CORPORATIONS - Oppression proceeding - Whether payment of remuneration to key executives associated with majority shareholder was excessive - Whether excessive remuneration was oppressive to minority shareholder - Whether non-payment of dividends was oppressive - Payment of bonuses was so high as to be oppressive - Non-payment of dividends oppressive to minority shareholder in context of excessive remuneration paid to key executives associated with majority shareholder - Corporations Act 2001 (Cth), ss 232, 233 - Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning Services Pty Ltd

CORPORATIONS - Oppression proceeding - Valuation of shares - Whether provisions of shareholder agreement regarding transfer of shares apply - Discount for minority shareholding not applicable where oppression is found - Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd [2004] FCAFC 153; (2004) 207 ALR 136 applied - Dynasty Pty Ltd v Coombs [1995] FCA 1447; (1995) 59 FCR 122 applied - Joint v Program IT Pty Ltd [2020] VSC 867 followed.

1. National Protective Services Pty Ltd (NPS) carries on a security business from premises in York Street, South Melbourne. The company provides protective security services - such as security guards, security patrols, secured transport, and consulting - as well as electronic security services - such as alarm systems, CCTV, and access control systems. NPS provides these services to government and commercial clients, as well as a limited number of domestic clients. The company employs between 260 to 360 staff depending on demand, most of whom are employed on a part-time, casual or 'full-time casual' basis. NPS is the second defendant in this proceeding.[1]
2. The first defendant, Rachaell Saunders, is the founder and Chief Executive Officer (CEO) of NPS. Ms Saunders is the sole director and the secretary of NPS, and owns two of three shares in the company through Lambert Properties (Aust) Pty Ltd (Lambert Properties), the third defendant in this proceeding. Lambert Properties is the trustee of the Lambert Family Trust, and Ms Saunders is its sole director and shareholder.
3. Jessica Lowson is the director, secretary and shareholder of the plaintiff, Holmes Properties (Aust) Pty Ltd (Holmes Properties), which own the remaining share of NPS. Holmes Properties is the trustee of the Holmes Family Trust.
4. The plaintiff alleges that the defendants have engaged in oppressive conduct by failing or refusing to respond to requests by the plaintiff for copies of the financial records of NPS. The plaintiff also alleges that during the period FY2021 to FY2023, Ms Saunders paid herself and her husband, Glenn Saunders, remuneration that exceeded market rates, and that NPS failed to pay dividends to its shareholders. Both of these are alleged to constitute oppressive conduct. The plaintiff seeks a purchase of its shares by the defendants, or alternatively, that NPS be wound up.
5. The defendants deny the plaintiff's claims.

1. NPS was founded by Ms Saunders in 1988, originally doing patrol and alarm response work.
2. In 1994, Christopher Holmes became involved in NPS when his brother, Gary 'Rob' Holmes (who had previously worked at and been a director of NPS), departed the company.[2] Mr Holmes initially performed patrol officer duties, but eventually started working in secure transport, such as collecting coins from parking machines. Mr Holmes became a director and shareholder of NPS in March 1994. According to Ms Saunders, as a director he signed contracts and banking documents on behalf of the company when required, but apart from this he did not perform other director duties.
3. In or around 2000, Mr Holmes moved into a staff supervisory role at the company. Around this time, Mr Holmes later transferred his share in NPS to his company, Holmes Properties.
4. In 2002, NPS acquired new business premises in York Street, South Melbourne (York Street Property). At that time, Ms Saunders and Mr Holmes both put up security for the purchase (in the form of separate mortgages over their personal real estate) and the property was and remains owned in equal parts by Lambert Properties and Holmes Properties. The company moved into the premises in 2003 and began paying rent in equal parts to Lambert Properties and Holmes Properties.
5. Around this time, Mr Holmes began to experience periods of ill health and worked at NPS less and less as his health deteriorated.
6. Also, in or around 2002, Glenn Saunders began working at NPS in a part-time support role. At that time, Mr Saunders was also a member of Victoria Police, where he had been working since 1976. From 2003 to 2005, Mr Saunders performed the role of operations coordinator. His role included rostering, maintenance of security equipment, maintenance of office infrastructure, coin counting, infrastructure purchase and negotiation, recruitment, staff onboarding and human resources related matters (such as staff welfare, discipline and management).
7. In 2005, Mr Saunders resigned from Victoria Police, having achieved the rank of detective sergeant, and started working full-time at NPS as the company's new operations manager.
8. Also in 2005, Mr Holmes ceased being involved in day-to-day operations of NPS due to his ailing health. Subsequently, the company made ad hoc payments from its cash reserves to Mr Holmes when he was experiencing financial difficulties. These payments were treated as a 'loan account' by the company's accountant, and were subsequently rationalised as a dividend paid to Holmes Properties at the end of the financial year. An equivalent dividend was then paid to Lambert Properties for each of its two shares in NPS. In 2006, although Mr Holmes remained a director, he lodged a total and permanent disability claim with WorkCover and ceased working at NPS.

1. In 2020, the COVID-19 pandemic began to have an impact on the business of NPS. The company lost several major security guard contracts as a result of event cancellations, as well as much of its electronic maintenance and installation work. This led the company to stand down most of its guard staff, including the electronics division. Some clients stopped paying their NPS invoices, while others were forced to close shop entirely. Eventually, NPS retrenched all of its office staff while the company's accountants had to rely on JobKeeper payments from the Australian Tax Office.
2. On 9 June 2020, Mr Holmes passed away. The circumstances of his death were not in evidence, as they are not relevant, but it was clear that his death was sudden and unexpected, and had a significant effect on those close to him.
3. Although he had not worked at NPS for 15 years prior to his death, he had remained a director and continued to hold a one-third interest in the company through Holmes Properties. He also held the company's firearms licence, and was the nominee for the company's firearms licence.
4. In the days following Mr Holmes' passing, Ms Saunders helped take care of Mr Holmes' personal and financial affairs. While helping to clean out Mr Holmes' residence, Ms Saunders discovered a will in the back of a gun safe. The will, which had been executed on 3 December 2013:

(a) revoked all former wills and testamentary dispositions;

(b) appointed Sue Jamieson [Mr Holmes' cousin] as executor and trustee under the will;

(c) gifted $500 each to Rob Holmes, Richard Charles Holmes, Jennifer Louise Williams and Ms Saunders; and

(d) named Ms Lowson as the recipient of Mr Holmes' residuary estate (which included the share in Holmes Properties).

1. On 6 July 2020, Ms Saunders removed Mr Holmes as a director of NPS and lodged the change of officeholder form with the Australian Securities and Investments Commission (ASIC).
2. On 7 July 2020, Ms Saunders, as director of NPS, signed and passed a resolution (the Resolution) which states:

Agreed Items:

(1) Glenn and Rachaell commit to the next 12 months at NPS

(2) Any profit will be paid to Glenn and Rachaell

(3) Reviewed quarterly

1. The circumstances around the passing of this resolution will be discussed later in this judgment.
2. In late July 2020, NPS began working with the Department of Health and Human Services (DHHS) to provide guard services at high-rise housing commission properties throughout Melbourne. This work quickly expanded to the provision of 'special response' guard services for COVID outbreaks in special government accommodations. From August 2020 to September/October 2022, NPS enjoyed 'its best years ever' according to Ms Saunders; employing upwards of 1500 staff, cementing its working relationships with government clients, and gaining a high degree of credibility and respect as a reliable provider of security services. This period of renewed business activity eventually tapered off as the COVID-19 pandemic began to wind down. However, NPS continued to enjoy the fruits of its new client relationships and reputational gain.
3. On 22 February 2022, Ms Lowson was appointed director and secretary of the plaintiff.

1. The plaintiff received dividends from NPS for FY2019 and FY2020 of $236,000 and $201,000, respectively. The third defendant also received dividends for those years.
2. On 10 November 2021, Ms Saunders advised Ms Jamieson's solicitor that no dividends to shareholders would be paid. No dividends have been paid to shareholders since.
3. For the period of FY2021 to FY2023, Ms Saunders, Mr Saunders, and the Lambert Family Trust received the following amounts from NPS:

1. On 28 February 2023, the plaintiff commenced this proceeding.

B.5 Key clauses of the shareholder agreement and Constitution of NPS

1. Clause 4 of the NPS shareholder agreement (SHA) provides that:

Notwithstanding the provisions of the Constitution of the Company:

(a) the Board shall at all times comprise of at least 2 Directors, one nominated by each Participant;

...the shareholders of the Company from time to time, and which at the date of this Agreement are Lambert Properties (Aust) Pty Ltd (ACN 095 076 458) as trustee for the Lambert Family Trust and Holmes Properties (Aust) Pty Ltd (ACN 095 076 485) as trustee for the Holmes Family Trust.

1. Clause 13 of the Constitution of NPS provides that:

The Directors may continue to act if there is a vacancy even if the number of Directors falls below the minimum number of Directors as resolved by the Members at general meeting. In that case, the Directors may only act to fill the vacancy.

...the registered holder of shares in the Company.

1. By its Amended Points of Claim filed on 15 November 2024, the plaintiff alleges that Ms Saunders caused:

(a) herself and Mr Saunders to be paid remuneration that was excessive in FY2021, FY2022 and FY2023, as compared to industry benchmarks;

(b) NPS to pay all profits of the company from 7 July 2020 to herself and Mr Saunders; and

(c) NPS to incur $2,954,855 in accrued charges in circumstances where no accrued charges have been listed in the company's balance sheets previously, and no accrued charges were listed in the company records on 30 June 2023.

1. The plaintiff alleges that NPS failed to pay dividends to its members in FY2021, FY2022 and FY2023 notwithstanding the excessive remuneration paid to the Saunders.
2. The plaintiff alleges that Ms Saunders has conducted and continues to conduct the affairs of NPS for the benefit of herself and her husband, contrary to the interests of the company and its members as a whole.
3. The plaintiff alleges that Ms Saunders has failed to exercise her powers and discharge her duties as a director of NPS in good faith in the best interests of the company and for a proper purpose. In addition, the affairs of NPS are being conducted in a manner that is either contrary to the interests of the company's members as a whole and/or oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff in its capacity as a member of the company or in any other capacity.
4. The defendants deny that the remuneration paid to the Saunders in FY2021, FY2022 and FY2023 was excessive. They say that:

(a) NPS was, for significant portions of these financial years, operating during the COVID-19 pandemic, which materially increased the workloads of Ms Saunders and Mr Saunders;

(b) the Saunders worked many hours in excess of their usual commitment in the company and performed a role that required them to be 'on call' 24 hours per day, seven days per week;

(c) NPS did not employ a separate executive team (performing such roles as Human Resources Director, Finance Manager and Marketing Manager), with the consequence that Ms Saunders performed those roles in addition to her existing responsibilities;

(d) NPS generated a significant increase in revenue and gross profit (particularly in the years ending 30 June 2021 and 30 June 2022), referable to the role performed by the Saunders in the company. This included securing additional contracts (including in relation to the provision of COVID-related services) and the delivery of services to clients;

(e) the remuneration paid to the Saunders was designed to reflect their respective personal contributions to the company, which resulted in NPS generating material profits, enhancing its market reputation, and increasing its market share; and

(f) the payment of bonuses was a market-recognized means of remunerating senior staff that had directly contributed to increased profitability. The payment of executive bonuses calculated as 5-10% of revenue generated was relatively commonplace.

1. The defendants deny that Ms Saunders caused NPS to pay all company profits from 7 July 2020 to herself and Mr Saunders.
2. The defendants accept that NPS did not pay dividends in FY2021, FY2022 and FY2023, but deny that this was oppressive.
3. In terms of the $2,954,855 in accrued charges, the defendants say that prior to July 2020 the Saunders had been paid remuneration that did not reflect market benchmarks and was not commensurate with the relative benefits derived by NPS from the services provided by the Saunders. They say that the accrued charges were recorded in the company's financial records as a provision for the company's liability to the Saunders referable to this historical underpayment. However, NPS has to date made no payment to Ms Saunders or Mr Saunders referable to the accrued charges or the historical underpayment.
4. Ms Saunders denies the allegations at paragraphs 33 and 34 above.

1. The plaintiff called Ms Lowson as a lay witnesses in support of its case.
2. The defendants called Ms Saunders and Mr Saunders as lay witnesses in support of their case.
3. All three lay witnesses gave oral evidence at trial.

D.1 High level observations regarding the lay witnesses

1. I will have more to say in the course of this judgment about my assessment of the evidence. At this point, I make some high-level observations about the witnesses.
2. Ms Lowson was, both by her own admission and to my observation, a nervous witness. She often seemed unsure of herself or her answers. She struggled to follow some of the more complex questions put to her by counsel, and struggled to recall key dates or even the years in which certain events took place.
3. Ms Lowson seemed reluctant to answer questions about her relationship with Mr Holmes, such as when and how often he would visit her, or how long they would spend together. For example, during cross-examination, the following interaction took place:

Mr McAloon: All right. So 2010 to 2013, you were seeing him on a weekly basis. You go to Canada and he comes and visits you there, and you sometimes meet in other countries?

Ms Lowson: Mmm.

Mr McAloon: And in a given year, you might have caught up with once, twice, how many times? Again, it's not a test, just do the best you can?

Ms Lowson: I'm not sure.

Mr McAloon: All right?

Ms Lowson: I didn't count.

Mr McAloon: No. But it might have been only once a year?

Mr Lowson: I don't know. I didn't count.

1. I found these answers somewhat incredulous, given how much time Ms Lowson spent with Mr Holmes over the years and the closeness of their relationship.
2. I formed the impression that Ms Lowson remained troubled and upset by Mr Holmes' death, which is understandable, and that this may have affected some of her evidence.
3. When asked what she understood of the work Mr Holmes performed at NPS, she was unable to recall any details.
4. At times, Ms Lowson became visibly frustrated by questions put to her during cross-examination. She appeared unwilling to answer questions which she did not consider relevant or important or that she assumed counsel would already know the answer to. However, I do not believe these factors undermine Ms Lowson's credit as a witness. Firstly, the details of her relationship with Mr Holmes are largely inconsequential to the matters at issue in this proceeding. Secondly, her defensiveness was likely a symptom of her nervousness and discomfort when unable to answer certain questions. Thirdly, I accept that her evidence was honestly given.
5. Ms Saunders was an honest and intelligent witness. She was knowledgeable about NPS' business and demonstrated strong business acumen. This was to be expected given she was the founder and CEO of the company. Ms Saunders displayed genuine emotion at the passing of Mr Holmes, as well as the difficult choices she was forced to make in laying off her staff during the early days of the COVID-19 pandemic.
6. I make many of the same observations about Mr Saunders as I do with Ms Saunders. Mr Saunders was honest, reliable and knowledgeable. He had a good memory for dates, taking time to consider most questions before answering. Mr Saunders seemed genuinely interested in providing accurate testimony and I consider this works to his credit. His evidence largely corroborated the evidence of Ms Saunders.

D.2.1 Ms Lowson's relationship with Mr Holmes

1. Ms Lowson had known Mr Holmes for 10 years before his passing. He was her best friend. When Ms Lowson studied abroad, Mr Holmes would visit her and they would often travel together. When Ms Lowson returned to Melbourne in 2017, she stayed with Mr Holmes for a few months before finding a place of her own. In the years that followed, Ms Lowson continued to see Mr Holmes every week.

D.2.2 Ms Lowson's understanding of Mr Holmes' work at NPS

1. Although Mr Holmes would sometimes tell Ms Lowson about the nature of his work at NPS, Ms Lowson stated during cross-examination that he did not go into much depth or detail about his work at NPS. According to Ms Lowson, they would usually talk about non-work-related matters. However, in or around 2019 Mr Holmes had spoken of his business relationship with Ms Saunders, and had told Ms Lowson that Ms Saunders wanted him out of the business and that she was offering a low price for his share buyback.

