occurred between Mr Samuel Catalano and his cross-examiner: … You didn't tell them then anything about the collapse of the Catcorp Group, did you?---That's not quite right. I personally didn't, but Nathan did. What did he say?---There was a meeting at the Kurth family home where we went back to have some lunch after the second, maybe the third day, to talk about moving forward, and we were having some lunch and before we started lunch, Nathan mentioned - he said, "There is something that I've got to put on the table" and he told them that there was an issue resulting in the collapse of the group due to the financial GFC at the time. There was no questions asked and there were some comments that came back, said, we understand, we had a difficult time during that period as well. Well, the global financial crisis occurred in 2008. This was 2010 and you were talking about a company that had gone into administration in February two thousand - - -?---The time taken for the - the reasons for that is that whilst the GFC did occur on the - commencing January 2008, the company was continuing to be profitable. We had lots of work on and business was good. The time taken for that to come through was through to 2009, when we had the Mandarin Club go down us on, point 1, which created a tight cash position, and then the banks walked in and said, "We need to revalue the properties", and as a result of that ongoing prices the values of those properties dropped by 30 per cent and they caught up some 20-odd million dollars. And are you sure that Nathan told Mr and Mrs Kurth and Mr Hepner that the - this corporate group had collapsed?---110 per cent. Are you sure he didn't just say something to the effect that you were forced to sell property?---I am sure. Sorry?---I am sure. 148 Messrs Kurth and Hepner denied that there was any such disclosure along the lines suggested by either Mr Nathan Catalano or Mr Samuel Catalano at that meeting in early August 2010. 149 The account of the August 2010 meeting provided by Messrs Kurth and Hepner is preferred to the account provided by either Mr Nathan Catalano or his father. It is unnecessary to make any finding other than that both Messrs Nathan and Samuel Catalano were at least mistaken in their recollection of what was then said. 150 Such disclosure as there was first occurred as the result of an exchange of e-mails on 17 and 19 September 2011. On 17 September 2011 Mr Kurth sent an e-mail to Mr Nathan Catalano in the following terms: 1. Why have I been getting e-mails from Sam purporting to direct company affairs? Because he's not a director and you are, you shouldn't be allowing him to make decisions on your behalf. 2. We have reason to believe he is an undischarged bankrupt and so if that is correct he shouldn't be managing the business at all. Is he a bankrupt? Mr Nathan Catalano responded two days later. He stated that "Sam Catalano is assisting me in the implementation of the day-to-day operations of the business" and stating that "Sam Catalano is an undischarged bankrupt". The response further stated that "Sam Catalano is aware of his obligations and is not managing the business - I am". 151 Notwithstanding the extent to which there were conflicting accounts as to the time of disclosure and that which was in fact disclosed, it is concluded that: there was no disclosure of the financial circumstances of Mr Samuel Catalano during the initial meeting held in Port Douglas in early August 2010; and the first occasion on which there was written disclosure of such matters was the 19 September 2011 e-mail. 152 Taken on its own, it is not considered that the failure to disclose Mr Samuel Catalano's financial circumstances would have constituted oppression of the Kurth/Hepner interests. The failure to disclose such circumstances, however, would inevitably impact upon the ability of Messrs Kurth and Hepner to place trust and confidence in the expertise being brought to the business by Mr Samuel Catalano. Mr Hepner, for example, was adamant that he "would not have entered the heads of agreement if [he] knew Sam Catalano had been involved in the Catcorp Group…". 153 Although not itself constituting oppression, the failure to disclose remains an aspect of the conduct of those in the Catalano camp which goes some considerable way to supporting the ultimate finding that their overall conduct constitutes oppression.