D.2.3 Events following Mr Holmes' death and leading up to the commencement of this proceeding

1. Following Mr Holmes' death on 9 June 2020, Ms Lowson was in a 'lot of shock' after learning that she was named as a beneficiary under his will. Mr Holmes had appointed Ms Jamieson as executor of his will, with Prior Law acting for Ms Jamieson as she undertook those duties. Although Ms Lowson had approached Prior Law requesting information about the assets that constituted Mr Holmes' estate, Prior Law refused to communicate with Ms Lowson directly and instead advised that she obtain her own legal representation. Ms Lowson soon engaged Northcote Lawyers.
2. Ms Lowson was questioned on her appointment as an appointor of the Holmes Family Trust and who were the beneficiaries of the Trust. Ms Lowson was evidently confused by counsel's line of questioning. I attribute this to her lack of exposure to the legal concepts and principles governing commercial trust structures; however, I do not believe this undermines Ms Lowson's credibility or weight of her evidence in any way. To help understand the mechanics and relevant appointments under the Holmes Family Trust, I raised the possibility of providing the Court - and Ms Lowson - with a copy of the relevant trust deed to assist in this line of questioning. No trust deed was provided to the Court overnight during the trial and I assume that neither party wanted to press any issues relating to the trust or trust deed.
3. On 29 March 2022, Ms Saunders contacted Northcote Lawyers - then acting for Ms Lowson as appointor of the Holmes Family Trust - requesting contact details and bank account details for the trust. Ms Saunders referred to the fact she had also requested those details at the end of February directly through Northcote Lawyers' website.
4. Later that same day, Mr Peter Lynch, Director and Principal Lawyer of Northcote Lawyers, confirmed that they acted for Ms Lowson and provided the relevant bank details. Mr Lynch also enquired as to whether Ms Saunders could make herself available for a teleconference or video conference that same week with himself and a senior associate at Northcote Lawyers, Ms Miriam Ungureanu. Ms Saunders stated in oral evidence that Mr Lynch had advised her via telephone that Ms Lowson wanted to sell her share of the business, and that a meeting to discuss that was necessary.
5. On 30 March 2022, Mr Lynch and Ms Ungureanu sent an email that they could not attend a meeting at 11:30am on that day and that they would propose a new time in the coming weeks, and settle an agenda for same. Ms Saunders later gave evidence during the trial that no subsequent meeting time was arranged between herself and Northcote Lawyers.
6. On 30 May 2022, Mr Lynch emailed Ms Saunders advising that Northcote Lawyers had engaged chartered accountants, Romanis Cant, to complete a forensic analysis of the business and its activities for the purposes of a formal valuation of the business. To complete the valuation, Mr Lynch requested key financial material from Ms Saunders such as NPS' financial statements, income tax returns and financial forecasts.
7. On 6 June 2022, Mr Reid Bettridge, Partner at B2B Lawyers, replied to Mr Lynch's email advising that B2B Lawyers were acting on behalf of the director of NPS, and its majority shareholder. Mr Bettridge rejected the information requested by Ms Lowson on the basis that it extended well beyond the entitlements of a shareholder to company information. Rather, Mr Bettridge advised that Ms Saunders would be willing to provide information that is reasonably necessary to prepare a valuation to Romanis Cant on a strictly confidential basis. This was on the condition that Romanis Cant entered into a non-disclosure agreement and a copy of the report was provided to B2B Lawyers once it was finalised. These terms were not agreed to and nothing further eventuated.
8. On 20 February 2023, Ms Saunders wrote directly to Ms Lowson stating that she would like to conclude the partnership regarding the York Street Property and buy out the plaintiff's 50% share. Ms Saunders proposed that valuations should be obtained for the property.
9. On 23 February 2023, Mr Lynch replied to Ms Saunders' email to Ms Lowson, confirming that Northcote Lawyers continued to act for Ms Lowson, and for Ms Saunders to 'refrain from contacting our client directly and ensure all communication is sent to this office'.
10. On 28 February 2023, Ms Lowson filed an affidavit (Lowson Affidavit). This was also the day that the proceeding was commenced. Ms Saunders gave oral evidence that she received no advance notice that the proceeding would be commenced, despite being informed by her accountant that Ms Lowson's accountant was requesting further financial information. Ms Saunders' evidence was that she gave permission for her accountant to give Ms Lowson full and complete information.
11. During cross-examination, the defendant's counsel challenged Ms Lowson's adherence to her obligations under the Civil Procedure Act 2010 (Vic) (Civil Procedure Act). Here, counsel suggested that from May 2022 to February 2023, despite being approached by Ms Saunders, Ms Lowson did not engage to see whether the dispute could be resolved, or whether the issues could be narrowed. Ms Lowson agreed with that proposition, and said that she did not have the information to know how to resolve it. Ms Lowson also justified her actions by referring to the nature of COVID lockdowns and the grief of losing her best friend. Counsel did not point to a specific provision under the Civil Procedure Act, and in my view, there is no evidence that Ms Lowson contravened any of her overarching obligations under the Civil Procedure Act. The tenor of Ms Lowson's evidence on this issue was that she felt unable to meaningfully engage in discussions about Ms Saunders buying out the plaintiff's interests in the York Street Property and NPS as she felt that she did not have sufficient information to do so. She had had her lawyers request it, but to her it had not been forthcoming.

1. As CEO, Ms Saunders is responsible for implementing strategy, maintaining compliance, and ensuring that the company is operating correctly and efficiently. I will come back to aspects of her role.

1. Ms Saunders regarded herself as 'extremely close' with Mr Holmes, and treated him as family. According to her, it was this relationship that spurred later business decisions at NPS such as the business' financial support of Mr Holmes from late 2005 when he went on sick leave, to Ms Saunders' decision to 'gift' Rob Holmes' share in NPS to Mr Holmes for no consideration.

D.3.3 Ms Saunders gifting a share in NPS to Mr Holmes

1. Rob Holmes was an employee, a director and a shareholder of NPS. Following Rob Holmes' departure from NPS, he 'released' his share in NPS. Instead of releasing his share back to NPS or to Ms Saunders - and as Mr Holmes was already working in the business - , Ms Saunders decided to transfer Rob Holmes' share to Mr Holmes for no consideration. It was Ms Saunders' understanding that at some point later in time, Mr Holmes transferred his share to Holmes Properties. Ms Saunders gave oral evidence that she had received advice from accountants to re-set her and Mr Holmes' structures to include family trusts for risk management. At this time, the Lambert Family Trust was also set up. The transfer of the share in NPS from Mr Holmes to Holmes Properties likely occurred around this time.

D.3.4 Purchase of the York Street Property

1. In 2002, Lambert Properties and Holmes Properties purchased the York Street Property for NPS to use. NPS moved into the premises in January 2003, and traded from there from that time. The sourcing of the Property, its purchase and its finance were all organized by Ms and Mr Saunders. The York Street Property was jointly owned by the two respective corporate trustees. Rental paid by NPS was applied first to pay down the finance used to purchase the York Street Property and then, after it was paid off, remitted to Lambert Properties and Holmes Properties in equal shares (less expenses).

1. Ms Saunders' evidence was that following Mr Holmes' becoming ill in 2005, NPS began the practice of paying dividends to shareholders. Ms Saunders asserted that the practice was that when Mr Holmes became short of money, he would come into NPS with various requests. NPS would pay Mr Holmes out of its cash reserves and the payments would be recorded in Mr Holmes' loan account. At the end of the year, NPS' accountant would 'clean out' his loan account and treat the total payments as a dividend. Lambert Properties would be paid an appropriate percentage dividend for whatever sum Mr Holmes had taken during the year.
2. I note that no evidence was called by the defendants to corroborate this: for example, NPS' accountant did not give evidence. Effectively a stranger to NPS, Ms Lowson was not really in a position to challenge it. This was the case for quite a lot of the matters about which Ms and Mr Saunders gave evidence.
3. After Mr Holmes died in June 2020, NPS ceased paying dividends to Holmes Properties. Ms Saunders conceded that NPS did not pay dividends despite it achieving unprecedented profits. Ms Saunders gave oral evidence that at the time of Mr Holmes' passing, there was no option of dividends. Ms Saunders did not think it was appropriate to pay dividends as she thought the partnership and the shareholding would be shortly concluding. She reasoned that a lack of payments would not cause harm to shareholders.

1. Ms Saunders was questioned about her reaction to the contents of Mr Holmes will, which she had found when helping clear out his house after his sudden death. She said that she was shocked, angry, distressed and upset, as she had not known about this will and in previous wills, he had left everything to her.
2. Ms Saunders gave evidence that as a result of the combined effect of COVID on NPS and her working hours, the passing of Mr Holmes, and her 'distressing' discovery that she was not a beneficiary under Mr Holmes' will, she no longer wanted to work at NPS as an employee. Ms Saunders saw herself as having three roles at NPS - a shareholder, a director and an employee. Ms Saunders outlined that although she did not want to return to work as CEO of the company, her role as director of NPS forced her to methodically work things through and take different considerations into account. Ms Saunders believed that her departure as CEO would mean that the business would not survive as there was no one who could step into her role.
3. As a result, Ms Saunders believed that she needed something to motivate her to commit to the business throughout the COVID pandemic period and to stay at the business during this time. She said that she discussed this with Mr Saunders, and had some initial conversations with people familiar with the labour market, who thought it unlikely she would find a replacement CEO. These discussions, including who they were with, were not particularised.
4. Following Ms Saunders' consideration of her position and the discussions referred to above, as director of NPS, Ms Saunders passed the Resolution on 7 July 2020.

1. In the first few months of the COVID pandemic and before the growth of its business, Ms Saunders gave evidence that most of the work associated with keeping the business going was done by her and Mr Saunders. They also gave evidence that due to lockdowns, they were working long hours under trying conditions.
2. Ms Saunders' evidence is that from late July 2020, NPS enjoyed a huge surge in business activity brought about by entering into government contracts to facilitate the government's response to the pandemic. Ms Saunders' work at NPS involved managing the company's payroll, accounts and compliance requirements. Due to the amount of work being performed by NPS, Ms Saunders would often work 80-hour weeks. These working conditions persisted for over two years, before eventually tapering off in September or October 2022.

D.3.8 Obtaining expert opinion in 2020 and the recording of the accrued charges in 2023

1. Ms Saunders gave evidence that after Mr Holmes' death, she consulted her solicitors, who suggested she obtain a market remuneration report. Ms Saunders did so, and obtained a letter dated 17 July 2020 from Simon Hare of the HaRe Group (the Hare Letter).
2. It is convenient here to set out the conclusions in the Hare Letter. In that letter, Mr Hare opined as to benchmarks for remuneration for senior executives in similar sized companies to NPS. According to Mr Hare, the relevant benchmarks were for a fixed remuneration package and short-term incentive payments.[4] Based on market remuneration practices for 2020, the fixed remuneration package for a CEO of a company like NPS was $300,000 to $310,000 per annum. For an operations manager of a company like NPS, it was $210,000 to $220,000 per annum. In addition, the majority of senior executives in similar-sized companies would be eligible to receive short-term incentive payments, additional performance-based pay in cash or company shares. For a CEO, this would likely be calculated at 25-30% of the fixed remuneration package. For an operations manager, it would likely be calculated at 20-25% of the fixed remuneration package.
3. Ms Saunders gave evidence-in-chief that on the basis that she and Mr Saunders had both been underpaid in the years 2006 to 2019, she caused a liability for accrued charges in the amount of $2,954,855 to be recorded in NPS' balance sheet as at 31 October 2023. She said that she calculated this based on alleged historical underpayments in accordance with the Hare Letter. She said that she took the middle figure of $305,000 per annum for CEOs and the middle figure of $215,000 for operations managers. She then took it back to 2006, deducting 3% each year for wage growth.[5] From there, she calculated what they had actually been paid, and these gave a net result of $2,954,855 in underpayments.
4. Ms Saunders stated that while this figure had been recorded in NPS' financial records since around October 2023 as a liability, no payments have been made to her or Mr Saunders in respect of that liability.
5. Ms Saunders was cross-examined on this topic. She agreed that she had received a copy of the Murone Report (defined in paragraph 95 below) in around September 2023, and that she did not agree with Ms Murone's opinion as to the value of NPS. Ms Saunders was asked why the accrued charges liability was not recorded in 2020 when she got the Hare Letter, but only after she received the Murone Report. Ms Saunders' answer was that she wanted to be able to present a complete and clean balance sheet with accurate figures.
6. Ms Saunders caused the accrued charges liability to be increased in NPS' financial records in 2024 to $4,450,000. She said that she re-calculated the accrued charges later in 2024 after she received the Hare Report (defined in paragraph 99(b) below) and that this time she included amounts for incentive payments. She said she calculated these by reference to the short-term and long-term incentive payment ranges in the Hare Report. She used the mid-point of the range for short-term incentives and slightly more than that for her for long-term incentives and slightly under for Mr Saunders. In one of the years, where she did not think they had performed well enough, she made no allowance for incentive payments.
7. Ms Saunders disagrees with the Joint Valuation Report (defined in paragraph 101(c) below) where it records that Ms Murone and Mr Sojka agree that for the purposes of valuing NPS, the accrued charges need to be reversed.

D.4.1 Working on-call for NPS between 2005 to 2014

1. Mr Saunders initially worked for NPS for a 12-month period in about 1990, before commencing with NPS again in 2002 and progressing his work duties after 2003.
2. In around 2005 to 2006, Mr Saunders commenced in his full-time role as operations manager. Mr Saunders outlined in oral evidence that there is an on-call component to the role, which he was responsible for up until around 2014.
3. After that time, NPS was able to allocate that work to staff rostered at one of their sites, with a majority of on-call work looked after by on-call operators. However, Mr Saunders needs to be contactable 24/7 to oversee any major issues that the on-call team are unable to deal with.

1. Between 2003 to 2013 inclusive, NPS did not pay Mr Saunders any wages, superannuation or other remuneration, despite him working in the business on a full-time basis for most of that time. This was because Mr Saunders did not seek payment. He gave evidence that he took on his role within NPS in this period without pay because of his relationship with Ms Saunders, that he already had an income, and in the early stages he did not think the profits were that great. He said it never really entered his mind to seek a wage during that period, and that it never really became part of a discussion until 2013 when the relationship between Mr Holmes, Ms Saunders and himself deteriorated to such a degree that he decided it was an appropriate time to discuss payment of wages.
2. From 2014 to 2020, NPS paid Mr Saunders the following remuneration:

1. In addition to the above, Mr Saunders received from FY2010 onwards, the use of a maintained and insured motor vehicle including fuel. He also received a benefit from management fees paid by NPS to the Lambert Family Trust.

1. According to Mr Saunders, there was a material change to NPS' business during the COVID-19 pandemic. The company quickly found itself providing security for more than 20 hotels around Melbourne, as well as several homeless housing projects. The increase in work was something that neither Mr nor Ms Saunders could have anticipated. The influx of new staff also created new challenges, such as securing work permits as well as providing each NPS guard with safety vests, work shirts, face masks, face shields and eventually full protective equipment. NPS also had to deal with hotel managers, health workers, WorkCover claims, assaults involving its staff members, and complaints from the public. Mr Saunders' evidence is that, during this period, he worked 'a minimum of 60-70 hours [per week] and anywhere upwards from that depending on which weeks had more or less issues'.

1. The evidence of Mr Saunders is that after the COVID-19 pandemic wound down, a 'coordinator' took on parts of the operations manager role and is now largely responsible for the hiring, firing and rostering of staff. Nowadays, Mr Saunders is mostly responsible for client management liaison.

1. Mr Saunders described Mr Holmes' involvement in NPS from 2003 as 'very limited' with no structure to when he came into the office. Mr Holmes had played a role in the coin counting programs that were firstly involved with City of Port Philip and later with the City of Melbourne. However, there was no real commitment to a structured rostering process.
2. After Mr Holmes ceased work due to illness, and he removed himself completely from the business, Mr Holmes remained a director and would have limited discussions about the running of the business.

1. On 4 May 2023, the Court ordered the parties to appoint an independent person to express an opinion as to the value of the shares in NPS. The parties agreed that Piera Murone, an independent business valuer and an executive director of Murcroft Business Valuations, be appointed to undertake that valuation. Ms Murone provided a report dated 12 September 2023 (Murone Report).
2. The defendants obtained a report as to the valuation of NPS from Michael Sojka dated 14 October 2024 (Sojka Report). Mr Sojka is a certified practising accountant and the managing director of Rose Partners accountants and advisors.
3. The defendants rely on the Sojka Report rather than on the Murone Report. There were a number of occasions where defence counsel referred to Ms Murone as the plaintiff's expert: I do not accept that characterisation. Ms Murone was appointed jointly by the parties to provide a valuation report, in accordance with orders made by the Court. She was an independent expert appointed jointly by the parties. That the plaintiff chose to rely on the Murone Report[6] and call Ms Murone to give evidence at trial does not change that.
4. In addition to the business valuation experts, both parties relied on reports from remuneration specialists. Broadly speaking, their remit was to provide their views as to whether the remuneration and bonuses paid to Ms and Mr Saunders were reasonable or excessive.
5. The defendants rely on the following two reports:

(a) The expert report of Mark Ritchie dated 10 October 2024 (Ritchie Report). Mr Ritchie is a workplace relations consultant and Managing Director of Workplace Wizards. The Ritchie Report covers the remuneration and bonuses paid from FY2021 to FY2023.

(b) The expert report of Simon Hare dated 21 October 2024 (Hare Report). Mr Hare is a Certified Professional member of the Australian Human Resources Institute (CAHRI) and Managing Principal at HaRe Group. He is the same person who provided the Hare Letter in July 2020, as referred to at paragraph 78 above. The Hare Report covers the remuneration and bonuses paid from FY2006 to FY2020.

1. The plaintiff relies on the expert report of Guy Sigston dated 6 December 2024 (Sigston Report). Mr Sigston is an executive search and professional recruitment consultant and Managing Director of Lawson Delaney. His report covers the period covered by the defendants' remuneration experts, being the period from FYE2006 to FYE2023.
2. Prior to trial, the Court made orders that the experts confer with their relevant counterparts and produce joint reports. As a consequence, the following joint reports were provided:

(a) joint report dated 24 April 2025 from Mr Sigston and Mr Hare;

(b) joint report dated 2 May 2025 from Mr Sigston and Mr Ritchie; and

(c) joint report dated 5 May 2025 from Ms Murone and Mr Sojka (Joint Valuation Report).

1. The day before the experts were due to give evidence, Mr Sojka provided a supplementary report dated 13 May 2025 (Supplementary Sojka Report). In that report, he stated that having further reviewed the Joint Valuation Report, he had identified erroneous calculations made by Ms Murone in that she had added together underpayments for FY2006 to FY2017 and overpayments for FY2018 to FY2023, whereas the underpayment should have been deducted from the overpayment. The Supplementary Sojka Report provided updated schedules to correct that.
2. In response, Ms Murone prepared a marked-up version of the Joint Valuation Report dated 13 May 2025 (Murone Mark-ups), which reflected the errors identified by Mr Sojka described in the preceding paragraph. This was provided to the Court by the plaintiff's solicitors - both in mark-up and in clean version - described in their covering email as the amended version of the joint report.
3. The defendants were critical of this, saying that what had been sent to the Court purported to be a joint report whereas it was not. Ms Murone had prepared the amendments and Mr Sojka had not been consulted about it. Counsel for the plaintiff clarified that it was not being adduced as a joint report, but was showing what changes Ms Murone had made to her opinion in light of the error identified by Mr Sojka.
4. The defendants' criticism as to the Murone Mark-ups purporting to be a joint report is fair insofar as the covering email to the Court is concerned, but overstated, given that the Court and the parties were able to quickly get to the bottom of it at the start of day 3 of the trial. Criticism of Ms Murone in this respect is unwarranted: she presented it as mark-ups on the joint report, but it was the plaintiff who did not clarify its origins or status when providing it to the Court.
5. Ms Murone and Mr Sojka were called to give evidence concurrently as to the valuation of NPS.
6. Mr Ritchie, Mr Hare and Mr Sigston were called to give evidence concurrently as to the remuneration paid to Ms and Mr Saunders.

1. Although Mr Hare was located outside of Australia at the time of the proceeding, I was satisfied that the technical requirements in s 42G of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) were met for Mr Hare to appear via Zoom. All parties consented to the making of the direction.
2. I found Mr Hare to be a knowledgeable witness with a great deal of experience in his field.
3. Mr Hare based his opinion in the Hare Report as to market remuneration on annual data published by Thomson Reuters (the Boardroom Remuneration Review) which analysed financial reports of most ASX listed companies, and on his many years working with a wide variety of clients. Those reports provided information about fixed remuneration packages (wages, allowances, superannuation, fees, cars, and other benefits, plus FBT costs), short-term incentives, long-term incentives, and total annual remuneration (being the sum of an employee's fixed remuneration package and short-term incentives). Mr Hare's view is that short-term incentives are typically an annual cash payment based on business performance and measurable objectives under the direct influence of the employee. Meanwhile, long-term incentives are generally limited to key people who have significant strategic business influence and are often based on enterprise value improvements over three or more years.
4. Mr Hare says that as NPS is a small proprietary company, annual revenue is the most accurate measure of organisation size, rather than employee numbers. As a small proprietary company, its CEO does not carry the same enduring accountabilities as most CEOs represented in the Thomson Reuters database, hence consistent with many CEOs of equivalent organisations, the most suitable benchmark for remuneration rates for the NPS CEO should be the 25th percentile.
5. As the COO information in the Thomson Reuters database is very limited for small companies, Mr Hare used market data on general manager remuneration to supplement that data. In his opinion, this approximates the responsibilities of a COO in a small proprietary company.
6. For each financial year from 2006 to 2020, Mr Hare's remuneration data analysis has accounted for the changes in NPS' annual revenue, leading to reasonable adjustments to the benchmark fixed remuneration package and total annual remuneration values for each position for each year. When calculating the fixed remuneration packages for Ms and Mr Saunders, in addition to the usual items included in those packages, Mr Hare included for each their share of the management fee paid to the Lambert Family Trust.
7. Mr Hare's market range for a fixed remuneration package for a CEO, taking the FY2020 financial year as an example, was for $276,000 at the low end and $374,000 at the high end. In addition, his market short-term incentive as a percentage of the fixed remuneration package was 25-30%.
8. Mr Hare's conclusions in respect of Ms Saunders' remuneration are that:

(a) her fixed remuneration package is under the market ranges for FY2006 to FY2014;

(b) her fixed remuneration package is within the market ranges for FY2015 to FY2019;

(c) her fixed remuneration package is over the market ranges for FY2020;

(d) her total annual remuneration is under the market ranges for FY2006 to FY2014 in the amount of $608,555; and

(e) her total annual remuneration is within the market range for FY2015 to FY2020.

1. Mr Hare's market range for a fixed remuneration package for an operations manager, taking the 2020 financial year as an example, was for $212,000 at the low end and $288,000 at the high end. In addition, his market short-term incentive as a percentage of the fixed remuneration package was 25-30%.
2. Mr Hare's conclusions in respect of Mr Saunders' remuneration are that:

(a) his fixed remuneration package is under the market ranges for FY2006 to FY2019;

(b) his fixed remuneration package is within the market ranges for FY2020;

(c) his total annual remuneration is under the market ranges for FY2006 to FY2019 in the amount of $1,661,932;[7] and

(d) his total annual remuneration is within the market ranges for FY2020.

1. A spreadsheet setting out Mr Hare's opinion as to the market rate for a CEO and an operations manager for each year from 2006 to 2020, together with the actual amounts paid to each of Ms and Mr Saunders, was attached to his report. In his opinion, the ranges he specified for market rate fixed remuneration packages plus short-term incentives were commercially reasonable ranges.

1. Mr Ritchie was instructed to assess the reasonableness of remuneration and bonuses paid to Ms and Mr Saunders for the financial years 2021 to 2023, taking into account any applicable market rates, industrial awards, and any other matters he considered relevant.
2. Mr Ritchie obtained and analysed remuneration benchmarking information from talent acquisition-related sources that was available on the internet, such as Hays, Glassdoor, PayScale Australia and Seek.com. He did not have the additional benefit of any paid subscription or wage benchmarking information or software. He says that he also examined publicly available remuneration figures from comparable security services companies within Australia. In conducting his analysis, he took the view that Mr Saunders' position was comparable to a chief operating officer (COO) position in other companies. The Ritchie Report sets out the averages and ranges for CEOs and COOs for remuneration packages ascertained from Hays, Glassdoor, PayScale Australia and Seek.com.
3. In respect of Ms Saunders' non-bonus remuneration, Mr Ritchie concludes that it is commensurate with the average salary of CEOs in Australia, as:

(a) it is only approximately 4% above the average salaries provided by Hays and PayScale Australia;

(b) it is approximately 18% above the average provided by Glassdoor. However, he considers the difference reasonably accounted for by the additional work undertaken by Ms Saunders over and above the ordinary role of a CEO. This is due to the lean management team and the lack of any other executives at NPS, besides an operations manager; and

(c) it is above the estimated average provided by Seek.com, but that figure does not account for the additional duties undertaken by Ms Saunders and is exclusive of bonuses and other benefits.

1. In respect of Mr Saunders' non-bonus remuneration, Mr Ritchie concludes that it is commensurate with the average salary of COOs in Australia, as:

(a) it is only 0.6% above the average COO salary according to Hays and Glassdoor; and

(b) it is higher than some average COO estimates, however the extent to which it exceeds those can be explained by NPS' lean executive and management structure, the significant additional responsibilities of Mr Saunders beyond a traditional COO role and the lack of any other NPS executives to share the load with.

1. From this, Mr Ritchie concludes that viewed independently from industry-specific considerations, the non-bonus salaries paid to Ms and Mr Saunders appear to be reasonable and appropriate for their positions in a company of NPS' size.
2. Mr Ritchie goes on to consider security industry-specific remuneration, which he considers supports his conclusion. He does so by considering the salary received by the CEO of Millenium Services Group Ltd (Millenium), who receives a base salary that is 10.6% higher than Ms Saunders. This is likely due to the higher revenue of that company. The CEO of Millenium also receives additional compensation for their role as a director, and share and cash bonuses.
3. Mr Ritchie then considers the bonuses paid to Ms and Mr Saunders and concludes that these were 'considerable.' He considers these excessive in ordinary market conditions, as they are above the acceptable and reasonable band However, he says that looking at the situation holistically, the bonuses paid were reasonable and proportionate.
4. It is necessary for me to set out the reasons for his opinion in some detail.
5. Mr Ritchie begins his analysis of executive bonuses by saying that:

This report is regrettably limited insofar as there is not any detailed publicly-available data on executive bonuses paid to CEOs and COOs within Australia, and especially within the security industry (different to the above relating to base salary). Hence, my ability to form a view as to whether the bonuses paid to Mr and Ms Saunders in the 2021-2022 period were reasonable or excessive - through an objective assessment derived via benchmarking comparable Australian corporations - cannot be done. As a result, the following assessment is not as complete and 'concrete' as the above relating to base salary, but has been formed instead based on based on my extensive experience and opinion specific to NPS and the environment the organisation was working within in the 2021-2023 period.

1. According to Mr Ritchie, a key factor in the adequacy of executive remuneration is performance. NPS' revenue since 2018 shows a consistent increase in non-COVID related revenue over the period, and significant additional revenue for 2021 and 2022, together with a far higher gross profit for that period.
2. Mr Ritchie states that it is not uncommon for bonuses to be paid based on overall revenue generation ( as opposed to, say, company profit), and roughly approximate reasonable bonuses are commonly in the band of 5-10% of revenue generated. For NPS in financial years 2021 and 2022:

(a) the bonuses paid to Ms and Mr Saunders were some 35% of gross profit;

(b) expressed another way, the bonuses paid were 19.7% of overall revenue gained/new contracts won in 2021, and 24% for 2022, which is higher than his recommended band of 5-10%;

(c) for the combined 2021-2023 period, these were approximately 30% of overall gross profit or 21.8% of overall revenue gained/new contracts won.

1. Based on this, Mr Ritchie's view is that the bonuses paid to Ms and Mr Saunders for that period 'seem unreasonably high'. However, he says that the following matters weigh in favour of the reasonableness of the bonuses paid when an overall assessment is made:

(a) the challenges of the pandemic and the commencement of the pandemic-related contracts significantly increased the responsibilities of and pressure, including managerial pressure, on Ms and Mr Saunders;

(b) managing these new contracts likely played a vital role in Victoria's public health response to the pandemic;

(c) given NPS' lean organisational structure and lack of any other executives, it is reasonable to conclude that Ms and Mr Saunders were instrumental in performing the myriad of management duties required during this time and ensuring that NPS not only survived, but thrived in this period;

(d) their work created significant value for NPS, enhanced its reputation and market share, and likely generated further lucrative opportunities for NPS. It is reasonable to conclude that their work during this period was not contemplated by the non-bonus base remuneration prior to the pandemic, such that additional remuneration to reward this extra effort is appropriate.

1. Mr Ritchie concludes that for these reasons, the bonuses paid were 'commensurate with what is reasonable and proportionate in the extraordinary circumstances of the time'.

1. Mr Sigston used his firm's database containing 203,455 candidates and over 700 recruitment assignments (including over 300 CEO recruitments) from 2012 to 2024. He describes this database as Melbourne-centric and covering employees across small, medium and large companies, not for profit organisations, and government. He also relied on interviews he had conducted with owners and CEOs within the security industry, along with the premium talent search candidate database on seek.com.au.
2. In addition, Mr Sigston had copies of the Hare Letter, the Hare Report, and the Ritchie Report when preparing his report. The Sigston Report includes comments on those documents.
3. Commenting on the Hare Report, Mr Sigston states that:

(a) he agrees with Mr Hare that small private businesses rarely have long-term incentive plans for executives;

(b) he agrees with Mr Hare that small private businesses generally have short-term incentive plans for CEOs, usually dependent upon key performance measures for achievement of growth in gross and net profit targets, and which are usually calculated at around 10-30% of their fixed remuneration package;

(c) the fixed remuneration package for a CEO in 2020 in the Hare Report is inconsistent with that in the Hare Letter, in that the former fixed it to the highest level of $374,000, rather than the 25th percentile range of $300,000 to $310,000;

(d) the fixed remuneration package for the CEO in 2020 should have been $280,000 with a short-term incentive of up to 30% based on the achievement of key performance indicators of profit and revenue growth. Based on NPS' performance, the short-term incentive for that year would likely have been 10% but possibly 20% depending on profit growth (for which he did not have the figures), such that total remuneration should have been $308,000 to $336,000;

(e) accounting for short-term incentives from one year to the next may create the illusion of under or over payment on a year-by-year basis. It is not uncommon for an incentive for one financial year to be paid in the following financial year, or partly in both. It is therefore prudent to look at cumulative short-term incentives over a number of years;

(f) it is not uncommon for the most senior operations manager to be the second-in-charge to the CEO, as Mr Saunders was;

(g) it is extremely rare for an executive to work in a business without any form of remuneration, as Mr Saunders did from 2006 to 2013;

(h) while the CEO wage was realigned to an appropriate market rate in 2013, this was not extended to the operations manager; and

(i) it is rare for short-term incentives for operations managers to exceed 20%, and the key metrics are usually different to CEOs and may include matters such as quality, gross profit, and client satisfaction.