Allowing Mr Samuel Catalano to act as manager whilst a bankrupt 154 The actual involvement of Mr Samuel Catalano in the "management" of Fine Food Solutionz was a matter of some dispute. 155 Mr Samuel Catalano, as was common ground, had been declared bankrupt on two occasions - once in December 1986 and again in February 2011. 156 What was also common ground between the parties was that Mr Samuel Catalano performed accounting services to Fine Food Solutionz via M.R.S. Holdings Aust. Pty Ltd ("M.R.S. Holdings"). The circumstances in which that company was established and those accounting services were explained by Mr Nathan Catalano as follows: The fact that your father had become bankrupt in February 2011, having regard to his role in the company, particularly his role in relation to the accounts of the company, was an important matter, wasn't it?---I didn't feel so. M.R.S. were doing the accounts. And who's the effective controller of M.R.S.?---Maureen and myself. Do you have accounting qualifications?---No. Does Maureen have accounting qualifications?---No. Does your father have accounting qualifications?---He does. So who, in regard to M.R.S., was doing the accounts?---For? Well, you said M.R.S. was doing the accounts for the company, as I recall it?---Correct. Right. Well, M.R.S. is a company. The company can only operate through the hands and minds of its agents. Wasn't it the case that in providing the service of doing the accounts, M.R.S. was simply providing the services of Sam Catalano?---Providing accounting services, yes. Right?---It doesn't mean he's controlling M.R.S., though. Had the facts remained there, perhaps little could thereafter have been said. Whether it was Mr Samuel Catalano or others who provided the accounting services, the provision of those services was not put in issue. 157 The significance of Mr Samuel Catalano's involvement, however, assumed greater prominence because of the suggestion that it was Mr Samuel Catalano who was in fact a guiding hand behind the business of Fine Food Solutionz. This suggestion raised peripheral questions as to whether or not Mr Samuel Catalano had contravened s 206A of the Corporations Act and, more relevantly to the present proceeding, whether that undisclosed involvement either constituted oppression or evidenced oppression for the purposes of s 232 of the Corporations Act. The evidence of Mr Samuel Catalano also went to his credit and the reliability of his evidence and (more remotely) the evidence of Mr Nathan Catalano. 158 Section 206A provides as follows: A person who is disqualified from managing corporations under this Part commits an offence if: (a) they make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or (b) they exercise the capacity to affect significantly the corporation's financial standing; or (c) they communicate instructions or wishes (other than advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation) to the directors of the corporation: (i) knowing that the directors are accustomed to act in accordance with the person's instructions or wishes; or (ii) intending that the directors will act in accordance with those instructions or wishes. Section 206B provides for the automatic disqualification of persons for certain reasons, including a person who is "an undischarged bankrupt under the law of Australia, its external territories or another country": s 206B(3). Given the legitimate concern as to whether or not his conduct may have constituted a contravention of s 206A(1) by reason of his disqualification under s 206B(3), a certificate was granted under s 128 of the Evidence Act 1995 (Cth). 159 The definition of a "director" provided in the Dictionary to the Corporations Act as set forth in s 9 should also be noted. The definition there provided is as follows: "director" of a company or other body means: (a) a person who: (i) is appointed to the position of a director; or (ii) is appointed to the position of an alternate director and is acting in that capacity; regardless of the name that is given to their position; and (b) unless the contrary intention appears, a person who is not validly appointed as a director if: (i) they act in the position of a director; or (ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes. Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body. Any conclusion as to whether or not Mr Samuel Catalano contravened s 206A or was acting as a "director" within the definition of s 9 of the Corporations Act is unnecessary for the purposes of the present proceeding. And no such conclusions or findings are made for the purposes of those provisions. 160 That which remains relevant, however, is whether Mr Samuel Catalano was in fact acting as a "manager" of Fine Food Solutionz. That was the character sought to be ascribed to his involvement in the written submissions of those in the Kurth/Hepner camp. Indeed, the relevance of any such finding was more narrowly confined in those submissions to the "conduct of both Sam and Nathan Catalano in permitting Sam Catalano to act as the manager of FFS while a bankrupt". 161 It is respectfully concluded that Mr Samuel Catalano did in fact act as a "manager" of Fine Food Solutionz and that Mr Nathan Catalano permitted him to do so. 162 The "oppressive" nature of that conduct focuses upon Mr Samuel Catalano assuming that role without any prior disclosure to those in the Kurth/Hepner camp of the role he was to assume and without fully disclosing his financial circumstances. 163 The fact that Mr Samuel Catalano acted as a "manager" of Fine Food Solutionz is, with respect, beyond question. His involvement started from the outset and continued thereafter. 164 Mr Samuel Catalano was involved from the outset when he and Mr Nathan Catalano first travelled to Port Douglas in early August 2010 for a "quick visit". 165 The active involvement of Mr Samuel Catalano continued thereafter. That involvement may be traced back to 9 September 2010 when he forwarded an e-mail to Mr Kurth headed "Re: Heads of Agreement". That e-mail canvassed what (inter alia) was seen to be a "valuation problem" in regard to Fine Food Solutionz, the "net deficiency" outstanding and owing by Fine Food Solutionz and the proposal to commit $250,000. There then followed a further exchange of e-mails between Mr Samuel Catalano and either Mr or Ms Kurth. 166 Chronologically, there followed the execution of the Heads of Agreement on 23 November 2010. Two days later, on 25 November 2010 it was Mr Samuel Catalano who forwarded an e-mail to Mr Kurth stating that the "four of us need to discuss the processes and culture required to make the business successful…". The "four of us" referred to Messrs Samuel and Nathan Catalano and Messrs Kurth and Hepner. 167 On 6 September 2011 it was Mr Samuel Catalano who forwarded an the e-mail to Mr Kurth confirming "our offer to acquire all the shares not held by Equicap Pty Ltd Provident Fund for the sum of $100,000 plus repayment of outstanding loans by MAD". Later, on 15 September 2011 Mr Samuel Catalano again forwarded an e-mail to Mr Kurth stating (inter alia) that "further to our phone conversation I confirm we do not agree with the proposed change in protocols for the day to day banking operational issues". 168 The involvement of Mr Samuel Catalano, it is further concluded, cannot be confined to the implementation of the Heads of Agreement and attempts to bring the agreement to an end by the purchase of shares. 169 His involvement, it is concluded, thereafter intruded into the day-to-day management of Fine Food Solutionz. And it intruded on an on-going basis. 170 Thus, for example, the notes of a "Management Meeting" held on 7 December 2010 also record the allocation of tasks between Messrs Kurth, Hepner, Samuel and Nathan Catalano. Mr Samuel Catalano, according to those notes, assumed responsibility for banking, logistics, inventory control and agreements with respect to manufacturing. 171 By way of further example, on 19 March 2011 Mr Samuel Catalano forwarded an e-mail to Mr Kurth expressed in terms including "I am invoking relevant clauses within our heads of agreement…" and "I believe it best to bring up" questions affecting the cash-flow of the business. Mr Kurth responded by way of a "without prejudice" e-mail on 31 March 2011. 172 Similarly, and later in 2011, Mr Samuel Catalano forwarded a number of e-mails to Mr Kurth. In one e-mail forwarded on 14 December 2011 Mr Samuel Catalano stated that "[q]uite candidly and openly our intention is to proceed with a manufacturing facility in Sydney". And, in a further e-mail forwarded on 16 December 2011, Mr Samuel Catalano again set forth a proposal to set up a "new manufacturing supplier". He also there stated that he had "proceeded to set up a manufacturing facility and [it] will be ready for production by Feb/March". He further states he has "briefed Nathan and he sees the benefits and supports the proposal…". This e-mail, it should further be noted, provides more than evidence as to the involvement of Mr Samuel Catalano. It shows something as to manner in which both Messrs Nathan and Samuel Catalano corresponded with Mr Kurth. When Mr Nathan Catalano was taken to this e-mail, the following exchange thus occurred during his cross-examination: Your father also says: And I have proceeded to set up a manufacturing facility and will be ready for production by February/March. Do you see that?---I do see that. Where was that facility?---There was no facility. It was a proposal. Well, he said he had proceeded to set it up?---It - it was again trying to convince Byron that this was the way to go. So is it - the true situation was that he hadn't proceeded at that stage to set up a manufacturing facility?---As I understand it that's correct. So there was no manufacturing facility that would be ready for production by February or March?---No, there was no facility. Had - had the go ahead been given I suspect that February/March may have been tough but I suspect it would have - it would have happened. So that was just - that was just a lie or two lies to prod them along was it?---It was certainly aimed at prodding them along to get it - to get them to make the decision that we thought was the best decision for the business, yes. Deception was, accordingly, a tool which Messrs Samuel and Nathan Catalano was willing to employ to "prod" the Kurth/Hepner camp into submission. The exchange also exposes the recurring difficulty of not being able to accept what is stated in documents as necessarily evidence of the facts stated. 173 Notwithstanding the involvement of Mr Samuel Catalano, both Mr Nathan Catalano and Mr Samuel Catalano denied that involvement. Both sought to characterise the involvement as mere assistance or the provision of accounting services. Further to the e-mail forwarded by Mr Kurth to Mr Nathan Catalano on 17 September 2011 in which confirmation was sought as to whether Mr Samuel Catalano was an undischarged bankrupt was (for example) Mr Nathan Catalano's response insisting that his father was merely "assisting me in the implementation of the day-to-day operations of the business". 174 The explanation provided by Mr Nathan Catalano as to the role played by his father and his father's involvement in the business of Fine Food Solutionz is rejected. The explanation is not consistent with (inter alia): Mr Samuel Catalano's involvement from the outset with the discussions held with Messrs Kurth and Hepner in Port Douglas and the discussions which followed as to the execution of the Heads of Agreement and its subsequent variation; the subsequent e-mails to or from Mr Samuel Catalano and the content of those e-mails; his involvement in the placing of the order in July or August 2011 with Mr Broadbent; the e-mail he forwarded on 16 December 2011 to Mr Kurth; and his involvement in the setting up of a company that was to compete with Fine Food Solutionz, namely Innova Foods. Other examples can also be provided, perhaps being more easily characterised as being activities incidental to the provision of accounting services. But some examples trespass well beyond those more limited activities, including: an e-mail forwarded by Mr Samuel Catalano to Mr Kurth on 15 September 2011 concerning changes to the banking protocols and addressing signatories to cheques. The e-mail referred to an earlier conversation and simply "confirm[ed] we do not agree with the proposed change in protocols for the day to day banking operational issues." The involvement of Mr Samuel Catalano in the business affairs of Fine Food Solutionz, it is concluded, cannot be confined (for example) to: those matters in respect to which he could be said to have some "accounting" involvement by reasons of the services provided by MRS; or simply providing advice or assistance to his son, Mr Nathan Catalano. Nor is it considered that the repeated reference to the personal pronoun "we" in e-mails can be explained, as suggested by Mr Samuel Catalano as: his practice that "[a]ll my business life I've always referred within a company to, 'We' I don't use the word 'I'…". He also maintained that he was "not a decision-maker within the company…". The failure to more frankly acknowledge his involvement in the decision-making of Fine Food Solutionz provides reason to more broadly question the reliability of some of his evidence. 175 Again, however, it is concluded that the involvement of Mr Samuel Catalano in the management of the business of Fine Food Solutionz - without a full and frank disclosure of the role he was to play and without a full and frank disclosure of his financial circumstances - did not itself constitute oppression. But that involvement, taken together with other aspects of the Catalano camp conduct, supports an ultimate conclusion that there was oppression by the Catalano camp of the interests of Messrs Kurth and Hepner.

The diversion of business to Innova Foods 176 Another aspect of the way in which those in the Catalano camp are said to have conducted the business of Fine Food Solutionz in a manner contrary to the interests of that company and contrary to the interests of its members is their conduct in diverting business or business opportunities to Innova Foods. The diversion of such business or business opportunities was also relied upon by those in the Kurth/Hepner camp as occasioning loss or damage. 177 It was not disputed that the improper diversion of business away from Fine Food Solutionz to a company in which those in the Catalano camp have an interest may constitute oppression: Re Bright Pine Mills Pty Ltd [1969] VR 1002; Vadori v AAV Plumbing [2010] NSWSC 274 at [184], 77 ACSR 616 at 650 per Ward J; Fitzpatrick v Cheal [2012] NSWSC 261 at [175], 264 FLR 313 at 365 per Ward J. What was disputed was whether there had been any diversion of business or any improper diversion of business to Innova Foods. 178 Innova Foods was registered under the Corporations Act on 30 November 2011. Its sole director was Mr Brendan Drew, the brother-in-law of Mr Nathan Catalano. At the time Mr Drew was a professional cricketer based in Tasmania. 179 Although the facts surrounding the role played by Innova Foods and the involvement of both Messrs Samuel and Nathan Catalano is somewhat messy, it is concluded that a number of factors culminate in a finding that Innova Foods was in fact set up initially by Mr Samuel Catalano as a vehicle to which business opportunities could be diverted which would otherwise be available to Fine Food Solutionz. His conduct in doing so, together with the involvement of Mr Nathan Catalano, was both contrary to the interests of Fine Food Solutionz and to the interests of Messrs Kurth and Hepner. 180 Mr Nathan Catalano most probably became aware of the setting up of Innova Foods in "around December 2011". 181 The conclusion as to the role to be played by Innova Foods is founded upon a number of factors, including the following. 182 First, the sole director and shareholder of Innova Foods (Mr Brendan Drew) is related by marriage to the Catalano family and is a person who had no experience in the manufacture or sale of food products. Moreover, the exchange of e-mails relevant to Innova Foods was an exchange to or from Mr Samuel Catalano. The apparent lack of involvement of Mr Drew is in contrast to the involvement of Mr Samuel Catalano. 183 Second, the establishment of Innova Foods in November 2011 followed comparatively soon after a telephone conversation between Mr Hepner and Mr Nathan Catalano on 27 September 2011. During that conversation Mr Nathan Catalano advised that he no longer wished to work with Messrs Hepner and Kurth and that he would start up a new business in competition with Fine Food Solutionz and take all of its customers if the differences that had emerged could not be resolved. 184 Third, steps were in fact taken by Mr Samuel Catalano shortly after 30 November 2011 to set up an account in the name of Innova Foods with a courier used by Fine Food Solutionz. The courier was known as Fresh By Noon and its Operations Manager was Mr Shayne Henshaw. An e-mail forwarded on 13 December 2011 from Mr Samuel Catalano to Mr Henshaw referred to an earlier discussion and the e-mail set forth "the details for [Innova Foods] which need to be set up…". So much in itself may appear to be neutral. But Mr Samuel Catalano, however, apparently did not wish the existence of the account between Fresh By Noon and Innova Foods disclosed. Mr Henshaw thus gave the following account of a telephone conversation during his evidence in chief: … Did you subsequently receive any phone calls from Mr Catalano about Innova Foods?---At the end of our business relationship, Sam did call me, and started off quite upset, the fact that I had mentioned to Juy, Juy Hepner, about Innova Foods, asking - well, stating that he thought we had a good relationship and what had I ever done to him, and asked me why I told Juy about it, and I just answered, "Why wouldn't I? He's part of the business." 185 Fourth, Fresh By Noon made deliveries to customers of Fine Food Solutionz, being Event Cinemas and Rydges Hotels. By way of example, the 13 December 2011 e-mail identified the following products for delivery (without alteration): Salted Caramel Tart 8 cm (Frozen) Louisana Wing Sauce (Ambient) 6" White Flower Tortilla (Frozen) Raw Cut Chips (Chilled) These were not products supplied by Fine Food Solutionz. But the e-mail also attached a delivery invoice to Rydges Melbourne of "White Flower Tortilla". The delivery invoice was on the letterhead of Innova Foods and the cost of delivery was paid for by Innova Foods. It is the delivery of products to customers of Fine Food Solutionz which attracts some (albeit limited) attention. 186 Attempts by Mr Nathan Catalano to marginalise the significance of one or other of these factors are largely rejected. Mr Nathan Catalano, for example, sought to explain the involvement of Mr Drew as follows: Did you express any surprise to find that your brother-in-law had suddenly gone into the wholesale food distributing business?---No I didn't. As I said I had spoken to him previously about business and the thing about cricket is its great fun to play when you're playing but if you're sitting on the fringe you can't necessarily carve out a comfortable lifestyle for your family so you need to do other things. But if Mr Drew had wanted to on leaving cricket develop a career in food wholesaling why not have him just come and work for FFS?---I didn't - we never discussed him coming to work for FFS. Do you recall having any discussions with Mr Drew prior to 13 December 2011 about him going into the food wholesaling business?---I discussed with him how I was enjoying FFS and the things that we were doing and the success that we had had. Did he express to you a desire to get into that business, too?---Not that I can recall. It was just sort of general chit chat. But the non-involvement of Mr Drew and the involvement of Mr Samuel Catalano remains unaddressed. 187 Mr Nathan Catalano sought to characterise the delivery of products otherwise not supplied by Fine Food Solutionz as part of a vision of Mr Hepner placing Fine Food Solutionz as a "one stop shop" and a developing realisation that there was not enough "margin" to warrant the continued involvement of Fine Food Solutionz. When being taken to what Mr Samuel Catalano told him about Innova Foods, the following exchange thus occurred: And what did he tell you about Innova?---Very little. And amongst that - well, what did that very little comprise?---That they would distribute those items there for AHL to the cinemas and to the Moonlight Cinemas. All right. Why would Adam Petr from AHL have spoken to you about the supply of those products to Moonlight Cinemas when they were not products that FFS otherwise made or sold?---Because we worked hard to service him, to do what - I certainly was accommodating for the most part and we had built up a relationship as such that he thought that he could ring up and ask me to do those things. The aim of FFS, at least as Byron and Juy had seen it, was to try to make it, as it were, a one stop shop for wholesale food supply; correct?---That's what Juy said. The reality is that that's not at all possible. We're not a one stop shop. They source lots of product from lots of different suppliers. We're not capable of being a one stop shop. Well, if, as you say, Mr Petr had told you that AHL wanted products of this sort, why couldn't FFS have made inquiries as to manufacturers of those products with a view to obtaining them from those manufacturers and them supplying them to AHL along with other FFS products?---The products itself were already sourced. Adam sourced them and he said he wanted them. It was the logistics and the distribution of them that he was interested in. So the products weren't developed. He developed them, he sourced them, he just needed someone to distribute them. He came to me and said can you do this and it - Adam's - the majority of Adam's correspondence is by phone. He asked whether I would do it. He didn't give a great deal of detail. The more detail I got, the more I realised that it just didn't fit and it was a very busy time. You know, there are some things there that are ambient, that are chilled, that - there's - the salted caramel tarts were very delicate and it was just a risk for the business and I just said, mate, if we're going to do it, we're going to have to charge you a hell of a lot more because I need to make a margin on it and I need to distribute it. It's best to find someone else. But the logistics of distributing food products wholesale was, effectively, what FFS did, wasn't it?---FFS does a bit more than that. We develop, we manufacture and we distribute but what - we do that for frozen food, frozen food predominantly. So this is a mix of - or this was a mix of ambient and chilled product. It was - you can't send ambient or chilled products in a frozen truck, which means the costs go up. The product itself was subject to spoilage. Raw cut chips have a limited shelf life, salted caramel tarts were very delicate. I just sort of deemed it a risk to take. Commercially, it wasn't worth it, given that we were having such difficulty with all the suppliers and everything that was going on in keeping up with the rest of the volume of work within the business. Much may be said for the business decision made by Mr Nathan Catalano that the supply of some products attracted such a little "margin" that it was not in the business interests of Fine Food Solutionz (or Innova Foods) to continue supply. But left unexplained (for example) is the lack of the opportunity extended to Fine Food Solutionz to develop the supply of different products and (more importantly) the reasons for the very establishment of Innova Foods at the outset. 188 Fifth, is the role played by Mr Galiere in both Fine Food Solutionz and Innova Foods. Mr Galiere was originally one of the head chefs at the Wagamama chain of restaurants. He was initially employed by Fine Food Solutionz on a part-time basis but was later employed on a full-time basis. The decision to employ Mr Galiere on a full-time managerial role at an annual salary of $80,000 was apparently taken by Mr Samuel Catalano or Mr Nathan Catalano prior to the meeting held in Sydney on 11 August 2011. At that meeting, chaired by Mr Samuel Catalano, Mr Kurth was told of the decision. Mr Kurth was not given a copy of the position description until December 2011. Mr Kurth accepted that the employment of Mr Galiere would be "good for the business" but was of the view that the business simply was not "in a position to cover his wages at that stage". Mr Kurth also had reservations about the rate of remuneration being paid to Mr Galiere, a rate he believed "was the same, if not higher, than Juy Hepner's, who had basically started the company and was far more involved in … the matters of the company than … than Pierre as a contractor". 189 The non-involvement of Mr Kurth in the decision taken prior to August 2011 to retain Mr Galiere evidences Mr Kurth's exclusion from decisions of central importance to the development of the business of Fine Food Solutionz. For present purposes, however, it is the involvement of Mr Galiere in the development and supply of Asian food products by Innova Foods to customers of Fine Food Solutionz that assumes relevance. And, whilst doing so, he was using the e-mail address of Crazy Dragon. Mr Nathan Catalano, he maintained, spoke to Mr Galiere about such matters. When taken to a series of e-mails between Mr Galiere and Mr Balcombe, the executive chef of Wagamama, the following exchange occurred between Mr Nathan Catalano and his cross-examiner: Well, how can you confidently say that Mr Galiere - if you look at the email he sends on 18 May, when he talks about dumplings - is talking about dumplings produced or sold by FFS?---Because I made it very clear once I found out about the other products that spring rolls, dumplings, shumai were absolutely not to be supplied by anybody other than FFS. You had some sort of conversation with Mr Galiere about this, did you?---I did. When was that?---As I said, I can't remember the date. I see. You were quite happy for him to be marketing Innova products using his Crazy Dragon email address, but you drew the line somewhere?---No, I wasn't comfortable with him using that address. Well, why didn't you tell him to stop?---I believe I did. The use of the e-mail address nevertheless continued. Mr Nathan Catalano nevertheless apparently saw no difficulty with Mr Galiere developing other products notwithstanding his employment by Fine Food Solutionz. The following exchange also occurred during the cross-examination: And all through this time, Mr Galiere was being paid the - his full consultancy fees by FFS?---Yes, he was. Yes?---He was carrying out work for FFS. I see. When he had the time?---No. No?---He was carrying out work for FFS. He had developed a number of products and continues to develop a number of products. As I said, Pierre is a contractor, so he first and foremost does the majority of his work for Crazy Dragon, but he's entitled, as I see it, to earn an income. He contracts out to a number of people. But by working for Crazy Dragon in dealing with Wagamama, he would be familiar with the product range supplied by Crazy Dragon to Wagamama, wouldn't he?---Absolutely. And the pricing structure?---Yes, he would have access to that. Which is a matter sensitive to that business, correct? You would agree with that?---Pricing structures are sensitive to businesses, yes. Yes. And at the same time, he's working for another supplier - - -?---Yes. - - - that's also supplying foods to Wagamama?---Yes, I think it's incorrect to lump [all food] together. They're completely different foods. 190 Taken together and on balance, these factors lead to the conclusion that Innova Foods was in fact set up by Messrs Samuel and Nathan Catalano as the vehicle by which business opportunities of Fine Food Solutionz could be - and were in fact - diverted. 191 The steps taken to set up Innova Foods and the diversion of business opportunities to Innova Foods, it is respectfully considered, constitute oppression. Alternatively, the conduct of those in the Catalano camp to the setting up of Innova Foods and the diversion of business opportunities to that company certainly assists in any residual reservation as to whether the conduct of those in the Catalano camp - taken as a whole - constitutes oppression.