1. Commenting on the Ritchie Report, Mr Sigston states that:

(a) the comparison of NPS to Millenium is irrelevant given the disparity between the two companies: Millenium is an ASX listed company with revenue of $257 million and a profit after tax for FY2020 of $16.6 million. That the CEO of Millenium receives a base salary only 10.6% higher than the CEO of NPS confirms that Ms Saunders' base salary is too high;

(b) he agrees with Mr Ritchie that Ms and Mr Saunders faced significant challenges in FY2021 and FY2022;

(c) FY2021 presented a re-set in base remuneration for CEOs and, to a lesser degree, operations managers within the security industry, but also the opportunity to earn significant short-term incentives based on revenue growth and increase in profitability;

(d) Mr Ritchie's statement that a reasonable band for bonuses is 5-10% of overall revenue gained/new contracts won is completely incorrect. CEOs are typically measured on a number of criteria including gross profit growth and profit/profit growth; and

(e) he does not agree with most of the Ritchie Report and does not agree with the conclusions expressed in that report.

1. The Sigston Report attaches a similarly formatted spreadsheet to that provided by the Hare Report, save that it covers the period from FY2006 to FY2023.
2. Mr Sigston gave his opinion as to the market rate for remuneration of a CEO and an operations manager within the security sector or similar, within three ranges: high, middle and low (each including superannuation and a car in the fixed remuneration package). He also used the same three ranges for short-term incentives. His opinion was that for FY2021 to FY2023, the performance of NPS was such that the high range was applicable.
3. Mr Sigston's opinion in respect of the period FY2021 to FY2023 for the CEO position is that:

(a) the CEO should have received a significant uplift in the fixed remuneration package from 2020 to $330,000 in 2021 and the short-term incentive would have been received in full (ie, 30% of the fixed remuneration package), plus a one-off discretionary bonus of $100,000 to $200,000, taking the total annual remuneration to the range of $529,000 to $629,000 for FY2021;

(b) there should be a modest increase from FY2021 in the fixed remuneration package for inflation, taking it to $350,000. The full short-term incentive would also have been paid, and a more modest discretionary bonus of $50,000 to $100,000 would have been paid, taking the total annual remuneration to $479,000 to $529,000 for FY2022; and

(c) given the results for FY2023, the total annual remuneration would be $350,000 for that year.

1. In respect of the operations manager position for FY2021 to FY2023, Mr Sigston's opinion is that:

(a) the fixed remuneration package would have been increased from $185,000 for the previous year to $220,000 for FY2021, a short-term incentive of 20% would have been paid, and a discretionary bonus of $100,000 would also have been paid. This would take the total annual remuneration for the operations manager for FY2021 to $364,000;

(b) for FY2022, the fixed remuneration package would have been increased to $235,000. A short-term incentive of 20% would have been paid, along with a discretionary bonus of $50,000 This would take the total remuneration package for the operations manager for FY2022 to $332,000; and

(c) for FY2023, the fixed remuneration package would have been $240,000 with no short-term incentive or discretionary bonus paid.

1. Mr Sigston concludes that in terms of total annual remuneration (ie, fixed remuneration package plus short-term incentive) for Ms Saunders for financial years:

(a) 2006 to 2012, Ms Saunders was underpaid by $524,620. This would have increased the profit of NPS by a similar figure, from which she may ultimately have benefited given her shareholding;

(b) 2013 to 2019, Ms Saunders' remuneration was appropriate;

(c) 2020, there was a reduction in profit from 2019 and given the uncertain times, the short-term incentive would not be more than 10%. Hence, Ms Saunders was overpaid by $114,732;

(d) 2021, Ms Saunders was overpaid by $2,098,763;

(e) 2022, Ms Saunders was overpaid by $1,949,810; and

(f) 2023, Ms Saunders was overpaid by $80,857.

1. Mr Sigston concludes that in terms of total annual remuneration (ie, fixed remuneration package plus short-term incentive) for Mr Saunders for financial years:

(a) 2006 to 2013 and assuming there was no other form of remuneration, Mr Saunders was underpaid by $1,275,638;

(b) 2014 to 2019, Mr Saunders was underpaid by $376,996;

(c) 2020, Mr Saunders was overpaid by $80,060;

(d) 2021, Mr Saunders was overpaid by $2,224,327;

(e) 2022, Mr Saunders was overpaid by $957,331; and

(f) 2023, Mr Saunders was overpaid by $48,740.

E.2.1 High level observations regarding Mr Sojka and Ms Murone

1. I found Mr Sojka and Ms Murone to be confident and knowledgeable witnesses, who did their best to assist the Court and made concessions where appropriate to do so.
2. The defendants were critical of Ms Murone, pointing to errors made in her section of the Joint Valuation Report. The errors referred to were the one identified in paragraphs 102 and 103 above, and one identified in the course of oral evidence, as I will now describe.
3. During the course of their concurrent evidence in relation to the 31 August 2024 valuation and questions about each valuer's surplus asset figure, it emerged that Ms Murone had thought Mr Sojka's figure for surplus assets included $4.45 million for the accrued charges as per NPS' balance sheet. Taking the view that it should not be included, she had backed it out. It became apparent that Mr Sojka had not included the $4.45 million and so therefore there has been no need for Ms Murone to back it out. The effect of Ms Murone backing it out when she did not need to was that her surplus asset figure was inflated by $4.45 million. That being the case, Ms Murone corrected those amounts during oral evidence. Ms Murone explained that when she was preparing this part of her opinion for the Joint Valuation Report, she did not have critical documents such as a balance sheet for that time.
4. Despite the defendants' submissions, I do not consider that this error undermined her credit as an expert witness. Nor do I accept the defendants' submission that the error made which led to Murone Mark-ups means that the wider accuracy of her report should be called into question. Ms Murone's conclusions largely align with those of Mr Sojka, and if the defendants wished to point out other mistakes in her report, they were at liberty to do so.

E.2.2 The methodology employed by Ms Murone and Mr Sojka

1. Ms Murone prepared a valuation of NPS as at 30 June 2023. Mr Sojka prepared a valuation of NPS as at 30 June 2023 and 31 August 2024. Ms Saunders provided documents, engaged in interviews, and responded to queries for both valuers. Ms Murone and Mr Sojka were ordered to prepare their joint report identifying the matters with which they agreed and matters with which they disagreed. During that process, Ms Saunders provided profit and loss statements, balance sheets, BAS statements, but otherwise did not have any involvement.
2. To value the shares in NPS, Ms Murone adopted the market value. She says this is defined as the price at which a business or its equity would change hands between a knowledgeable willing buyer and a knowledgeable willing seller - with neither being under a compulsion to buy or sell, and both having a reasonable knowledge of the relevant facts.
3. Ms Murone refers to three different methodologies for conducting the valuation: capitalisation of future maintainable earnings; assets-based approach; and discounted cash flow methodology. She has followed the first of these, taking the view that an assets-based approach would undervalue the equity and a discounted cash flow methodology was not appropriate as the projections indicate a significant decline in revenue and earnings, and there is insufficient data to assess the reasonableness of the assumptions. A capitalisation of future maintainable earnings approach involves estimating the future maintainable earnings of the business and capitalising the earnings at a rate which reflects the risks and growth opportunities associated with the business and the earnings it generates.
4. Mr Sojka also used the capitalisation of future maintainable earnings approach.
5. I have found the Joint Valuation Report, together with Ms Murone's and Mr Sojka's oral concurrent evidence, to be very helpful in this case. The joint report and oral evidence reveal that while there are a number of matters on which the Sojka Report differs from the Murone Report, most of these differences do not make a material difference, with the exception of how to treat the remuneration payments - both in terms of assessing future maintainable earnings and whether to treat the overpayments as a surplus asset. In respect of remuneration payments, Mr Sojka had been instructed by the defendants to assume that the payments made were reasonable. Ms Murone was not given that instruction, and she made adjustments for overpayments.[8] In the Joint Valuation Report, the two experts state:

The significant difference between the two valuations reflects primarily the difference in instructions pertaining to the remuneration of the Saunders. If not for this, the values derived by the single experts would not be materially different.

1. Other factors upon which they differ and which make a tangible difference in the valuation are the valuation date and whether a minority discount ought to be applied.
2. That being the case, I see little utility in setting out the detail of each of their respective reports. Rather, it is only necessary to set out their conclusions as expressed in the Joint Valuation Report, as updated to reflect the Sojka Supplementary Report, the Murone Mark-ups, and their oral evidence (together, the Updated Joint Valuation Report).
3. As noted above, the Murone Report provided a valuation as at 30 June 2023 and the Sojka Report provided valuations as at that date and as at 31 August 2024. However, in the process of conferring with Mr Sojka and preparing their joint report, Ms Murone considered Mr Sojka's valuation as at 31 August 2024 and included in the Joint Valuation Report her assessment as to value as at that date.
4. The opinions of Ms Murone and Mr Sojka as to a valuation of NPS as at 30 June 2023 expressed in the Updated Joint Valuation Report are summarised in the below table:

1. The opinions of Ms Murone and Mr Sojka as to a valuation of NPS as at 31 August 2024 expressed in the Updated Joint Valuation Report are summarised in the below table:

1. Below, I provide a brief overview of the conclusions in the Updated Joint Valuation Report and explanations for amounts in these tables.

E.2.2.1 Maintainable EBITDA as at 30 June 2023 and as at 31 August 2024

1. There were some differences between the two experts in respect of the components of maintainable EBITDA, however with one exception, these were not material and are not necessary to describe. The key difference between their respective figures is that Ms Murone has made adjustments for commercial levels of remuneration to the CEO and COO, whereas Mr Sojka has not.
2. In this regard, Ms Murone had adjusted earnings by approximately $2.1 million in FY2022, $1.2 million in FY2023, and $127,000 in FY2024 to remove the excess remuneration paid to the Saunders. In determining the commercial remuneration for her report, Ms Murone adopted the midpoint of the amounts indicated in the Hare Letter. Since then, she reviewed the expert remuneration reports and their joint reports, and adopted the following:

(a) she made no change to the commercial remuneration adjustment for FY2017[9] to FY2019 as the amounts were not materially different to that in the expert reports;

(b) she made no change to the commercial remuneration adjustment for FY2020 as the amount was not materially different to that in the Sigston Report;

(c) she reduced the commercial remuneration adjustment for FY2021 from $4.766 million to $4.323 million in line with the Sigston Report;

(d) she reduced the commercial remuneration adjustment for FY2022 from $2.144 million to $1.832 million in line with the Sigston Report;

(e) she increased the remuneration adjustment by $11,000 from $1.194 million to $1.205 million for FY2023 in line with the Sigston Report; and

(f) she increased the remuneration adjustment by $3,000 to $130,000 for FY2024, which is based on the market remuneration for FY2023 in the Sigston Report increased by 3%.

1. In contrast, Mr Sojka was instructed to assume that the remuneration and bonuses were justified and do not require any adjustment. In addressing likely future maintainable earnings, he considered FY2024 and projected FY2025 which exclude bonuses.
2. Their joint conclusion on this issue was that the amount which should be adopted for the Saunders remuneration when calculating maintainable future earnings is that which is ultimately considered by the Court to reflect the commercial level of remuneration based on the expert remuneration reports.
3. In respect of other adjustments to maintainable EBITDA where the experts originally differed:

(a) Ms Murone's adjustments to revenue and earnings for the abnormally high revenue and gross profit due to the impact of COVID have been accepted by Mr Sojka;

(b) they agree that their differences in respect of payroll tax and Workcover should be adjusted based on what the Court concludes is a commercial level of remuneration;

(c) they have each maintained their respective positions regarding uniforms and computer expenses, but agree these do not have a material impact on the assessment of EBITDA;

(d) normalisation adjustments made to consultants, legal fees and motor vehicle expenses by Ms Murone have been accepted by Mr Sojka; and

(e) various revisions were made due to FY2024 actuals being available at the time of preparing the Joint Valuation Report.

1. Ms Murone adopted an EBITDA multiple in the range of 3.25 to 3.75 based on the transaction data available at the time of preparing her report and other factors as set out in the Murone Report. Mr Sojka adopted an EBITDA multiple in the range of 3.0 to 3.5 times based on the Industry Business Value Assessment Report. This report considered 16 comparable businesses within the public order and safety services sector, with the reported industry average of 3.49 times. Given the small difference in multiples adopted by each expert, they agreed and adopted a midpoint of 3.375 times.

1. The experts agree that the level of surplus assets as at 30 June 2023 should be adjusted for any under or overpayment of remuneration to the Saunders to 30 June 2023, based on the amounts determined by the Court. The experts agree that the level of surplus assets as at 31 August 2024 should be adjusted for the above, plus any under or overpayment in the year ended 30 June 2024 and the two months to 31 August 2024 plus the reversal of the accrued charges of $4.45 million.
2. During their concurrent oral evidence, Ms Murone explained that if overpayments are added back as surplus assets, then it is the post-tax amount and not the face value of the overpayments that are added back. This is because NPS had received the benefit of a tax deduction from those payments, as expenses were higher. Therefore, less tax was paid by NPS on the profits than would otherwise have been paid - had the profits not been taken out, NPS would have paid a higher amount of tax. Mr Sojka agreed that this would be the case if the Court found that overpayments were to be added back, and both experts agreed that the taxation rate would be 25%. This means that the face value of the overpayments would be reduced by 25% before being added to surplus assets.

1. Ms Murone had been instructed to value the business and equity, not the interest, and therefore did not consider the issue of minority interest. Mr Sojka had adopted a minority discount of 15%.
2. As part of their conferral, the experts discussed this issue. Ms Murone's opinion is that no discount is warranted given that the interest will be held 100% by the Saunders' interests. However, she says that this may be a legal issue as to the question of fair value. If the Court determines it is appropriate to apply a discount, then Ms Murone is of the opinion that a 15% minority discount is not unreasonable. Mr Sojka's opinion is that a discount is appropriate given that one party holds a minority (33.33%) interest and is unable to exert influence on commercial decisions. The experts have been unable to agree on this point but agree, if a discount is considered appropriate by the Court, that the rate of 15% is reasonable.

F Applicable law regarding shareholder oppression

1. The Court's jurisdiction to make an order under s 233 of the Corporations Act 2001 (Cth) (Corporations Act) is enlivened if s 232 is met. That section relevantly provides:

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 on behalf of a company; or

(c) a resolution, or a proposed resolution, of members or a class of members of a company;

(d) contrary to the interests of the members as a whole; or

(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

1. Once the Court's jurisdiction is enlivened under s 232, pursuant to s 233(1) the Court may make any order it considers appropriate in relation to the company, including (relevantly) an order:

(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;

(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.

1. Under s 461 of the Corporations Act, the Court may order the winding up of a company if (relevantly):

(e) directors have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members; or

(f) affairs of the company are being conducted in a manner that is oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member or members or in a manner that is contrary to the interests of the members as a whole; or

(k) the Court is of opinion that it is just and equitable that the company be wound up.

1. Such an order can be made on the application of a member of the company.[10] Where the application is made by a member of the company for a winding up on the just and equitable ground, and the Court is satisfied that the applicant is entitled to relief - either by way of winding up the company or some other means, and in the absence of any other remedy it would be just and equitable to wind up the company, then the Court must make a winding up order. However, it may not do so where it is of the opinion that some other remedy is available to the applicant and the applicant is acting unreasonably in seeking a winding up rather than that other remedy.[11]

1. I recently set out a summary of the key shareholder oppression principles in Re Renex Founder Hold Co Pty Ltd[12] and Re Lendly Pty Ltd.[13] I follow those principles here. There is no need for me to repeat them, although I will emphasise the following as of particular relevance to this case:

(a) For there to be oppressive conduct for the purposes of s 232(e) of the Corporations Act, there must be commercial unfairness to a member or members of the company.[14] Commercial unfairness is the touchstone of oppression under s 232(e).