The termination of the services of Mr Hepner 192 Prior to establishing the business Fine Food Solutionz, Mr Hepner taught English in Taiwan. It was there that he leant how to make Chinese dumplings and other Asian recipes. He returned to Australia and in 2003 started the business then known as Crazy Dragon Gourmet Foods. Work on developing the brand progressed between 2003 and 2010. It was during that period that he found two consistently good and reliable contract manufacturers - Barramundi Gardens and WonSum. 193 It was in April 2009 that he built the "Crazy Dragon" website. Mr Hepner was responsible for the creation of the name "Crazy Dragon", that being his "nickname" when he was a schoolteacher in Taiwan. It was the website that initially attracted the attention of Mr Nathan Catalano. 194 Mr Nathan Catalano first contacted Mr Hepner by e-mail on 5 July 2010. 195 Intervening between this first contact and the execution of the Heads of Agreement in November 2010 were the e-mail on 4 August 2010 and the meeting in Port Douglas between Mr Hepner, Mr and Ms Kurth and Messrs Samuel and Nathan Catalano. It was the 4 August 2010 e-mail in which Mr Nathan Catalano expressed the view that it was the intention of his father and himself "to add value, not simply take it". There was also the meeting in mid 2010 at the Swiss Grand Hotel in Sydney after which Messrs Samuel and Nathan Catalano said that they were keen to buy into the business of Fine Food Solutionz and to help manage and grow the business into a $20 million a year business. 196 Mr Nathan Catalano accepted that "there [was] certainly a partnership" as between he and his father and Messrs Kurth and Hepner. 197 The role that Mr Hepner was in fact to play in the future business of Fine Food Solutionz was nevertheless unquestionably different to that which he saw for himself. 198 Hints of a difference, perhaps with the considerable benefit of hindsight, emerged early. The notes of the "Management Meeting" held on 7 December 2010 recorded the allocation of tasks as between Messrs Kurth, Hepner, Samuel and Nathan Catalano. When taken to the notes of this meeting, however, and the allocation of tasks it recorded, the following exchange occurred between Mr Hepner and his cross-examiner: Can you have a look - - -?---That's right. I remember there being an inordinate number of responsibilities that Nathan had put himself down for on this document. I think he did this document, and I remember thinking, "What about me?" What steps did you take to have a greater role in the business?---I always - he put his name down on this document, but I was doing all this stuff anyway. All of the production, all of the products and - it was all me. It is accepted that Mr Hepner assumed a far greater role in the affairs of Fine Food Solutionz than the documents - and, in particular, Mr Nathan Catalano - was prepared to acknowledge. 199 The deterioration in the relationship between Mr Hepner and Mr Nathan Catalano came to a head on 17 February 2012. On that date Mr Nathan Catalano wrote a letter to Mr Hepner concerning the "proposed termination" of the services of Mr Hepner. That letter identified "specifically" three "serious concern[s] regarding your recent conduct", namely: "taking unapproved and unentitled leave"; "misleading the business as to your taking leave"; and "conduct unbecoming of a holder of your position - specifically the conversation between yourself and I on Friday afternoon (17th February 2012) regarding your dissatisfaction with the current situation." The letter required (inter alia) Mr Hepner's attendance at a phone conference on Friday 24 February 2012. A further letter required Mr Hepner's attendance at a "Discipline Hearing to be held via phone conference on Friday 20th April at 4pm". The "disciplinary hearing" was thereafter adjourned to 24 April 2012 apparently because Mr Hepner had not had time to prepare a response. 200 On 21 February 2012 Mr Nathan Catalano e-mailed Mr Kurth advising that with "regards to Juy, no decision has been made as to whether he be removed or not as yet". 201 On 30 April 2012 Mr Nathan Catalano forwarded an e-mail to Mr Hepner notifying him of the decision to terminate his employment. Mr Hepner responded on the same day maintaining that Mr Catalano had "no right to sack me". Mr Kurth did not agree with the termination of Mr Hepner's employment. 202 An exchange of e-mails discussed a proposed settlement of the claims being made by Mr Hepner and competing accounts as to the authority of Mr Nathan Catalano to effect the termination of Mr Hepner's services. 203 Proceedings were thereafter unsuccessfully instituted by Mr Hepner before the Fair Work Commission. A hearing was held before the Fair Work Commission on 10 and 11 December 2012. Mr Kurth gave evidence on behalf of Mr Hepner and during that evidence he described Mr Nathan Catalano as a "hostile director". It was Mr Kurth's evidence that Mr Nathan Catalano did not have "the jurisdiction to sack Juy". It remained his view that Mr Hepner's services should not have been terminated. In re-examination, in the present proceeding, the following account thus occurred: … That sacking having taken place, you were taken to various emails that raised questions about settling that dispute. What was your view as to how that dispute could have been, or should have been, settled?---Well, my - my initial feeling was that Juy should still be involved in the company, and that that was my - my main aim. But there was discussions about settlement that were actually pressed by Mr Catalano, but I - I believed that Nathan - Juy should stay on. Given the original contribution on the part of Mr Hepner to the business of Fine Food Solutionz and his continuing attempts to be involved in the business after the execution of the Heads of Agreement, the position of Mr Kurth was not unexpected. 204 Attempts by Counsel in the cross-examination of Mr Hepner to marginalise his contribution to the business of Fine Food Solutionz both before and after the executions of the Heads of Agreement, it is respectfully concluded, are to be rejected. An attempt, for example, to suggest that Mr Hepner really did not contribute to the development of any new recipes after the execution of the Heads of Agreement was rejected by Mr Hepner. His account was that he "tried to contribute recipes but [was] told to basically stay out of it…". Similarly, an attempt to suggest that Fine Food Solutionz did not have any retail customers prior to the involvement of Mr Nathan Catalano was also rejected. Mr Hepner stated that prior to the execution of the Heads of Agreement, Fine Food Solutionz was supplying IGA and that discussions with Coles and Woolworths started in 2008 when those retailers came across him at the Fine Food shows in Sydney and Melbourne. This evidence of Mr Hepner is accepted. 205 Attempts in the cross-examination of Mr Hepner (for example) to establish that he had failed to disclose to Messrs Samuel or Nathan Catalano information perhaps relevant to the relationship to be formed, with respect, also missed their target. It was thus suggested that Mr Hepner had failed to disclose the fact that a company of which he was the sole director and shareholder had been "struck off" pursuant to s 601AB of the Corporations Act. The company had in fact been struck off. It was a company involved in a proposal to operate a brothel. The idea, Mr Hepner, maintained was a "bad idea" and the site of the brothel remained a vacant block of land "just sitting there". The only continuing relevance of the proposal was that the block of land was a property at Echuca in Victoria, namely the block of land referred to in the Heads of Agreement. 206 The termination of the services of Mr Hepner's services, it is respectfully concluded, evidences a commitment on the part of Messrs Samuel and Nathan Catalano to exclude any further involvement in the business of Fine Food Solutionz of either Mr Hepner or Mr Kurth. The commitment on the part of Mr Nathan Catalano to exclude Mr Hepner from further involvement is that which attracts present attention. Other than the grounds set forth in the letter on 17 February 2012, no further explanation was provided by Mr Nathan Catalano for his decision. 207 Left to one side is any question as to whether Mr Nathan Catalano had the authority or "jurisdiction" to terminate Mr Hepner's services and any question as to whether the decision of the Fair Work Commission in fact left for later resolution by this Court any question of the broader considerations affecting the decision to terminate his services. The evidence of the oppression is to be found in: the decision to terminate Mr Hepner's services, and thereby exclude him from further participation in the business of Fine Food Solutionz; the circumstances surrounding the decision to terminate his services, including the lack of agreement on the part of Mr Kurth; and the very fact that the decision further divided the interests of the Catalano camp on the one hand and the competing interests of Messrs Hepner and Kurth. The lack of agreement on the part of Mr Kurth to the termination of the services of Mr Hepner, it is respectfully considered, is given added significance given: the role initially played by Mr Hepner in the establishment of the business of Fine Food Solutionz and the recognition of that role by the inclusion of Mr Hepner as a signatory to the Heads of Agreement. Whatever authority Mr Nathan Catalano may have had to terminate the services of others employed by Fine Food Solutionz, the importance of the role played by Mr Hepner was such that there should have been far greater involvement of Mr Kurth in any decision-making process whereby Fine Food Solutionz and Mr Hepner were to part their ways. Mr Kurth was firmly of the view that "given that [Mr Hepner] had a key role as founder of the FFS business and Food Service Business Development Manager the termination was something that should have been considered at board level pursuant to clause 16 of the HOA." The reference to clause 16 may be left to one side. Concurrence may nevertheless be expressed with the view of Mr Kurth that a decision to terminate Mr Hepner's services "should have been considered at board level…". Even if the decision to terminate Mr Hepner's services is accepted as a perfectly authorised exercise of power on the part of Mr Nathan Catalano, the fact remains that that decision did little to seek to progress a harmonious development of the business and business opportunities of Fine Food Solutionz. Indeed, the decision only achieved a further fracturing of the competing interests and did so in a manner which further solidified the position of influence of Messrs Samuel and Nathan Catalano. And, it is respectfully considered, that result was what they had set out to achieve. 208 The termination of the services of Mr Hepner, either taken by itself or together with the other conduct of those in the Catalano camp relied upon by Messrs Kurth and Hepner, it is thus concluded, is an act of oppression.