(b) The test for commercial unfairness has an objective standard. It requires an assessment of whether objectively, in the eyes of a commercial bystander, there has been unfairness.[15] This inquiry is not assessed in a vacuum: the context is relevant to assessing the fairness of the conduct.[16]

(c) Evidence of conduct having been engaged in deliberately, knowing it to be unfair or not in good faith is persuasive, but not necessary.[17] Motives are irrelevant,[18] but the presence or absence of a reasonable commercial justification is relevant when assessing commercial unfairness.[19] It is not necessary to establish lack of probity or want of good faith.[20]

(d) If the directors or a majority membership conduct the affairs of a company such that they advance their own interests or the interests of others of their choice, to the detriment of a minority shareholder, that conduct will ordinarily be oppressive.[21]

(e) Departure by one party from a legitimate expectation held by the other party, including where the expectation arises from the conduct of the other party, may be unfair or oppressive.[22] However, such legitimate expectations are not immutable: if there has been some good reason for the extinguishment of the expectation, then its non-fulfilment will not establish oppression.[23]

(f) Oppressive conduct may arise from a series of events or from a single act or omission.[24] It is not necessary that the oppressive conduct be continuing at the time of trial, although the cessation of the oppression will be relevant to whether there is any occasion for, or utility in, making an order under s 233 of the Corporations Act.[25]

(g) Sections 232(d) and (e) are distinct grounds of relief, although there may be conduct which falls within both.[26]

(h) A breach of s 232(d) may not necessarily involve commercial unfairness. The court is required to examine all of the relevant facts and circumstances in order to determine whether the conduct under scrutiny is in the best interests of the company as a whole, apart from its members.[27]

(i) Breaches by a director of their statutory or fiduciary duties to the company may well be conduct that is not in the best interests of the company as a whole, thus falling foul of s 232(d).[28]

G Summary of how each party puts its case regarding the allegations of oppression

1. The ultimate submission of the plaintiff is that the evidence establishes that the affairs of NPS have been conducted in a manner which is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the plaintiff, or otherwise contrary to the interests of the plaintiff or members as a whole.
2. The plaintiff submits that the following four matters establish that the affairs of NPS have been conducted in a commercially unfair manner:

(a) The passing of the Resolution to pay all profits to the Saunders, with the implication that no profits would be paid to the plaintiff.

(b) The execution of the Resolution, in part, by paying excessive sums to the Saunders in financial years 2021, 2022 and 2023.

(c) The refusal of NPS to pay dividends in 2021, 2022 and 2023 notwithstanding:

(i) a history of dividends being paid to shareholders from 2005 to 2020;

(ii) the large payments that were received by the Saunders in those years; and

(iii) the high profits achieved by NPS during the COVID-19 pandemic.

(d) The recording of the accrued charges liability, which the plaintiff says does not represent a binding or real liability, and was recorded as a means of reducing the price to be paid for the plaintiff's share at a time when this proceeding was on foot.

1. The plaintiff submits that these matters, taken together, establish that NPS was conducted in a way that preferred the Saunders' interests over those of the plaintiff and at times even over the interests of NPS.
2. In response, the defendants point to paragraph 14 of the plaintiff's Amended Points of Claim, which pleads that Ms Saunders has conducted and is continuing to conduct the affairs of NPS for the benefit of herself and her husband and contrary to the interests of NPS and its members as a whole by:

(a) paying excessive remuneration to Ms and Mr Saunders;

(b) causing NPS to pay all profits to Ms and Mr Saunders in accordance with the Resolution;

(c) failing and/or refusing to pay dividends to members where there would be a reasonable expectation of receiving dividends; and

(d) incurring $2,954,855 in accrued charges between 30 June 2023 and 31 October 2023.

1. The defendants submit that the plaintiff ought to be held to its pleaded case. In support of this submission, the defendants rely on the following principles as outlined by me in Renex:[29]

(a) It is necessary for each single allegation in an oppression case to be pleaded clearly in order to assess whether the totality may amount to oppression.

(b) Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded in the pleadings.

(c) The pleading of an oppression claim needs to specify how the relief sought would have the effect of remedying the conduct complained of or the consequences of the conduct.

1. The defendants submit the following in respect of the four items of oppression contained in paragraph 14 of the plaintiff's Amended Points of Claim:

(a) The question of excessive remuneration is the only item of alleged oppression the needs to be engaged with substantively.

(b) The 'all profits' allegation is entirely misconceived, as a passing review of the company's financial statements expose as erroneous the claim that NPS paid all of its profits to Ms and Mr Saunders. Furthermore, the plaintiff has shifted its focus from the payment of profits to the making of the Resolution, a matter which was not pleaded (although it does provide some context for the remuneration payments).

(c) The non-payment of dividends is not oppressive in the circumstances of this case, given that payments were historically paid to Mr Holmes on an ad hoc basis to support him financially and later rationalised as a dividend at the end of the financial year. After the passing of Mr Holmes, these payments were no longer necessary. To the extent that the plaintiff could not access profits retained by the company, the defendants submit that any perceived or purported prejudice is illusory given that the plaintiff has sought a buyout of its share from the very beginning.

(d) The allegation relating to 'accrued charges' is misconceived in the way it is articulated, as the alleged charges were nothing more an internal book entry, which was never acted upon. As such, any prejudice to the plaintiff is entirely theoretical.

1. The allegation that Ms Saunders caused NPS to pay excessive levels of remuneration to herself, Mr Saunders and the Lambert Family Trust is of central importance in this case, as it is both an alleged act of oppression relied on by the plaintiff and, if found as such, has the most impact on relief in terms of the price to be paid for the plaintiff's share in NPS.
2. It is therefore necessary to determine: (1) whether the remuneration paid to the Saunders' interests in the period 2020 to 2023 is excessive; and then (2) whether that constitutes oppressive conduct.
3. The other key issues for determination are:

(a) whether all of the other alleged acts of oppression, individually or taken together, are made out; and

(b) if oppression is found, it appeared to be common ground that the appropriate remedy was for a buyout of the plaintiff's share. On that basis, I would need to determine the price to be paid for the plaintiff's share. This involves determining the value of NPS.

I Plaintiff's submissions regarding the alleged acts of oppression

1. The plaintiff submits that the decision to pass the Resolution must be assessed at the time that it was made. In March 2020, the Australian Grand Prix had recently cancelled its contract with NPS and refused to pay. Following that, other clients started cancelling work, and NPS lost its events work. Some clients were not paying NPS' invoices. The plaintiff submits that the evidence of Ms Saunders was that NPS was facing financial uncertainty and she did not know how the business would survive.
2. The plaintiff submits that, in these circumstances, one would expect that a director with NPS and its members' interests in mind would have retained funds within the company to ensure its economic survival. The plaintiff submits that, instead, Ms Saunders' motivation for passing the Resolution was at least in part the emotional state she was in following the discovery of Mr Holmes' will, which virtually left her nothing. Ms Saunders was upset, shocked and angry, and with these emotions she passed the Resolution less than one month after Mr Holmes' death, and the day after he was removed as a director in the records of ASIC.
3. The evidence of Ms Saunders is that the Resolution and remuneration payments were motivated by an incentive to continue in the business. Relying on the case of Spargos Mining,[30] the plaintiff submits that while reasonable commercial justification or conduct is relevant when assessing commercial fairness, motives and intentions are not. The plaintiff urges the Court to be cautious when considering the distinction between what is truly a reasonable commercial justification for conduct, and what may be considered an argument deployed to justify conduct actuated by improper purposes or improper motives.
4. The plaintiff further submits that Ms Saunders passed the Resolution knowing that it was in breach of clause 4(a) of the SHA and clause 13 of the Constitution. Ms Saunders had no power to pass the Resolution and it follows that any payments made in accordance with the Resolution were likewise without power. The assessment of oppression is objective, which underscores the proposition that motives of intentions are irrelevant.[31]
5. Lastly, the plaintiff submits that the passing of the Resolution:

(a) was done without proper consideration of the interests of NPS at a time when it was facing a bleak outlook. It was a decision that no one in Ms Saunders' position giving proper consideration to NPS's interests could have arrived at. This is a breach of her duty under s 181(1)(a) of the Corporations Act;

(b) disregarded the interests of NPS' members, as it placed NPS at more financial risk that it was currently in and elevated Ms Saunders and her interests above members as a whole; and

(c) unfairly discriminated and unfairly prejudiced the plaintiff by favouring one set of interests over those of another.

1. The plaintiff submits that, therefore, there is no doubt that the passing of the Resolution was oppressive under s 232 of the Corporations Act. Just because not all profits were taken does not mean the payments are not unfairly discriminatory, unfairly prejudicial, or oppressive. The defendants submit that some profits were left in NPS, which benefits the plaintiff. The plaintiff submits that this is an artificial argument, given there is no possibility that the plaintiff will access those funds unless there is a sale of its share.

I.2 Remuneration paid to the Saunders' interests

1. The plaintiff submits that in circumstances in which the funds beyond what could be considered reasonable remuneration are NPS' funds, these are regarded as shareholder funds. Therefore, payment of excessive remuneration to the Saunders excludes the plaintiff from the property of NPS and unfairly prejudices its rights to that property. Not only can overpayments be considered oppressive, but they can also amount to a contravention of s 181 of the Corporations Act.[32]
2. The plaintiff submits that if the Court finds that the Resolution was invalid, acts done in accordance with the Resolution are also invalid. This is because the payments were made in accordance with the Resolution and they were thereby made without power. Therefore, they ought to be considered oppressive under s 232 of the Corporations Act. Even if the Court is against the plaintiff on this point, the circumstances of the payments and their quantum are such as to render them oppressive, unfairly prejudicial, or unfairly discriminatory to the plaintiff and contrary to members as a whole in any event.
3. The plaintiff submits that the payments were made at a time:

(a) when NPS was making unprecedented profits;

(b) after Mr Holmes' death when Ms Saunders was sole director; and

(c) when no dividends were being paid to the plaintiff notwithstanding it received dividends from 2005 until 2020.

1. The plaintiff submits that the conduct of the affairs of NPS during this time excluded the plaintiff from NPS to the benefit of Ms Saunders and her interests. It was unfairly discriminatory and appears to have been motivated by anger at the contents of Mr Holmes' will. The plaintiff submits that Ms Saunders seeks to justify the payments on the basis that they were required to retain her and Mr Saunders' services and to reward them for the growth in NPS' revenue. Mr Sigston allows for those matters in reaching his opinion.
2. The plaintiff submits that the payments must also be considered in the light of Ms Saunders' knowledge that she was facing the prospect of a new controller of Holmes Properties. She did not want the plaintiff to enjoy the benefits of NPS. As the Resolution was motivated by anger towards Mr Holmes, so were the payments. They were a contrivance to exclude the plaintiff from the property of NPS to the advantage of Ms Saunders and her interests.
3. The plaintiff submits that it is important to consider on what basis the payments were made. They were made in accordance with the Resolution to pay 'any profit' to the Saunders. There is no mention of any manner of calculation of short-term incentives, or any consideration of discretionary bonuses in the event that NPS outperformed what was a bleak outlook at that time. The payments ought not be characterised as short-term incentives or discretionary bonuses, but simply a taking of funds from NPS at a time when they were available, to the exclusion of the plaintiff. In addition, the payments were made without consideration by, input, or approval from shareholders.
4. The plaintiff submits that the payments were made at a time when the only information on what would be considered a reasonable remuneration available to Ms Saunders was what was contained in the Hare Letter. Ms Saunders either chose to ignore the Hare Letter, or arrived at a unilateral decision that the short-term incentives in the Hare Letter were inadequate. In any event, the payments cannot be considered reasonable remuneration, as the evidence of Mr Sigston establishes.
5. The plaintiff submits that Mr Sigston's evidence as to reasonable remuneration should be preferred.
6. According to the plaintiff, Mr Sigston's opinion was:

(a) based on experience in the security industry dating back to 1994;

(b) informed by interviews with members of the security industry at the start of the COVID pandemic; and

(c) informed by more robust and complete data, including that found on the 'Seek Talent' database, which enables access to data from over five million candidates.

(a) based on incomplete instructions, as he was not told that NPS employed consultants, key personnel, and an on-call operator; leaving him to believe that the Saunders performed their various roles without assistance;

(b) not informed by any identified experience in the security industry;

(c) not based on any relevant available data that could have informed an objective assessment of the bonuses or non-bonus remuneration; and

(d) relied on two publicly listed companies that are significantly larger than NPS and which were, in Mr Ritchie's own words, not great comparisons.

1. The plaintiff submits that, in relation to historical underpayments and the accrued charges, NPS has no obligation to pay historical underpayments. Firstly, there is no employment contract between NPS and Ms Saunders or Mr Saunders. Secondly, no provision of the Fair Work Act 2009 (Cth) (the FWA) requires the underpayments to be paid and, in any event, all are beyond the six-year limitation period under s 544 of the FWA. Thirdly, the Security Service Industry Award does not contain a minimum wage obligation for CEOs and COOs.
2. The plaintiff submits that the historical underpayments were not recorded as a genuine liability, but only with this litigation in mind. This is clear from the timing of their recording in the balance sheet. Ms Saunders received the Hare Letter in July 2020. No liability was recorded until 31 October 2023 after receipt of the Murone Report. The quantum of the accrued charges was later revised by Ms Saunders following receipt of the Hare Report. The recording of the accrued charges was not a real liability in the sense that there is no obligation to pay the accrued charges, and ought to be ignored.
3. The plaintiff submits that the Court's task is not to undergo an accounting exercise of underpayments and overpayments. The Court's task is to remedy any oppressive conduct. If the payments were excessive, they must be reversed. There is no moment to consider the historical underpayments, which are not a real liability in this exercise.

1. The plaintiff submits that the mere fact of payment of what seems to be high level of remuneration, including bonuses, does not of itself render the conduct unfair.[33] However, where there is a correlation between high remuneration and lack of or modest dividends to the prejudice of shareholders who are not employed by the company, there is a greater likelihood that the court will find oppression proven.[34] Where a payment of low or no dividends is part of a larger plan of majority shareholders to conduct the company in their own interests, it can be unfair, which is particularly the case where payments are made to the majority shareholder or its interests to the exclusion of the other shareholders.[35]
2. The plaintiff relies on Slea (No 9),[36] where Robson J said the following (citations omitted):

While a dividend policy may be fixed for justifiable commercial reasons, a failure to reconsider the dividend policy in light of the company's changed circumstances may be oppressive, particularly where directors have taken steps to review their own remuneration.

1. The plaintiff submits that these principles apply in the present case. The plaintiff had been receiving dividends from 2005 until 2020. After the death of Mr Holmes, and following the passing of the Resolution, no further dividends were paid to the plaintiff in the context of NPS making payments to the Saunders that were well in excess of what could be considered reasonable remuneration.

J Defendants' submissions regarding the alleged acts of oppression

J.1 Conduct of the plaintiff is part of the context

1. The defendants submit that courts have held that the task of deciding whether there has been commercial unfairness is to be undertaken in the context of the particular relationship which is in issue, including by examining the conduct of the plaintiff. In the present case, the plaintiff was in every respect a 'silent partner' in the enterprise being conducted by NPS, making no contribution to that enterprise, nor assuming any of the associated burden.
2. The defendants referred to Joint v Stephens, where Nettle, Ashley and Neave JJA said:[37]

As is observed in Ford's Principles of Corporations Law, 13th Ed [11.450], the assessment of commercial unfairness will not infrequently involve an examination of the conduct of the applicant. Thus as Nourse J said in Re London School of Electronics Ltd in relation to the English oppression provision:

The conduct of the petitioner may be material in a number of ways, of which the two most obvious are these. First it may render the conduct of the other side, even if it is prejudicial, not unfair: cf In re R.A. Noble & Sons (Clothing) Ltd. Secondly, even if the conduct on the other side is both prejudicial and unfair, the petitioner's conduct may nevertheless affect the relief which the court thinks fit to grant ...

In Noble the prejudicial conduct consisted in one director running a quasi-partnership company virtually as his own, and it was held that that conduct was not unfair because the applicant had not shown any interest in being involved in management or decision making.

1. The defendants also pointed to Extons, where Sifris J observed that 'the conduct of the applicant may well be a relevant - and in some cases most relevant - factor in determining the nature and extent of any relief, as of course will the nature and extent of oppression as at the time of trial'.[38]
2. The defendants summarised the relevant conduct of the plaintiff as follows:

(a) The plaintiff elected to play no role in the conduct of NPS' affairs in the period following June 2020. In particular, the plaintiff did not avail itself of the opportunity to nominate a director to NPS, nor did it have a representative involved in NPS' day-to-day operations.

(b) The plaintiff elected to commence this proceeding in circumstances where:

(i) The plaintiff had contractual rights under the SHA that governed the transfer of its share in NPS, which the plaintiff did not exercise.

(ii) The plaintiff did not engage with Ms Saunders or Lambert Properties in any meaningful way regarding the subject matter of the proceeding and took no steps to identify or seek to narrow the dispute between the parties.

(iii) The plaintiff issued the proceeding without notice and filed the Lowson Affidavit, which provided an incomplete and inaccurate account of the pre-litigation dealings between the parties.

1. They submit that in this context, the plaintiff has not established that the affairs of NPS were conducted in a manner contrary to the interests of its members.
2. The defendants submit that the following timeline provides important context to the allegations of oppressive conduct contained in the Lowson Affidavit, which the defendants say gives an incomplete and misleading account of the correspondence between the plaintiff and Ms Saunders in the period prior to the proceeding being issued.
3. On 29 March 2022, Ms Saunders emailed the plaintiff's solicitors, Northcote Lawyers, asking for confirmation that they acted for the Holmes Family Trust. The next day, Ms Saunders received a response from Mr Lynch confirming that the firm acted for Ms Lowson and asking if Ms Saunders could make herself available for a teleconference or videoconference. Ms Saunders' evidence was that she was informed by Mr Lynch that Ms Lowson 'wanted to sell her share of the business' and that she had agreed to attend a meeting to discuss that prospect.
4. However, on 30 March 2022, Mr Lynch cancelled the proposed conference, stating in an email that Northcote Lawyers would propose a new time in the coming weeks. According to the defendants, no alternative time was ever proposed despite Ms Saunders' willingness to attend a conference.
5. On 30 May 2022, Mr Lynch emailed Ms Saunders stating that Romanis Cant had been engaged to complete a forensic analysis of the business of NPS. The email included a listing of requested financial information. In the Lowson Affidavit, Ms Lowson states that Ms Saunders 'has failed and/or refused to respond to this communication'.
6. The defendants submit that Ms Lowson's statement is erroneous where, on 6 June 2022, the defendants' solicitors responded to Mr Lynch's email, stating that:

In the interests of seeking to move the matter forward, our client would be willing to provide information that is reasonably necessary to prepare a valuation, directly to Romanis Cant, on a strictly confidential basis...

This offer was expressed to be conditional upon Romanis Cant entering into a non-disclosure agreement and providing NPS a copy of its report once finalised.

1. The defendants submit that no evidence was adduced at trial of any response from the plaintiff to this offer.
2. Almost nine months later, on 20 February 2023, Ms Saunders contacted Ms Lowson and others regarding the York Street Property, expressing a desire to 'buy out the Holmes Family Trust 50% share' and proposing that valuations be obtained for that purpose. Ms Lowson did not respond to that email. Instead, on 23 February 2023, Mr Lynch sent an email to Ms Saunders asking that all communications to Ms Lowson be sent via Northcote Lawyers. That email was sent in circumstances where Northcote Lawyers had apparently made no contact with Ms Saunders or her lawyers since May 2022. In the interim, Ms Saunders responded to requests for information made by the accountants acting for Ms Lowson or the plaintiff, authorising the provision of requested information.
3. Five days after Mr Lynch's email, without any notice to Ms Saunders, the plaintiff commenced this proceeding. The Originating Process filed on 28 February 2023 was supported by the Lowson Affidavit, which stated that Ms Saunders had 'not produced any records to verify the amount of rental income received [in respect of the York Street Property], or whether the distribution of such amounts are in accordance with the shareholding of the Company [NPS]'. The Lowson Affidavit made no reference to the email sent by Ms Saunders to Ms Lowson on 20 February 2023, nor to Ms Lowson's failure to respond substantively to that communication.
4. The defendants submit that Ms Lowson accepted during her evidence that in the period from May 2022 to February 2023, despite the approaches made by Ms Saunders regarding both NPS and the York Street Property, Ms Lowson did not engage with Ms Saunders to see whether any dispute regarding the plaintiff's shareholding in NPS could be resolved or narrowed.

1. The defendants submit that the allegation that Ms Saunders caused NPS to pay 'all profits' to herself and her husband lacks a proper basis and ought not to have been pressed at trial. Significant profits generated during FY2021 and FY2022 were retained in NPS for the benefit of all shareholders. The defendants submit that this position was accepted by Ms Murone and was evident from her expert report.
2. The defendants contend that the passing of the Resolution itself is not, in terms, pleaded as an act of oppression, and that the plaintiff ought not now be permitted to rely on that. Further, they say that the contention that the Resolution was invalid, as it was not passed in accordance with the requirements of the SHA or the Company's constitution, is not pleaded by the plaintiff. Therefore, it cannot be part of the plaintiff's case. The defendants say that, in any event, the passing of the Resolution was not oppressive.
3. Some of the defendants' submission regarding the remuneration paid to the Saunders, as set out in the next section, is also relevant to the passing of the Resolution.

1. The defendants submit that, insofar as the remuneration payments are concerned, context is critical. In BBHF Pty Ltd v Sleeping Duck Pty Ltd,[39] Delany J stated that 'fairness is not to be assessed in a vacuum. It is to be assessed in the context in which the conduct occurred and in relation to what is known at the time of the conduct and not in relation to what subsequently transpires'.
2. The defendants submit that the remuneration payments were made during, and by reference to, an abnormal period of highly profitable trading by NPS, which entailed related onerous demands on the two key executive staff members that received the payments. The payments were also made in the context of Ms Saunders passing the Resolution and the circumstances that informed her doing so, that context being:

(a) a global pandemic and the related public health measures, which were assessed as posing a threat to the viability of NPS' business;

(b) Ms Saunders having genuine misgivings about her ongoing involvement in the conduct of NPS' business;

(c) the Saunders having been historically underpaid for the work they performed for NPS;

(d) the prospect of Ms Saunders stepping away from the NPS business being perceived as an existential threat to the business, not unreasonably where there was no apparent path to appointing a replacement CEO;

(e) Mr Holmes having passed away, meaning that, in Ms Saunders' view, Mr Holmes' personal circumstances, and the need for ad hoc payments to him from the NPS cash reserves, no longer figured as relevant considerations; and

(f) Ms Saunders no longer being able to confer with Mr Holmes or any other representative of the plaintiff regarding the prospect of NPS continuing to trade.

1. The defendants submit that Ms Saunders' evidence at trial was that the bonuses paid to her and Mr Saunders were determined by reference to 'the COVID revenue' and profitability, with cashflow being an important consideration.
2. The evidence of Mr Ritchie was that:

(a) the non-bonus salaries paid to the Saunders were reasonable and appropriate for their positions in a company of NPS' size; and

(b) a discretionary executive bonus paid during the period of the remuneration payments was an appropriate mechanism of remuneration and the bonuses paid by NPS were commensurate with what was reasonable and proportionate in the circumstances.

1. The defendants submit that Mr Sigston's evidence as to the purpose of discretionary bonus payments to senior or key employees was broadly consistent with Mr Ritchie's opinion. Importantly, Mr Sigston accepted the following:

(a) Executive owners of businesses will structure their remuneration on occasions in a manner that suits their needs or preferences. Particularly insofar as small to medium enterprises and tightly held companies are concerned, remuneration decisions will not necessarily be informed by objective market benchmarks.

(b) Discretionary bonuses, not calculated as a percentage of base remuneration, are an acceptable means of rewarding or incentivising senior staff.

(c) The quantum of a discretionary bonus can take account of considerations such as industry-specific trading conditions, circumstances particular to the subject business, and/or the circumstances of the recipient of the bonus.

1. The defendants submit that, assessed within that framework and given the context described above, the remuneration payments should not be characterised as excessive or commercially oppressive. First, mismanagement or poor management does not constitute oppression.[40] What is complained of must rise higher than a management decision with which the minority disagrees, even if that decision is shown to have been made poorly or based on a misunderstanding of relevant facts. Second, courts are cautious to conclude that business judgments amount to oppression.[41] The defendants submit that the plaintiff is asking the court to 'second guess' Ms Saunders' decisions regarding the remuneration to be paid to the persons responsible for delivering record profits to NPS. In the absence of compelling expert evidence, the Court cannot be satisfied that such commercial decisions were oppressive.
2. The defendants submit that the question of commercial unfairness is also to be judged having regard to the facts known to the parties at the time of the conduct complained of, and not by reference to what subsequently transpires or facts which subsequently become known.[42] As events transpired, the COVID-19 pandemic afforded NPS a commercial opportunity that, by reason of the dedication and personal exertion of the Saunders, NPS was able to exploit in a manner that generated significant profits. That could not have been foreseen as at July 2020, particularly when NPS was being asked to commit to a legal and commercial framework that was novel and attendant with risk.
3. The defendants rely on Shamsallah where Owen J, in the course of determining that the payment of remuneration that was alleged to be excessive was not oppressive, made the following observations:

...it is another notorious fact that small business is difficult and so often the success of an enterprise is dependent on the experience and willingness to work of the proprietors. All of this suggests to me that salary levels ought not to be divorced from the actual circumstances of the individual business. I do not think that, taken alone and in the circumstances of this case, for the managers of the company, who have been materially responsible for the development of the business, to take salaries that are high but not excessively so, is oppressive. I am not suggesting that "hands on" directors can take, as salaries, whatever they like or whatever they think the company can bear and thus ignore the interests of persons whose interests are represented solely by invested capital.[43]

1. In Shamsallah, the 'ultimate question' was framed as follows: are the salary levels so high as to amount to oppressive conduct?[44] Owen J determined that question by reference to expert evidence from human resources consultants, noting that the plaintiff bore the onus, and then accepting evidence that supported a contention that the subject salary packages, 'while perhaps on the high side', were not 'entirely out of kilter with "the going rate"'.[45]
2. The defendants submit that equivalent evidence has been adduced here, where, as noted above, Mr Ritchie's evidence was to the effect that the remuneration payments were commensurate with what was reasonable and proportionate in the circumstances. That assessment is fortified by Mr Ritchie's unchallenged evidence that executive bonuses are a means of 'reducing "key man risk" so crucial executives do not leave during a period of uncertainty or tension, when their departure might be disastrous or fatal for the smooth and effective operation of the organisation'.
3. The defendants submit that, even more pronounced in this case are what Owen J described as 'other issues of a more general nature' that included the contribution made by the persons that received the impugned salary packages to the 'progress and development of the business'. In the present case, absent the commitment of the Saunders to operate the business, there was no apparent prospect of NPS continuing to trade in its then current form. This is particularly so in light of the unchallenged evidence about the absence of any prospect of Ms Saunders being effectively replaced at that time as CEO. The remuneration payments were made to secure the continuation of NPS as a going concern. The long-term benefit to both shareholders of NPS was the continued existence of NPS' business and the preservation of the value of NPS' assets and undertaking.
4. The defendants submit that the preservation of NPS' business was in the interests of the plaintiff for an additional reason: for so long as NPS continued to operate from the York Street Property, the plaintiff continues to receive 50% of the net rental proceeds.
5. The defendants submit that when the period of record profitability of NPS came to an end, so too did the payment of remuneration equivalent to that paid during the 2020 to 2023 period. Ms Saunders' decision to proceed in a manner approximating that contemplated by the Resolution, by making the remuneration payments, cannot be characterized as commercially unfair.
6. The defendants submit that where any relief granted under s 233 of the Act is informed by considerations of fairness, if such relief is to be granted to the plaintiff in a manner that seeks to account for some portion of the remuneration payments -account would also need to be taken of the historical underpayment of remuneration to the Saunders. The remuneration experts, Mr Hare and Mr Sigston, have each sought to quantify those underpayments but no consensus was reached. The quantum of the historical underpayments has been assessed as being in the order of $2.211 million by Mr Hare and $1.605 million by Mr Sigston.
7. The defendants submit that rather than seeking to select both an applicable adjustment amount for overpayments and underpayments, the preferred approach to assessing value for the purpose of s 233 is to make no adjustments for any perceived overpayment referable to the Relevant Period or the historical underpayment of Ms and Mr Saunders. That approach is consistent with the way in which NPS actually traded (remuneration levels to key staff fluctuated by reference to the prevailing circumstances) and is reflected in Mr Sojka's valuation as at 30 June 2023.
8. The defendants submit that such an approach reflects the fact that in a tightly held business such as NPS, in which a key executive is an indirect owner, remuneration will often not accord with that suggested by market-based benchmarking. Accordingly, seeking to classify remuneration as being less or more than what is being paid in the broader market at a particular time would ignore the legitimate preferences of the executive owners, as determined by personal circumstances and profitability.

1. The defendants submit that, according to the plaintiff's Amended Points of Claim, the alleged 'incurring' of accrued charges is attributable to the contents of a balance sheet of NPS dated 31 October 2023. Ms Saunders gave evidence at trial that this accounting entry was the product of her attempt to calculate and record the extent of the historical underpayment of herself and Mr Saunders by NPS. That exercise was undertaken by reference to the Hare Letter as reflecting the historical underpayment of entitlements to NPS's key employees.
2. The defendants submit that the accrued charges entailed no more than the making of an accounting entry in NPS' internal financial records. Where no payment has been made from cash reserves of NPS, referable to the charge recorded in a balance sheet, any prejudice is entirely theoretical.
3. The defendants submit that the position is akin to that considered in Hylepin Pty Ltd v Doshay Pty Ltd,[46] where an erroneous alteration to a share register (later corrected) was held not to be oppressive where 'it was not established that anything flowed from that error' and '[n]othing beyond theoretical prejudice' arose.
4. The defendant submits that it was never put squarely to Ms Saunders that certain circumstances or a prevailing condition caused her to act in a particular way.

1. The defendants submit that the allegation in respect of the non-payment of dividends is premised upon the plaintiff having 'a reasonable expectation of receiving dividends'. However, no basis for any such expectation is evident or was established. Rather, Ms Saunders' evidence at trial served to confirm that not only did NPS have no policy governing the payment of dividends to shareholders, NPS declared dividends solely as a convenient means of characterising payments that had been made to Mr Holmes from NPS' cash reserves on an 'as needs' basis. Following Mr Holmes' death, there was no reason to make such payments (or declare dividends referable to such payments).
2. The defendants submit that, as was stated by Robson J in Slea (No 9):[47]

Establishing merely that a company has failed to pay a dividend, or as large a dividend as may be possible, is not sufficient to constitute oppressive conduct. If it can be shown that dividends have been withheld or fixed at a certain rate, pursuant to "a properly exercised commercial judgment", there will be no oppression.

1. The defendants submit that no shareholder was prejudiced by the non-payment of dividends in the period following June 2020. During the period of relative uncertainty following Mr Holmes' death, net profits were retained in NPS. Ms Saunders' evidence was that, based upon information from the executor of Mr Holmes' estate, she anticipated that the issues with Mr Holmes' deceased estate would conclude within a short period of time.
2. The defendants submit that the approach to dividends was consistent with previous practice and entirely justified. Unlike Mr Holmes while he was still alive, there was no suggestion that the plaintiff was experiencing cashflow or funding needs that needed to be addressed by the payment of a dividend by NPS.