The exclusion of Mr Kurth from the management of Fine Food Solutionz 209 The Kurth/Hepner camp submitted that a further aspect of the oppressive conduct pursued by the Catalano camp was the exclusion of Mr Kurth from participation in the management of Fine Food Solutionz. 210 It was common ground that such exclusion could evidence oppression or assist in a conclusion that conduct is oppressive: Hogg v Dymock (1993) 11 ACSR 14 at 20. Malcolm CJ there summarised some of the relevant principles as follows: The directors of a company are required to conduct the affairs of the company in the interests of the company and its shareholders as a whole. They may not engage in conduct which would be oppressive or unfairly prejudicial to or unfairly discriminatory against a shareholder. Such conduct clearly can exist in a small company such as the present. In Sanford v Sanford Courier Services Pty Ltd (1986) 10 ACLR 549; 5 ACLC 394 the high level of salaries and other payments made by a couple who ran the business to themselves were held to be oppressive because the plaintiff, who was an equal shareholder but no longer a director did not receive any salary and so did not share fairly in the company profits. The key word in s 260 of the Corporations Law is "unfairly": see Wayde v New South Rugby League Ltd (1985) 59 ALJR 798; and Re Norvabron Pty Ltd (No 2) (1987) 11 ACLR 279 at 290 per Derrington J. In Re Spargos Mining NL (1990) 3 ACSR 1 at 43 Murray J said: "... unfairness may lie in the harm suffered as a result of the conduct of management, the prejudice caused, the lack of reasonable commercial justification for the course taken, or simply in the decision-making processes within the company". Removal from a salaried position within the company may be unfair, even though it might be a valid exercise of the powers of the majority of the directors: Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 378-379 per Lord Wilberforce. While that case involved a partnership which had been converted into a company, it is common ground that the parties in this case envisaged in the first instance that they would be partners and share equally in the day to day conduct of the business as well as in the management of it at the level of directors. In the Westbourne Galleries case there was an expectation of continuing participation. This was also the case in Diligenti v RWMD Operations Kelowna Ltd (1976) 1 BC 36 in which a founding member was removed as a director and dismissed as a salaried manager. As against this, the board may properly decide what is in the best interests of the company, even where the majority of the directors decide to terminate the employment of an equal shareholder. In Re Terri Co Pty Ltd (1988) 12 ACLR 457; 6 ACLC 402 a business judgment, which was judged to be objectively reasonable and untainted by improper motives, was described as one which will be respected by the courts. See also: Ground and Foundation Supports Pty Ltd v GFS Management Services Pty Ltd [2002] WASCA 306 at [39], 21 ACLC 506 at 512-513 per Wallwork J (Anderson J and Burchett AUJ agreeing). 211 What was not common ground, however, was whether Mr Kurth had in fact been excluded from the management of Fine Food Solutionz. In very summary form, on behalf of the Catalano camp it was submitted that: Mr Kurth in effect had chosen not to take an active role in the management of Fine Food Solutionz; and Mr Kurth was in fact provided with information in the form of a "board pack" and never complained as to the lack of information provided. It may be accepted that, at least initially, Mr Kurth chose to take a less active role in the management of Fine Food Solutionz. It may also be accepted that he was regularly given information in the form of a "board pack". 212 The involvement of Mr Kurth in the management or business affairs of Fine Food Solutionz must necessarily be assessed against the background that his time was largely consumed by his being the Managing Director of Managing Australian Destinations. It was that company that paid him. According to Mr Kurth, it was that company that took up "all my time[s]". And he travelled extensively for that company. 213 But these other demands upon the time of Mr Kurth should not be overstated - as was the temptation indulged in on behalf of the Catalano camp in their written submissions. One submission was that Mr Kurth "was often late in responding on FFS matters and was uncontactable to third parties whom Byron had required seek his confirmation before moving stock". The instance of Mr Kurth being "uncontactable" was said to be supported by the following exchange between Counsel on behalf of the Catalano camp and Mr Henshaw in respect to a courier used by Fine Food Solutionz, namely Fresh By Noon: How long a delay in co-authorisation from Mr Kurth would cause disruption to the business?---Well, I - I can say that after I received one, one that I needed co-authorisation I emailed Byron straight away and he was uncontactable, so I had to virtually tell Fine Food Solutionz I had to wait for co-authorisation. No reference, however, was made to the exchange which followed immediately thereafter, namely: Were there other occasions where you had tried to contact Mr Kurth and not able to get in contact with him?---No, because I never needed to beforehand. So that was the only time you tried to contact Mr Kurth and you couldn't get a response from him?---Yes. Selective referencing to passages in a transcript on behalf of any party, especially references provided without the context in which an exchange occurs, is seldom helpful. 214 Nor should the degree of detail as to the affairs of Fine Food Solutionz communicated to Mr Kurth be concealed against the euphemism of a "board pack". 215 Included in the evidence was an e-mail from Mr Samuel Catalano to Mr Kurth forwarded on 5 March 2011 attaching "a summary of facts, thoughts, analysis and questions for discussion soon". Also included was a bundle of documents comprising (inter alia) the balance sheet for the business as of October 2012; a profit and loss statement; and a budget analysis. The suggestion put to Mr Kurth in cross-examination was that that bundle was "an example of the information that [he was] provided on a monthly basis". But that suggestion was rejected. His evidence was: Your question to me is whether I got this on a monthly basis, and, no, I don't get this level of detail on a monthly basis is my answer to your question. Mr Kurth was being regularly provided with some information - but the nature and extent of that information obviously varied. 216 But any unequivocal request on the part of Mr Kurth for the provision of further information was less certain. There was, for example, no e-mail from Mr Kurth requiring the regular provision of further information. Mr Kurth did maintain, however, that he requested further information from Mr Nathan Catalano. He thus explained during his cross-examination: Why would you go through Nathan rather than Sam?---Because I was going through Nathan after I - because I'm looking at the last email. Is it because ­ ­ ­?---It's 8 November, but I started going through Nathan when I discovered that Sam was a bankrupt for - and we discussed that we wanted MYOB access and access to a centralised server in the office so that we could see what was happening in the day-to-day business. And was Nathan able to provide you with that information that you requested?---No. Why not, do you know?---He refused to. The reference to the date of the e-mail was 8 November 2012. But this exchange has also to be viewed against an earlier exchange of e-mails in February 2012 in which Mr Kurth wrote to Mr Nathan Catalano: The only conclusion that I can draw from you not wanting me, your business partner, to access any information I require is that there is something to hide. Mr Nathan Catalano's response was recorded as being: I have nothing to hide and as such, I again make the offer, have one of your advisors come in a do a full audit of the financials of the business. This offer has been made in the past and this is still open to you. The only "audit" Mr Kurth instigated was one being carried out at the time of hearing. 217 With respect to the present contention that Mr Kurth was informed as to the business of Fine Food Solutionz by means of the provision of "board packs", it is concluded that he was regularly provided with information - albeit of uncertain content. It is further concluded, however, that he took very few steps to seek further information and did not avail himself of an opportunity to access "the financials of the business". 218 Any contention that Mr Kurth was initially excluded from the management of Fine Food Solutionz by reason of those in the Catalano camp not providing him with the requisite degree of detail as to the financial affairs of the company would, most probably, not have prevailed. 219 It is concluded that Mr Kurth was initially content to allow Mr Nathan Catalano to conduct the business of Fine Food Solutionz in a manner consistent with the expectation prior to and immediately after the execution of the Heads of Agreement. Indeed, the intimate involvement of Mr Nathan Catalano in the conduct of the business was a principal reason for entering the Heads of Agreement. 220 But that position changed in about September 2011. Thereafter, it is concluded that Mr Kurth was excluded - or largely excluded - from participating in the management of Fine Food Solutionz. 221 That exclusion is evident from (for example): his non-involvement in the termination of the services of Mr Hepner; and his non-involvement in the retention of Mr Pierre Galiere. 222 Taken by itself, the extent to which Mr Kurth was initially excluded from the management of Fine Food Solutionz may thus not have made out a claim of oppression. But the later exclusion of Mr Kurth from decisions of central relevance to the business does evidence and make out a claim for oppression. Taken together with the other claims of oppression being made, the conclusion as to oppression by reason of his exclusion from the management of the company is only further reinforced.

Conclusions 223 Taken individually, one or other of the aspects of the dealings between those in the Catalano camp may thus not constitute oppression as to the interests of Messrs Kurth and Hepner. Other aspects of those dealings, it is respectfully concluded, do constitute oppression. 224 That which is beyond doubt, however, is that the conduct of those in the Catalano camp - taken as a whole - constitutes oppression of the interests of Messrs Kurth and Hepner. Taken as a whole, it is concluded that those in the Catalano camp have treated Messrs Kurth and Hepner in a manner which can readily and objectively be described as "commercial unfairness". When resolving the claims as to oppression advanced on behalf of Messrs Kurth and Hepner, the Court - it is considered - should not take "a narrow view" and consider individual aspects of conduct separate and discrete from the overall conduct of those said to have exerted oppression. 225 That conclusion leaves open the remedy to the granted. Central to that question is the value to be given to the shares in Fine Food Solutionz.

THE VALUATION OF THE SHARES 226 Two separate issues were potentially presented for resolution, namely: the general principles to be applied in valuing the shares in Fine Food Solutionz; and the facts going to that valuation.