K Consideration - the alleged acts of oppression

K.1 Consideration of defendants' submissions regarding the plaintiff's conduct

1. The plaintiff's originating process filed 28 February 2023 sought interim orders authorising the plaintiff and/or its advisors to inspect the books of NPS or, alternatively, an order for discovery by NPS of such documents. Orders for the inspection of NPS' books and records were made on 4 May 2023. The plaintiff's amended originating process filed 29 January 2024 no longer sought those interim orders, presumably because they had been made by then.
2. I do not think the defendants' criticism of the plaintiff's commencement of the proceeding and of the content of the Lowson Affidavit is warranted. The upshot of the defendants' criticism is that any buyout of the plaintiff's share in NPS ought to be performed in accordance with the terms of the SHA. I will address this submission later in my consideration.
3. The plaintiff had sought information from Ms Saunders since at least May 2022. Much of the information sought was information to which the plaintiff, as a shareholder, was entitled. In the context of the plaintiff exploring selling its share in NPS, access to the financial information was needed to better understand the value of that share.
4. The defendants' response was not to provide the requested information to the plaintiff, but to say that it would be provided only to Romanis Cant on a confidential basis. This was not a sufficient response. There is no apparent basis for the shareholder itself to be deprived of that information. If the defendants were particularly sensitive about confidentiality, they could have sought undertakings from the plaintiff, its lawyers and Romanis Cant, but they did not.
5. Furthermore, I reject the defendants' accusation that the plaintiff acted unreasonably in bringing this proceeding, although I do think it was likely precipitous:

(a) The defendants' response to the request for information was likely unreasonable, for the reasons already given.

(b) Furthermore, there is nothing to indicate that the reason the plaintiff sought financial information from NPS was for some purpose other than following the process contained in the SHA. In other words, there is no evidence that the plaintiff was trying to avoid that process.

(c) I accept that the commencement of the proceeding likely came as a surprise to the defendants. There had been a long period of silence after around May-June 2022, before Ms Saunders understandably revived communication in February 2023. There is also some evidence that some information was provided between the accountants for the parties, although that evidence is not particularly clear or detailed.

(d) One would have thought that the most appropriate course prior to issuing the proceeding was for the plaintiff to make, via her lawyers, clear demands on the defendants so as to crystallise the issues in dispute and provide an opportunity to see if they could be resolved, before embarking on Supreme Court litigation. For reasons which were not adequately explained by Ms Lowson, that did not occur.

1. The Lowson Affidavit is very brief and clearly does not tell the full story. However, I do not consider it to be misleading or inaccurate. Further, one must recognise that the Practice Note for oppression proceedings requires that the affidavit filed with the originating process is no longer than 3 pages and beyond exhibiting a current ASIC search of the company, may not contain any other exhibits.
2. Be that as it may, the defendants did not articulate how these matters can, or do, affect the question of whether there has been commercial unfairness or oppression of the plaintiff by the defendants. I accept that when assessing whether there has been commercial unfairness constituting oppression, the conduct of the plaintiff is likely to be relevant. However, I fail to see how the matters described above form part of the relevant factual matrix for assessing whether there has been oppression.
3. The other matters relied on by the defendants, as set out in paragraphs 203 and 206(a) above are ones which may bear upon the question. Mr Holmes did not play an active part in NPS once he ceased employment in around 2005. His role after then was as director only, and the evidence from Ms and Mr Saunders was that this did not extend much beyond signing some documents. However, there was no evidence that Ms Saunders sought more from her fellow director: for example, she did not say that she ever asked Mr Holmes to do more and he refused.
4. Mr Holmes may not have been an active director, but that does not mean that the shareholding associated with him (ie, that of the plaintiff) somehow has less rights than any other shareholder. In the circumstances of this case, I fail to see how the defendants' characterisation of the plaintiff as a 'silent partner' bears upon the question of whether there has been oppression. The complaint here is not one of failing to involve the plaintiff in management of the company. If that were the complaint, then these matters would be relevant. However, the main complaint is of excessive remuneration being paid to the Saunders in the context of no dividends being paid to shareholders. In circumstances where Ms Saunders was CEO of NPS and working hard in NPS' business, it is hardly surprising that she received more than a non-employee director who played little role in the business. The question here is whether this resulted in the shareholder being oppressed.
5. I do not regard the plaintiff's non-involvement in the conduct of NPS' affairs after June 2020 as being relevant here. It is hardly surprising that Ms Lowson did not seek to have herself appointed as a director or be involved in NPS' day to day affairs. Again, where there is no complaint based on exclusion from management of the company, such matters are not relevant.

K.2.1 Whether the passing of the Resolution itself is part of this case

1. The passing of the Resolution, in and of itself, is not pleaded by the plaintiff as an act of oppression or as a breach of director's duties. Rather, acting in accordance with the Resolution is pleaded.
2. The Resolution is referred to in the Amended Points of Claim in the following ways:

(a) it is listed as a particular to paragraph 10 of the Amended Points of Claim, which paragraph alleges that Ms Saunders caused NPS to pay all profits of NPS from 7 July 2020 to herself and Mr Saunders;

(b) in paragraph 11 of the Amended Points of Claim, the plaintiff alleges that:

In accordance with [the Resolution], the Company paid to Ms Saunders and Mr Saunders the profits of the Company for the financial years ending 30 June 2021, 30 June 2022, and 30 June 2023.

(c) in paragraph 14 of the Amended Points of Claim, the plaintiff alleges that by paying the excessive remuneration to the Saunders, causing NPS to pay all profits to the Saunders in accordance with the Resolution, failing to pay dividends when there was a reasonable expectation of them, and incurring the accrued charges, Ms Saunders has conducted the affairs of NPS for the benefit of herself and Mr Saunders and contrary to the interests of NPS and members as a whole; and

(d) in paragraph 15 of the Amended Points of Claim, the plaintiff alleges that by reason of the matters referred to in (c) above, Ms Saunders has contravened her duties as a director and NPS' affairs are being conducted in a manner contrary to the interests of members as a whole and/or oppressive to the plaintiff.

1. However, the case which the plaintiff ran at trial was that the passing of the Resolution was a breach of director's duties and oppressive conduct. Further, the plaintiff's case at trial was that the passing of the Resolution was invalid.
2. Putting aside the issue of invalidity for the moment, at first blush, the defendants' complaints about this appear justified.
3. The defendants' complaint that the allegation that Ms Saunders caused NPS to pay 'all profits' to herself and Mr Saunders (see paragraph 217 above) lacked a proper basis and ought not to have been pressed at trial ought be accepted. It is clear from the company's financial records that not all profits were paid to Ms and Mr Saunders. Once the plaintiff had those records, the allegation ought to have been withdrawn or amended.
4. It seems to me that by the time the trial commenced, and with the benefit of each other's opening submissions, it was tolerably clear that the acts of oppression relied on by the plaintiff were:

(a) Ms Saunders adopting or passing the Resolution to pay any profit to her and Mr Saunders;

(b) excessive remuneration paid to the Saunders interests;

(c) non-payment of dividends to the plaintiff; and

(d) the accrued charges.

1. Further, while the act of passing of the Resolution was not expressly pleaded as an act of oppression, it was certainly raised in an indirect way in the pleading.
2. Importantly, the defendants themselves rely on the Resolution to justify the payments made to the Saunders:

(a) in their written opening submissions, the defendants said that it is convenient to address the remuneration payments and the alleged 'all profits' conduct together, 'where both are attributable to' the Resolution. The defendants submitted that there was apparently no contention by the plaintiff that the making of the remuneration payments did not conform with the Resolution, and went on to say that 'Accordingly, unless the plaintiff can successfully characterize the [Resolution] as being oppressive in some way, the [remuneration payments] cannot be oppressive (where the making of [those payments] was consistent with the [Resolution]'; and

(b) also in their written opening submissions, the defendants said that the non-payment of a dividend was 'a product of NPS acting in accordance with' the Resolution, which did not constitute oppressive conduct.

1. Thus, the defendants, in essence, contend that the remuneration paid to the Saunders and the non-payment of dividends were not acts of oppression because they were carried out in accordance with the Resolution. By their written opening submission, the defendants effectively challenged the plaintiff to seek to characterise the Resolution itself as oppressive, and did not cavil with the plaintiff's reliance in its written opening submission on the Resolution as an act of oppression.
2. To the extent that the defendants rely on the Resolution as justification for the remuneration payments and the non-payment of dividends, that makes the Resolution itself squarely part of this case. That, together with the indirect ways which it is pleaded, is a sufficient basis for me to consider it as part of the allegations of oppression in this case.
3. I reach that conclusion without needing to engage with the question of whether or not the Resolution was invalid because it was not passed in accordance with the company's constitution and the SHA. Had it been necessary to do so, I would say the following about it:

(a) This was not a matter referred to in the plaintiff's written opening submissions. In oral opening submissions, the plaintiff's counsel said that the issue with the validity of the Resolution had not formed part of the case because of the effect of s 1322 of the Corporations Act, which allows the court to essentially overlook irregularities unless doing so would cause substantial injustice. It was said that the substantial injustice in this case is the same as the oppressive conduct, but s 1322 would not give rise to the same remedy. For this reason, the validity of the Resolution had not formed a critical part of the case, but it was said that it is an important part of the factual background to the passing of the Resolution.

(b) In oral opening submissions, the defendants' counsel said that he had been taken by surprise by the contention that the Resolution was invalid.

(c) No argument occurred as to whether the defendants were prejudiced by the plaintiff's approach in respect of this issue, although the defendants made a number of submissions that the plaintiff should be held to its pleaded case.

(d) Even if the Resolution was invalid and that in itself was found to constitute oppression, it is a complaint without a significant remedy unless the Resolution was carried out. Apart from a declaration of invalidity in such circumstances, what other remedy flows from it? If the Resolution is not carried out, in part or in full, then it has had no real consequence for NPS or its shareholders.

K.2.2 Whether the passing of the Resolution was oppressive conduct

1. As both counsel pointed out in oral closing submissions, motivations and intentions are irrelevant to the assessment of whether there is oppressive conduct. That is true, but it is not as simple as that. While a lack of improper or unreasonable motive or a lack of ill-intention may not prevent an action from constituting oppression, to the extent that motive or intention is part of the commercial justification for an action, then it may be relevant.
2. Here, the plaintiff seeks to characterise Ms Saunders as being motivated by anger towards Mr Holmes when she passed the Resolution, based on her being substantially left out of his will. The defendants complain that this proposition was not put to Ms Saunders, and submit that it should play no part in assessing her conduct. I do not accept that this was not put to Ms Saunders. She agreed with plaintiff's counsel that seeing that she was left $500 and Mr Holmes residuary estate went to Ms Lowson, upset her, shocked her a little bit and made her angry. This exchange immediately followed:

Mr Ford: So within one month with those emotions, you pass the resolution. Within one month of his death. Is that correct?

Ms Saunders: Yes.

1. The defendants also complain that the plaintiff's proposition that Ms Saunders was motivated to pass the Resolution because she did not want the plaintiff to enjoy the benefits of NPS was not put to Ms Saunders. I accept that complaint - this was not put to Ms Saunders and I will disregard the plaintiff's submission in that respect.
2. Whether Ms Saunders' anger about Mr Holmes' will factors into my consideration, however, is another question.
3. The defendants themselves placed a lot of importance on Ms Saunders' reasons for passing the Resolution, presumably in an attempt to satisfy the Court that there was a reasonable commercial justification for it. Ms Saunders went into some detail about her thinking at the time, and it is fair to say that it appeared to me that she experienced something of a watershed period in terms of whether she wanted to continue to work in NPS' business. I have described her evidence on this point earlier in these reasons, and I accept that evidence. Ms Saunders did seem to have reached a point where she was seriously contemplating walking away from the business. In explaining the context for the Resolution, Ms Saunders focused heavily on her feelings at the time. Part of those feelings involved her natural distress at Mr Holmes passing, but also her distress as to the contents of his will. That was not the sum of it though: a lot of her feelings and reasons were based on the difficult times NPS was experiencing in the first few months of the pandemic, along with the undoubted stress which the pandemic placed on everyday life for millions of people, including Ms Saunders and her family, and her increased workload as a consequence of having to reduce staffing levels.
4. I accept, therefore, that a large part of Ms Saunders' justification for the Resolution was to provide motivation for her to remain as CEO of NPS. Her anger at Mr Holmes' will contributed to her emotional state at the time, but I do not regard that anger as a significant motivating factor for the Resolution. It is certainly not something which rises to the level of negating any other justification or reason for passing the Resolution.
5. I also accept that there is some commercial justification for NPS to enter into arrangements which would more generously benefit Ms Saunders. But that does not justify NPS paying any profit to Ms Saunders and Mr Saunders.
6. The essential problem for Ms Saunders insofar as passing the Resolution is concerned is that there is no evidence at all that she gave any consideration to the effect of the Resolution on the minority shareholder, being the plaintiff. Clearly, the plaintiff would be advantaged by the continuation of NPS' business, such that something which motivated Ms Saunders to continue in the business may be seen as in the interests of all shareholders, but this is not the end of the matter. Was it necessary for 'any profit' to be paid to Ms Saunders and Mr Saunders for the former to continue as CEO, or would some lesser arrangement have sufficed? There is no evidence that Ms Saunders considered anything other than quitting as CEO or passing the Resolution.
7. A resolution to pay 'any profit' to Ms and Mr Saunders means that if that resolution was carried out, payment of a dividend to shareholders would be unlikely, given the requirements of s 254T of the Corporations Act.[48]
8. It is the Resolution that 'any profit' be paid to the Saunders such that no dividend could likely be paid to shareholders, without any consideration of the plaintiff as shareholder, which I consider to be oppressive. It is not to the point that the other shareholder, Lambert Properties, would not receive a dividend either. Given the structure and ownership of NPS and Lambert Properties, Ms Saunders was placing herself in a position to benefit from the Resolution, at the expense of the plaintiff.
9. In my view, passing the Resolution was clearly oppressive and unfairly prejudicial to the plaintiff. It was commercially unfair for any profit to be paid to the Saunders such that no dividend could likely be paid to the plaintiff. Ms Saunders did not take the interests of the other shareholder into account.
10. It was also contrary to the interests of members as a whole. The Resolution was passed at a time when NPS was experiencing a drastic downturn in its business and all the uncertainty which the pandemic generated. It had lost many key contracts or customers, several customers were not paying their invoices, staff had had to be retrenched, and at the time the Resolution was passed, the new contracts with government agencies for the provision of security for pandemic-related activities were not yet on the horizon. It is difficult to see how, in such circumstances, it was prudent to resolve that any profit be paid to the two senior employees rather than at least some of it being retained in the business. I accept that over the ensuing months, extraordinary profits were achieved by NPS, but that is not to the point. At the time of passing the Resolution, Ms Saunders had no idea that instead of continuing to jeopardise NPS' business, the pandemic would result in unprecedented and extraordinary profits for NPS.
11. I note that the plaintiff complains that it was not given a copy of the Resolution as part of the company's books and records when those were provided following the making of orders for their provision. Instead, the first time the plaintiff received and Ms Lowson saw the Resolution was when Ms Saunders' witness outline was served in late 2024. No satisfactory explanation was given by the defendants for the failure to provide a copy of the Resolution earlier.

K.2.3 Whether the passing of the Resolution was a breach of Ms Saunders' duties as a director

1. The plaintiff contends that by passing the Resolution, Ms Saunders has failed to exercise her powers and discharge her duties as a director of NPS in good faith in the best interests of NPS and for a proper purpose, thereby contravening s 181(1)(a) of the Corporations Act. The plaintiff seeks declarations that such breaches have occurred.
2. The defendants deny this, and further say that no leave to bring a derivative action against Ms Saunders has been sought or obtained by the plaintiff.
3. That is so. However, a breach of director's duty may also be used to establish a contravention of s 232(d) of the Corporations Act, as set out in paragraph 171(i) above. Given I have already found that passing the Resolution was a contravention of s 232, strictly speaking it is not necessary to also consider whether Ms Saunders breached her director's duties and whether that contributed to a contravention of s 232(d).
4. However, a breach of director's duties is a serious allegation to make, and I feel it necessary to say something about it. In this case, I am not satisfied that Ms Saunders contravened s 181(1)(a) by passing the Resolution, primarily because the evidence does not establish a want of good faith on the part of Ms Saunders. I accept that she genuinely believed that it was in the best interests of NPS for her to remain as CEO, the price for which she believed was the Resolution. Nor does the evidence establish that the Resolution was passed for an improper purpose. The effect of the Resolution, if carried out, would have deprived the plaintiff of a share of the profit, but I do not accept that Ms Saunders' purpose in passing the Resolution was to so deprive the plaintiff.