General principles 227 When making an order for the purchase of shares, the task of the Court is to fix a price that represents a fair value in all the circumstances: Smith Martis Cork v Benjamin Corporation Pty Ltd [2004] FCAFC 153 at [71], 207 ALR 136 at 146 per Wilcox, Marshall and Jacobson JJ. 228 General principles and some of the authorities as to the valuation of shares in oppression cases were summarised as follows by W B Campbell J in Queensland Co-Operative Milling Association Ltd v Hutchison (1976) 2 ACLR 188 at 192-193: In Meyer v Scottish Co-operative Wholesale Society [1957] SC 110, the First Division of the Court of Session made an order pursuant to s 210 of the Companies Act 1948 (UK), corresponding to the Qld s 186, that certain respondents purchase the petitioners' shares in a company at a price of £3/15/ - per share. In the circumstances of this case I think it important to set out the following passages from the judgments. In his reasons, Lord Sorn said, at 156: The conditions of the section being satisfied, there remains only the questions of remedy. In the circumstances of this case, it is manifest that the only appropriate remedy is to make the majority shareholder, that is to say, the society, purchase the petitioners' shares at a fair valuation. … In arriving at a fair value, how should we go about it? I think we should look at the date when the proceedings were begun and ask ourselves what would have been a fair figure for the society to have paid at that date. In doing this, however, it must be remembered that the oppression had begun at an earlier date, with some resultant loss of share value, and what we must endeavour to do is to fix the value which the shares would then have had but for the effect of oppression. The decision was affirmed by the House of Lords on appeal (sub nom Scottish Co-operative Wholesale Society v Meyer [1959] AC 324), and Lord Keith of Avonholm said at 364: "It was contended that the value of £3.15s put upon the shares was excessive. I see no reason for altering this figure. Lord Sorn has, in my opinion, approached this matter on a correct principle, by considering what would have been the value of the shares at the commencement of the proceedings had it not been for the effect of the oppressive conduct of which complaint was made. This is clearly not a matter on which a calculation can be made with mathematical accuracy or by the application of strict accounting principles …". Lord Denning said at 369: "One of the most useful orders mentioned in the section - which will enable the court to do justice to the injured shareholders - is to order the oppressor to buy their shares at a fair price: and a fair price would be, I think, the value which the shares would have had at the date of the petition, if there had been no oppression. Once the oppressor has bought the shares, the company can survive. It can continue to operate. That is a matter for him. It is, no doubt, true that an order of this kind gives to the oppressed shareholders what is in effect money compensation for the injury done to them: but I see no objection to this. The section gives a large discretion to the court and it is well exercised in making an oppressor make compensation to those who have suffered at his hands." This method of fixing a fair price for shares ordered to be purchased under s 186 has been accepted ever since: see Re Associated Tool Industries Ltd [1964] ALR 73, per Joske J at 84… Wanstall SPJ agreed. See also: Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549 at 562 per Waddell CJ in Eq. 229 As the facts unfolded in the present proceeding, no dispute arose as to the general principles to be applied. It was unnecessary to resolve any problems that may have arisen as to methods of share valuation. See: Sirianos, Problems of Share Valuation Under Section 260 of the Corporations Law (1995) 13 C & SLJ 88.

The evidence of valuation 230 As those events unfolded, any potential problems that may otherwise have arisen in respect to the valuation of the shares in Fine Food Solutionz receded as the only evidence of valuation was that filed on behalf of the Plaintiffs, namely on behalf of the Catalano camp. 231 That evidence was a valuation prepared by Mr Robin Humphreys. Mr Humphreys qualified as a Chartered Accountant in 1968 and has been responsible for the audit of major public companies and subsidiaries of multinational corporations. He has previously been retained to provide expert opinions, reports and evidence in other litigation. 232 Mr Humphreys was retained by the lawyers acting for the Plaintiffs on 15 March 2013. He was asked to prepare "an independent valuation of the shares in the company…". He was asked to assume that Fine Food Solutionz had two directors (being Mr Nathan Catalano and Mr Byron Kurth) and that there were 1,000 issued shares (being 500 shares held by Equicap and 300 shares held by Mr Juy Hepner and 200 shares held by Kurth Management Pty Ltd). 233 In the course of preparing his valuation, Mr Humphreys explained that the measure of return provided to an investor generally applied is "Earnings before Interest and Tax", abbreviated to "EBIT". The EBIT in respect to Fine Food Solutionz was then summarised in the following table: 2010 2011 2012 2013 $ $ $ $ Amended net profit (loss) as above (189,231) (224,254) 40,358 (120,484) Add back: Interest received (5) - - - Borrowing costs 20,539 13,399 4,063 16,901 Interest paid 38,888 15,004 116,001 69,949 EBIT (129,809) (195,851) 160,422 (33,634)

If the loss for the seven months to January 2013 is annualised, the projected loss for the full year to June 2013 will be $57,582. He thereafter expressed the opinion that the "figures indicate that there is a definite potential for future earnings, particularly from the establishment of sales of products to Woolworths and Coles…". 234 Mr Humphreys expressed his conclusion as follows: Conclusion: In my opinion, based on the above considerations, there has been little tangible progress in profitability from the date that the plaintiffs purchased their 50% interest in FFS. The Balance Sheet continues to show a deficiency of Net Assets and increased loan funding by the shareholders. There are indications that the business may develop and become profitable, subject to changes to distribution logistics still to be implemented. In my opinion, the value of FFS shares has not changed from 2010. In my opinion, the value of FFS shares should be deemed to be $2,000, based on the nominal amount of $1,000 initially paid by the plaintiffs to purchase their interest in FFS. In his oral evidence Mr Humphreys was taken to his initial assumption as to the number of shares acquired by the Catalano interest and was asked to change his assumption such that "the Catalano interest did not acquire 1000 shares for $1 but instead they acquired 500 shares for $1". Not surprisingly, Mr Humphreys maintained that if "they only paid $500, then the value would be $1000 and not $2000". 235 The evidence of Mr Humphreys was the subject of limited cross-examination. 236 His opinion as to value was accepted by the Kurth/Hepner camp. 237 There is, accordingly, no reason in the present proceedings why his opinion as to the value of the shares should not be accepted.

REMEDIES 238 Both the Further Amended Originating Process and the Amended Notice of Cross-Claim seek a variety of orders. 239 The principal order sought - by both those in the Catalano camp and those in the opposing Kurth/Hepner camp - was: an order for the purchase of shares - obviously the appropriate order being dependent upon which camp of interests was found to be "oppressing" those in the opposing camp. In the event that the relief sought in the Amended Notice of Cross-Claim was to prevail, an order was also sought: restraining Mr Nathan Catalano and Mr Samuel Catalano from approaching those who have had an interest - be it as supplier or customer - in Fine Food Solutionz; and for loss or damage or for equitable compensation. All parties have previously attempted to resolve the proceedings between themselves. Needless to say, those attempts have proved unsuccessful. But the attempts continue to have relevance to both the proper characterisation of the conduct of the parties and to the remedies to be granted.

An order for the purchase of the Equicap shares? 240 The conduct of those in the Catalano camp, it is concluded, falls within either s 232(d) and/or (e) of the Corporations Act. Section 233 thereafter confers wide discretionary powers upon the Court. The Court may make such order as "it considers appropriate". One of those powers, namely that conferred by s 233(1)(d), provides that the Court may make an order "for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law". 241 The conclusion that it is those in the Catalano camp who have oppressed the interests of Messrs Kurth and Hepner does not necessarily pre-empt an order being made that that it is they who should nevertheless have the benefit of an order that they purchase the outstanding shares in Fine Food Solutionz. It was certainly the position of those in the Catalano camp that they were in the best position to develop the business of the company and had the necessary expertise to best exploit (in particular) the growing business opportunities with Woolworths and Coles. 242 But it is concluded that an order in favour of the Catalanos should not be made. 243 To so order would be to permit them to benefit from their oppressive conduct and to forever exclude Messrs Kurth and Hepner from the business they had first established. Messrs Kurth and Hepner, it should be recalled, had invested considerable capital into the business even before the arrival of Messrs Nathan and Samuel Catalano. Nor would it be correct to assume that Messrs Kurth and Hepner could not themselves develop and exploit the future business opportunities, particularly with Woolworths and Coles. Messrs Kurth and Hepner may not have been as aggressively developing the business as Mr Nathan Catalano did, but the business was developing. Even if the view were to be formed that Mr Nathan Catalano may have been the better person to exploit future business opportunities - and it is unnecessary to reach any such concluded view - it was open to question whether the manner in which he was conducting the business would have been in the best interests of Fine Food Solutionz in the end. But such matters are matters of speculation. 244 The correct exercise of discretion is to make an order as sought in the Amended Notice of Cross-Claim for the purchase by those in the Kurth/Hepner camp of the outstanding shares in Fine Food Solutionz, currently held by Equicap. Such an order, it is respectfully concluded, gives effect (inter alia) to the fact that the relationship between the parties was essentially in the nature of a partnership; the fact that it is those in the Kurth/Hepner camp that have been oppressed; and also gives effect to what is considered to be in the best interests of the company overall. 245 The price at which they should purchase those shares is to be in accordance with the valuation evidence adduced by those in the Catalano camp, namely the valuation of Mr Robin Humphreys.

The Catalano camp's dealings with others 246 Also relevant to the conclusion that an order for the sale of outstanding shares in accordance with the Amended Notice of Cross-Claim is in the best interests of Fine Food Solutionz overall is an assessment as to the manner in which the Catalanos have dealt with others. This consideration may only assume slight significance, but it is a matter which attracted some attention during the hearing. 247 Reference may be made to two instances. 248 First, there was the dispute between Fine Food Solutionz and an amount being claimed by Mr Broadbent. The culmination of that dispute was the following e-mail dated 4 July 2010 forwarded from Mr Broadbent to Mr Nathan Catalano stating: I confirm that this amount of $14785.57 is full and final and ends the matter and that no further correspondence will be entered into. On its face, the e-mail records an agreement to resolve an outstanding dispute as to the amount to be paid - or accepted - in full and final satisfaction of outstanding monies said to be owing to WonSum. Lurking behind the e-mail, however, was a sense of grievance on the part of Mr Broadbent as to the manner in which he had been treated. In cross-examination it was suggested that Mr Broadbent had been "duplicitous" in accepting the $14,785.57 but not telling Mr Nathan Catalano that he was also silently seeking to reserve his rights to pursue the balance of monies said to be owing. The following exchange occurred: So what I put to you, Mr Broadbent, is that Nathan was frank and open in his dealings with you, but you were antagonistic with Nathan?---On the contrary. To the point where you were more than happy to deceive him into paying you $14,000 on a false pretence?---Well, he deceived - no. On the contrary. That is his - his and his father's entire game, going back almost all of the way through the dealings, that they were deceitful, they lied, they promised when they had no intention to deliver, they short-paid, they thought they had - they - they suggested to me that they had made agreements with me, which they had never done. So certainly not. I - it was - they are not honest people. It perhaps does not reflect well on Mr Broadbent that he was not disclosing to Mr Nathan Catalano that he would accept the payment purportedly in "full and final" satisfaction of the amounts outstanding but that he was also secretly seeking to reserve his rights to pursue the balance. But the position of Mr Broadbent, it is considered, was thoroughly understandable. 249 Second, there was the dispute between Fresh By Noon and the Catalanos as to the amount of product said to have been delivered and, again, a dispute as to the amount payable. Mr Henshaw thus gave evidence of the rejection of what he regarded as a "gentleman's agreement" and disputes which seemed to be always resolved against his interests as follows: Right. When these issues about the stocktake were raised, was the - what was being put to you by Maureen Catalano or by anyone else on behalf of Fine Food Solutionz, was it ever to Fresh By Noon's benefit or advantage on that stocktake?---No, no. We were always short product. And in that process, you checked your own invoices and stock?---Yes. We - we kept a manual Excel spreadsheet. Every week, when we sent the invoice, we would send a - a worksheet of what we had done, and that dictated everything that had gone out that - that week, and, you know, within reason, if ever there was a discrepancy, it might have been a picking issue, where we pick one against another - one instead of another, which could have been a fault of ours, but there was always, you know, boxes and boxes that were - the discrepancy was boxes and boxes, not just one or two. So there were issues about payment as a result of that were there?---I don't know whether it was directly about that. All I know is from day one our payment terms as discussed in a gentleman's agreement when we first had our first meeting were seven days from invoice. After our invoice became seven days overdue I rang Sam and Sam just bluntly told me that it was a 30 day account and that's how he dealt with everybody. All right. And in your dealings - while your day-to-day dealings with Fine Food Solutionz were with Maureen, on major matters who would you deal with as the person in charge?---I would call Sam. 250 When considering the future of Fine Food Solutionz such instances provide some further support for the conclusion that it is best left in the hands of Messrs Kurth and Hepner.

No order for the winding up of Fine Food Solutionz 251 Throughout the hearing a recurring concern which was repeatedly expressed with the parties was the prospect that the only remedy may be to wind up the company. A recurring concern was that the conduct of those in either camp was such that it may have been an erroneous exercise of discretion to order the sale of the shares of those in one camp to the other or that the business as a whole had become so marginalised and for so long that it could not continue to operate in any effective manner. That concern was only reinforced by an Interlocutory Application made after the close of submissions for an order to be made in respect to the payments of outstanding accounts of product supplied to Fine Food Solutionz. Even in the interim between the close of submissions and the delivery of judgment, the parties were unable to agree upon the necessity for payments to be made. 252 An order for the winding-up of the company can be made, it is accepted, but only should be made if no other option is effectively available: John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'Asia) Pty Ltd (1991) 6 ACSR 63 at 74. Young J there observed: There is no doubt at all that the court is empowered to make such an order and the real question is whether it is a viable order. It is incumbent upon the court when making an order under s 320 to endeavour to find a scheme, short of winding up, if possible, which will "put the company back on the rails" and avoid the causes of conflict and oppression, yet will as far as possible allow all members to participate in the business. 253 Notwithstanding continuing reservation, it is ultimately concluded that an order should not be made for the winding up of the company and that an order should be made for the purchase of the shares.

An injunction 254 The orders sought in the Amended Notice of Cross-Claim as against Mr Nathan Catalano and Mr Samuel Catalano and as filed on 15 April 2013 were expressed as follows: (a) an order that they and each of them be restrained for a period of 12 months from the date of this order from approaching, indirectly or directly, by themselves or by any agent or by way of any corporation or entity in which they have an interest as shareholder, director or other officer, any supplier or customer of FFS and/or the Third Cross-respondent for the purpose of or in connection with any business involving the wholesale supply of food products; (b) an order that they and each of them be restrained for a period of 12 months from the date of this order from being involved as an employee, manager, accountant, director or agent of any business engaged in the manufacture or supply of food products. 255 The form of an order that may be made may presently be left to one side. 256 Initially, there is a question as to whether any order should be made. That question, it is respectfully concluded, should be answered in favour of those in the Kurth/Hepner camp. 257 There is considered to be a sufficient threat that unless restrained either Mr Nathan Catalano or Mr Samuel Catalano would seek to divert business away from Fine Food Solutionz and establish a competing business. That threat is founded upon a number of considerations. 258 First, there is the involvement of Mr Samuel Catalano in the management of the business of Fine Food Solutionz. 259 Second, there is also the involvement of Mr Samuel Catalano with the business of Innova Foods and the setting up of an account with Fresh by Noon. 260 Third, not to be ignored was the commitment on behalf of the Catalano camp to establish their own manufacturing and distribution company in Sydney - as opposed to the more conservative approach of Mr Kurth that Fine Food Solutionz could not at that stage afford the financial commitment to do so. 261 Fourth, during the telephone conversation on 27 September 2011 Mr Nathan Catalano and Mr Hepner were discussing (inter alia) the ability of Messrs Hepner and Kurth to carry on and develop the business of Fine Food Solutionz and the following exchange occurred: Nathan Catalano : "If you guys think you can do a better job of running it then guess what, here you go, here's your opportunity to come and run it, and we'll buy it out of receivership in six months time because I can assure you that mate within a couple of months Woolworths will go, PFD will go, AHL will… AHL I know for a fact will go." Juy Hepner : "Why, have you said that you are going to open your own business and take the customers away? Is that what you're planning to do? Go and buy your own spring roll machine and take the customers away?" Nathan Catalano : "It's an option for us. We know the business. There's opportunities there." Juy Hepner : "But you're a director of Crazy Dragon! You're not allowed to take customers away from Crazy Dragon!" Nathan Catalano : "Once you pay me out I won't be a director of Crazy Dragon any longer. What I do in the future is my call." Juy Hepner : "I don't think you're allowed to resign and run off and steal all the customers. I think that's unethical." Nathan Catalano : "I don't care whether you think it's unethical. I think it's unethical to try and use scare tactics to coerce me into agreeing with something that I don't want to agree to. You can't stop me ! If you think you can do a better job; if you and Byron think you can do it better, and you and Byron want to listen to your mate, do it." Juy Hepner : "Well we have to listen to our proper advisors. It's not just him, even the Bibby guy said… When considering that exchange, it must necessarily be taken into account that Mr Hepner knew the exchange was being recorded and that Mr Nathan Catalano was not privy to that fact. There must also be taken into account the fact that at that time the relationship between the two camps was under a considerable degree of stress. There nevertheless remains the fact that Mr Nathan Catalano was adopting a position that he remained free to take such steps as he considered were open to him and that such expressions of intent could not be summarily dismissed as mere posturing on his part. 262 These considerations, taken into account against the back-drop of the conduct of Messrs Samuel and Nathan Catalano from the outset of their dealings with Messrs Kurth and Hepner, it is concluded, gives rise to a reasonable basis for concluding that - unless restrained - one or other of them (and most probably both) will undermine the business sought to be developed by Fine Food Solutionz. 263 There is no reservation in concluding that an order should be made restraining both Mr Samuel Catalano and Mr Nathan Catalano from taking steps to compete with or to again seek to divert business from Fine Food Solutionz to a company or other entity in which they had control. 264 But difficulty is expressed as to whether the terms of the order as sought go beyond a protection of those more limited interests. The form of orders to be made require some refinement.

The cross-claim for loss and damage 265 The Amended Notice of Cross-Claim and a Further Amended Statement of Cross-Claim filed in Court on 15 April 2013 named the first Cross-Claimant as Mr Hepner; the second Cross-Claimant was Kurth Management Pty Ltd. The Cross-Respondents were Fine Food Solutionz, Innova Foods, Messrs Samuel and Nathan Catalano and Ms Maureen Catalano. The Amended Notice of Cross-Claim and Further Amended Statement of Cross-Claim, as amended, were both dismissed as against Innova Foods. 266 In very summary form, monies were sought in respect to loss and damage claimed to have been suffered by reason of: 1. the wrongful diversion of business opportunities to Innova Foods; and 2. "supplier wrongdoing", namely loss and damage suffered by reason of a refusal to permit Fine Food Solutionz to contract its dumpling and gyoza manufacturing to Rethink Group Pty Ltd. It is concluded that both claims for loss and damage have been made out as against Messrs Nathan and Samuel Catalano. It is concluded that loss and damage has been suffered by reason of both of the claims being made. The difficulty lies in attempting to give any certainty to the quantification of such loss and damage. To some extent this difficulty is attributable to the extent of discovery provided; to some extent it is also to be attributed to the manner in which the Cross-Claimants sought to quantify their loss or damage. 267 Initially there were attempts by Mr Kurth and Mr Hepner to calculate the quantum of any loss or damage. 268 One attempt was made by Mr Kurth. In his witness statement filed 25 March 2013 he calculated the loss or damage as follows: Wages Sam Catalano 15 months x $5,500 = $82,500 / 2 = $41,250 Nathan Catalano 15months x $12,149.95 = $182,249.25 / 2 = $91,124.60 Maureen Catalano 15 months x $5,500 = $82,500 / 3 = $27,500 Pierre Galiere 15 months x $7,500 = $112,500 / 3 = $37,500 Emil Haddad 8 months x $8726.42 = $69,811.36 / 2 = $34,905.70 Estimated loss of profit AHL products 15 months x $9,500= $142,500 Barramundi Gardens products: 6 Months x $27,130= $162,746 Total $537,526.30

But the difficulty with that calculation was that it was accepted by Mr Kurth as but a "guess" and "speculative". There thus occurred the following exchange between Mr Kurth and his cross-examiner: Well, if we just take the first line of Sam Catalano. Sam - on what basis did you include the $5500 a month?---$5500 is what we pay Sam for his accounting services. So that was the money paid to MRS holdings?---Yes, For Sam's accounting services?---Yes. And obviously the $12,149.95 is Nathan's ---?---Yes. - - -salary. How did you come to the figure of halving both Sam and Nathan Catalano's pay for the purposes of this exercise?---Well, at the time I wasn't fully aware of what Innova's actions were, but I believe that a lot of Sam and Nathan's time was spent in the Innova business. And what led you to conclude that they both spent the same amount of time in the Innova business?---It was just a guess, really. And is that the same in relation to Maureen Catalano having hers divided by three?---Yes, it's all - all this is speculative, based on the fact that I didn't have the detail at the time. 269 Mr Hepner separately attempted to calculate loss or damage. He believed that Fine Food Solutionz had "suffered loss and damage of at least $250,000 as a result of the 'Innova Conduct' and the 'Supplier Conduct', on the assumption Innova has sold in the order of $120,000 worth of products that should have been sold by FFS, at a margin of 40% and on the further assumption that FFS would have saved costs of in the order of $200,000 if the gyoza and dumpling manufacture had been moved to Rethink Group Pty Ltd from about September 2012". 270 Given the difficulties with this evidence, leave was given to the parties to file further written submissions. The written submissions of the Defendants and Cross-Claimants separately addressed the amount claimed in respect to the diversion of business to Innova Foods and the amount claimed for what was characterised as "supplier wrongdoing". 271 In respect of the former claim, a profit and loss statement for Innova Foods for the period from November 2011 to June 2012 set forth a gross profit of $8,203.40. The written submissions extrapolated that amount for a further ten month period from July 2012 to April 2013 calculated in the sum of $61,570.00. A total amount was claimed of $69,773.40. 272 But one of the difficulties with that approach, however, was that the gross profit had been earned in respect to the sale of product which was said to be the "non-core" business of Fine Food Solutionz. 273 In respect to the latter claim, Rethink Group Pty Ltd was a supplier of food products to Fine Food Solutionz. 274 The Further Amended Statement of Cross-Claim filed in Court on 15 April 2013 alleges that since about September 2012, Fine Food Solutionz has been required to contract its dumpling and gyoza manufacturing to Innova Foods rather than from the Rethink Group. The difficulty experienced by the Cross-Claimants was to quantify the extra costs that have been incurred. 275 The ultimate method employed by the Cross-Claimants to quantify these extra costs was by a process of written submissions to refer to the evidence that had been filed and to attempt a calculation based essentially upon: costs of sales; and average costs of production and thereafter a calculation as to: the total number of "units" produced and then the application to that number of "units": the estimated "savings" per "unit". By that process of submission, the amount claimed in respect to "supplier wrongdoing" is calculated to be $296,694. But that amount, whatever other deficiencies it may experience, does not take into account freight costs. 276 Not surprisingly, the written submissions filed by the Cross-Respondents maintain that the alternative bases upon which loss and damage is sought to be calculated remain "speculative". 277 The choice foist upon the Court by the Cross-Claimants is either to award no amount for loss or damage (notwithstanding a conclusion that some loss or damage has been suffered) or to award an amount which falls safely below what could reasonably be regarded as a minimum amount representing loss or damage. 278 Albeit involving an element of considerable approximation, it is concluded that loss or damage has been suffered in respect to both of the claims made in the Amended Notice of Cross-Claim. It is concluded that loss or damage should be assessed in respect to: (a) the diversion of business to Innova Foods - in the sum of $30,000; and (b) "supplier wrongdoing" - in the sum of $100,000. It is considered that the loss and damage suffered is at least that amount. Any ability to award any greater sum which may better approximate the loss and damage in fact suffered nevertheless must be visited upon the Cross-Claimants and their inability to adduce reliable evidence.

CONCLUSIONS 279 The principal issue in dispute in the present proceeding is the fate of the company, Fine Food Solutionz. That was the principal focus of attention of the written and oral submissions. Other claims for relief mentioned in the written submissions sought (for example) declaratory relief as to the ownership of food production machines and declarations as to breaches of director's duties. None of that other relief, however, assumed any prominence when it came to final submissions. 280 In respect to the principal issue dividing the parties, and for the purposes of s 232 of the Corporations Act, it is concluded that "the conduct of the affairs" of Fine Food Solutionz under the control of Messrs Nathan and Samuel Catalano was either: "contrary to the interests of the members as a whole" - for the purposes of s 232(d); or: "oppressive to, unfairly prejudicial to …. a member of members" - for the purposes of s 232(e). 281 That conclusion has been reached by looking at both: the conduct relied upon by those in the Kurth/Hepner camp - and irrespective of any conclusion as to the conduct of those in the Catalano camp; and the conduct relied upon by those in the Catalano camp. The conclusion has been reached by looking at the overall conduct of the parties. Viewed objectively, there can be little doubt that there has been "commercial unfairness" towards the interests of those in the Kurth/Hepner camp. 282 For the purposes of s 233(1)(d) of the Corporations Act, it is further concluded that an order should be made "for the purchase of any shares by any member or person" as valued by Mr Humphreys. If that conclusion had not been reached in favour of those in the Kurth/Hepner camp, an order would have been made for the winding up of Fine Food Solutionz. But any order for the winding up of the company would have been deferred for a period of 28 days with a view to giving the parties one final opportunity "to reach agreement among themselves": e.g., Re City Meat Co Pty Ltd (1983) 8 ACLR 673 at 682 per Millhouse J. Given the history of the opposing parties being unable to reach agreement in the past, including during the course of a mediation, such an opportunity may have proved to be of limited utility. But all such matters need not be further pursued - given the conclusion that an order should be made for the purchase by those in the Kurth/Hepner camp of the outstanding shareholding. 283 An order should be made for the payment of $130,000 to represent loss or damage or compensation payable by Messrs Nathan and Samuel Catalano by reason of their conduct in respect to "supplier wrongdoing" and their diversion of business opportunities otherwise available to Fine Food Solutionz to Innova Foods. 284 An injunction should be granted restraining Messrs Nathan and Samuel Catalano from interfering in the business of Fine Food Solutionz. 285 The parties are to bring in Short Minutes of Orders to give effect to these reasons within 28 days. These orders are expected to address issues of interest and costs as between the parties. Given the time permitted to bring in such orders, it is not considered necessary to defer the making of any orders for any period of time. If the parties are not able to reach agreement with the benefit of these reasons and the general nature of the orders to be made within that period, orders will be made to finally bring this dispute to an end. 286 A number of attempts have been made to file further material in addition to the submissions for which leave was granted during the hearing. An Interlocutory Application brought by the Plaintiffs/Cross-Respondents was heard and resolved on 14 May 2013. A further Interlocutory Application bought by the Defendants/Cross-Claimants together with two affidavits were refused for filing by the Duty Registrar on 27 June 2013. An additional affidavit of Mr Byron Kurth was mistakenly accepted for filing on 5 July 2013, but as leave to file additional evidence had been neither sought nor granted, the affidavit was removed from the Court file. A subsequent attempt to seek leave to file the affidavit was refused. 287 If there remains outstanding any claim for other relief which remains a "live issue" between the parties, the identification of those outstanding issues and the manner of their resolution can also be addressed in the Short Minutes of Orders.

THE ORDERS OF THE COURT ARE:

1. The parties bring in Short Minutes of Orders to give effect to these reasons within 28 days. I certify that the preceding two hundred and eighty-seven (287) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.