1. The case pleaded by the plaintiff is that the remuneration paid to Ms and Mr Saunders for FY2021 to FY2023 (Relevant Period) was excessive and that this was oppressive.
2. As set out in section H above, two key issues require consideration regarding the excessive remuneration allegation:

(a) Were the remuneration payments paid for the Relevant Period to Ms and Mr Saunders excessive?

(b) If the remuneration payments to the Saunders interests were excessive, does that constitute oppressive conduct?

K.3.1 Were the remuneration payments paid in FY2021 to FY2023 to Ms and Mr Saunders (or for their benefit) excessive?

1. At the outset, I accept the evidence from Ms and Mr Saunders that during the Relevant Period, they worked extremely long hours and under great pressure. I acknowledge that the unprecedented profits achieved by NPS during this time were substantially due to their hard work and dedication. In those circumstances, I do not consider it unreasonable that Ms and Mr Saunders received increased levels of remuneration in that period.
2. I consider this context to be important.
3. I will begin with setting out what Ms and Mr Saunders were paid -adjusted for certain elements derived from the Hare Report and the Sigston Report.
4. It appears that the parties agree that the following total gross remuneration was paid to Ms and Mr Saunders for the Relevant Period, noting that it was common ground that the management fees paid to the Lambert Family Trust were part of the overall remuneration of Ms and Mr Saunders:[49]

1. Answering the question as to whether the remuneration payments for the Relevant Period were excessive involves consideration of the expert remuneration evidence given by Mr Ritchie and Mr Sigston, noting that the context I refer to above has been factored into their opinions.
2. I prefer Mr Sigston's evidence to that of Mr Ritchie, for a number of reasons:

(a) I consider the Hare Report to be of some relevance to the Relevant Period. Although his opinion as to market remuneration and whether the payments to the Saunders were excessive or not does not cover the Relevant Period, Mr Hare's methodology and opinions are useful in my analysis of the Relevant Period. In my view and in general terms, the methodology in the Hare Report reinforces the Sigston Report and my preference for it over the Ritchie Report.

(b) I found the Sigston Report and the methodology in the Hare Report more persuasive and compelling than that contained in the Ritchie Report. I also found Mr Sigston's and Mr Hare's oral evidence to be more compelling than that of Mr Ritchie.

(c) While their opinions as to market remuneration rates for the period up to and including FY2020 differed somewhat, there were many similarities in the methods adopted by Mr Sigston and Mr Hare. Both had regard to benchmarking data, including those available on subscription databases, whereas Mr Ritchie did not. Both gave precise opinions as to amounts, particularly in their detailed spreadsheets, whereas Mr Ritchie did not.

(d) Importantly, Mr Sigston and Mr Hare were both of the view that short-term incentives were calculated as a percentage of the fixed remuneration package, rather than as a percentage of revenue, which was Mr Ritchie's approach. I accept that whether or not to award a bonus may be assessed by reference to performance indicators such as revenue growth or new contracts obtained, but I do not accept that this is the measure by which the bonus is actually calculated for executives in small private businesses. Mr Sigston and Mr Hare were much more compelling in their evidence in this regard than Mr Ritchie.

(e) In relation to Mr Hare's evidence, I have found his data relating to benchmark comparisons for CEO and operations manager remuneration helpful. In my view, Mr Hare's analysis - combined with Mr Sigston's evidence - provides a sound foundational basis for determining the reasonableness of Ms and Mr Saunders' remuneration.

(f) I accept the plaintiff's submissions comparing Mr Sigston's opinion with Mr Ritchie's, as set out at paragraphs 195 and 196 above, and that Mr Sigston's opinion as to reasonable remuneration is to be preferred. It was clear during the course of evidence that Mr Sigston's findings were underpinned by more robust analysis and complete data than those of Mr Ritchie. As noted above, Mr Sigston's opinion was based on his experience in the security industry dating back to 1994, informed by interviews with members of the security industry prior to the beginning of the COVID pandemic, and, informed by more robust and complete data provided by the 'Seek Talent' database - providing access to more than 5 million candidates. In comparison, Mr Ritchie's conclusions were based on incomplete instructions, not informed by any identified experience in the security industry and were not based on any relevant available data where an objective assessment of Ms and Mr Saunders' remuneration could be undertaken. Given this lack of data, Mr Ritchie was forced to rely on two publicly listed companies that were significantly larger than NPS. I agree with Mr Ritchie's own concession that these were 'not a great comparison.'

(g) I consider Mr Ritchie's methodology to be less sophisticated than the other expert remuneration evidence. Critically, Mr Ritchie conceded that he was less reliant on benchmarks and more reliant on a 'rule of thumb' based off his experience. He stated from the outset of his oral evidence that this process was different to the more sophisticated approaches adopted by Mr Hare and Mr Ritchie. In my view, the Ritchie Report was limited in providing a concrete company comparison to NPS. Mr Ritchie stated that information on comparative companies within Victoria of a similar size to NPS was unavailable to him, and consequently this was a limitation in the Ritchie Report with respect to the benchmarking and salary exercise.

(h) Furthermore, Mr Ritchie's ability to form a view regarding the reasonableness of Ms and Mr Saunders' bonuses in the Relevant Period was hamstrung by a lack of interviews or discussions with persons in the security industry that NPS operated within. Again, Mr Ritchie relied on his own experience to form a view regarding the reasonableness of Ms and Mr Saunders' remuneration - asserting that his previous advice and support to clients in the security industry helped him to formulate his views in the Ritchie Report.

(i) Mr Ritchie's justification for Ms and Mr Saunders' non-bonus remuneration and bonuses was attributed to a comparison with a Melbourne-based security company generating $257 million in revenue per year. Mr Ritchie contended that incentivising leaders to achieve greater revenue growth were important factors to consider in determining the reasonableness of Ms and Mr Saunders' remuneration during a period of uncertainty such as the pandemic. I do not consider Millenium to be a useful comparator at all: I agree with Mr Sigston's criticisms in that respect.

(j) The defendant's counsel identified some arithmetic errors in the Sigston Report for the Relevant Period. These were addressed by Mr Sigston in an open and honest way and I do not believe that these errors undermine the credibility of Mr Sigston's work. The errors were primarily in the summary section of the report and were readily conceded by Mr Sigston when pointed out to him, and the numbers in the body of the report were correct.

(k) Noting that the Sigston Report contained a statement that Mr Sigston did not agree with most of the substance of the Ritchie Report, the defendant's counsel also stepped Mr Sigston through a series of propositions derived from the Ritchie Report that Mr Sigston was asked to agree or disagree with. Those statements and Mr Sigston's responses follow:

Mr McAloon: Do you agree that executive bonuses offer the ability for organisations to remunerate employees for work of a type or value that may not have been contemplated when setting a base salary for a discrete set of tasks. Agree or disagree?

Mr Sigston: I agree with that.

Mr McAloon: Another proposition, do you agree that executive bonuses 18 offer a flexible remuneration option, yes or no?

Mr Sigston: Yes.

Mr McAloon: Next proposition, executive bonuses are a way of reducing key many risk, so crucial executives do not leave during a period of uncertainty. Agree or disagree?

Mr Sigston: Agree.

(l) The defendants' proposition is that these responses undermine Mr Sigston's opinion as they show that he does agree with some aspects of the Ritchie Report. I do not accept this. In my view, the statements stated by the defendant's counsel are mere generic and vague representations that do not address issues relating to executive bonuses not already canvassed in Mr Sigston's and Mr Ritchie's reports. Rather, the propositions merely act to reinforce generic business principles that businesses may adopt in determining discretionary bonuses. They do not directly address the specific circumstances of NPS in the present case or the question of appropriate market rates.

1. Most importantly in respect of the bonus-related remuneration for the Relevant Period, the Ritchie Report fails to adequately explain how Mr Ritchie got from his opinion that these were 'considerable' and 'above the acceptable and reasonable band', such that he would ordinarily consider them excessive, to his conclusion that they were reasonable. He gives reasons, as I have set out at paragraph 130 above, but nowhere does he explain, by reference to any objective considerations or market-based data, why those matters justify bonuses of the level which were paid, as opposed to something less than that. There is a gulf between the bonuses paid being considerable and above the acceptable and reasonable band on the one hand, and excessive on the other, that is just not adequately explained by Mr Ritchie. In my view, he moves from one conclusion to the opposite without an adequate foundation, such that I am unable to accept his opinion. I do not accept his conclusion that the bonuses paid to Ms and Mr Saunders for the Relevant Period were commensurate with what is reasonable and proportionate, irrespective of the extraordinary period in which they were paid.
2. From my analysis of the spreadsheets attached to the Hare Report and to the Sigston Report, Mr Hare's figures for market-based fixed remuneration packages were, for the high band, significantly higher than those of Mr Sigston. For example, for FY2020 for a CEO, Mr Hare's fixed remuneration package range was $374,000 at the high end, and $276,000 at the low end. On the other hand, Mr Sigston's fixed remuneration package range for that year was $280,000 at the high end, $272,500 at the middle, and $265,000 at the low end. Thus, Mr Sigston's low and middle figures were not that different to Mr Hare's low figure. Their figures for years earlier than that have much the same sorts of differences. Similar comments can be made as to their opinions in respect of market rates for operations managers.
3. Thus, I consider that there is not a great deal of difference between Mr Hare and Mr Sigston, except for Mr Hare's high-end figure. Mr Sigston's observations as to the inconsistency between Mr Hare's opinion for a market rate for a CEO as at July 2020 as expressed in the Hare Letter, as opposed to the opinion in the Hare Report, were put to Mr Hare by the plaintiff's counsel. Mr Hare explained this to my satisfaction: essentially, in 2024 when preparing the Hare Report, he had access to better data that allowed a more comprehensive assessment to be carried out.
4. I will come to the quantification of overpayment later, but for the purposes of reaching a determination as to whether the remuneration paid to Ms and Mr Saunders for the Relevant Period was excessive, I consider that the focus should be on the bonuses that were paid.
5. Given that I have accepted Mr Sigston's opinion as to the payment of short-term incentives in terms of the methodology to be used, which opinion is consistent with that of Mr Hare, there is simply no conclusion to reach other than that the bonuses paid to Ms and Mr Saunders for the Relevant Period were excessive. Taking the higher percentage of 30% for short-term incentives, whether that is applied to the Saunders' actual fixed remuneration packages for that period or for Mr Sigston's market range, the bonuses actually paid to the Saunders vastly exceeded what those would have been. For example, for FY2021:

1. From this table, one can readily see that Ms Saunders' actual bonus for FY2021 was excessive, to the tune of at least $1,971,671 if one takes the 30% short-term incentive on her actual fixed remuneration package (rather than Mr Sigston's market rate) and adds Mr Sigston's discretionary bonus, and then deducts that from $2,300,000. Using the same methodology, Mr Saunders' actual bonus for FY2021 is excessive, to the tune of at least $2,113,502.
2. The same methodology applied to FY2022 results in the bonuses paid being excessive, although not in the same amounts.
3. By way of comparison, I note that if I applied the same methodology to Mr Hare's market fixed remuneration package for a CEO, it would still produce a bonus which was considerably less than that actually paid. Mr Hare does not give a market figure for FY2021, but if one takes his high figure for FY2020, which is $374,000, and increase it by say 10%, this gives a fixed remuneration package of $411,400. Taking 30% of that, adding Mr Sigston's discretionary bonus of $200,000, and then deducting that from $2,300,000 results in a bonus that is excessive by $1,976,580.
4. In this case, the excessive bonuses are not explained or justified, for example, by fixed remuneration packages which are well below market rates. If the fixed remuneration packages were below, or well below, market rates, then there may be some justification for high bonuses for years where extraordinary results were achieved. Here, the fixed remuneration packages were, depending on whether Mr Sigston's or Mr Hare's market rates are preferred, over or at market rates.
5. Accordingly, on anyone's measure, the bonuses paid to Ms and Mr Saunders for the Relevant Period were excessive. This is so, even though the Relevant Period covers an extraordinary and unprecedented time, both for NPS and generally.
6. In my view, the defendants' position that if alleged overpayments are to be taken into account, then so too should historical underpayments does not fall for consideration here. Rather, it fits more within whether or not the excessive payments were oppressive and if so, what relief should be fashioned so as to remedy that oppression.

K.3.2 If the remuneration payments to the Saunders' interests were excessive, does that constitute oppressive conduct?

1. As set out in the preceding section K.3.1, the bonuses paid to Ms and Mr Saunders in the Relevant Period mean that the total annual remuneration paid to them for that period was excessive. I turn now to whether that constitutes oppressive conduct within the meaning of s 232 of the Act.
2. For the reasons set out below, the excessive bonuses paid to Ms and Mr Saunders in the Relevant Period are oppressive. Causing these payments to be made was conduct which was commercially unfair.
3. First, that the payments were made as a consequence of the Resolution does not mean that they were not oppressive. Given my finding that the passing of the Resolution was oppressive, it follows that I reject the defendants' submission that the bonuses paid to Ms and Mr Saunders were reasonable because they were made in accordance with the Resolution. That does not mean that I accept the plaintiff's submission that the acts done in accordance with the Resolution were invalid because the passing of the Resolution was invalid: I have expressly declined to make any finding as to the validity of the Resolution.
4. Second, the bonuses were paid to the Saunders in accordance with the Resolution that 'any profit' be paid to them. That is, a Resolution that had been passed as an incentive for them, particularly Ms Saunders, to remain in the business. They were not calculated by reference to market factors such as short-term incentives or even by reference to the information available to Ms Saunders at the time, being the Hare Letter. Rather, the bonuses were taken because funds were available.
5. Third, I accept that the bonuses were paid during an abnormal period of highly profitable trading by NPS and that during that time Ms and Mr Saunders worked incredibly long hours and had a great deal of responsibility placed on them and that they performed well under extreme pressure. This is the case, irrespective of the plaintiff's criticisms of the instructions given to or assumptions made by the defendants' remuneration experts as to the level of support given to Ms and Mr Saunders by other employees at a managerial level or by consultants. This context justifies an approach which does not focus on chasing down every last dollar, instead giving some leeway and generosity to the decision to make these payments. The excessive bonuses paid must be considered in this context when determining whether they were oppressive. However, I consider that the bonuses paid were so excessive that they go way beyond a generous and flexible approach which gives the defendants the benefit of the doubt. The bonuses were so excessive that they were oppressive.
6. Fourth, I accept that mismanagement or poor management does not constitute oppression, as submitted by the defendants. I also accept that courts should be cautious to second guess business decisions taken by those in charge of the company. The defendants submit that absent compelling expert evidence, the Court should not be satisfied that such commercial decisions were oppressive. I agree. However, here I consider that there is compelling expert evidence establishing that the bonuses paid to Ms and Mr Saunders for the Relevant Period were excessive, and by a large margin. In this case, payment of vastly excessive bonuses cannot be characterised as merely the product of mismanagement or poor management or decisions lacking a commercial basis.
7. Fifth, I agree with Owen J in Shamsallah that managers of the company who have been materially responsible for the development of the business and who take salaries that are high, but not excessively so, does not constitute oppressive conduct. But here, the remuneration paid to Ms and Mr Saunders is not just high, it is excessively high. In Shamsallah, Owen J went on to say that:

I am not suggesting that "hands on" directors can take, as salaries, whatever they like or whatever they think the company can bear and thus ignore the interests of persons whose interests are represented solely by invested capital.[51]

1. True it is that the plaintiff does not have any capital invested in NPS: Mr Holmes received the share in NPS for no consideration. However, that does not mean that his interests as a shareholder can be ignored. In the context of not paying dividends during the Relevant Period, when dividends had historically been paid up until that point, excessive remuneration paid to or for the benefit of shareholders working in the business is oppressive. This is so, irrespective of the fact that some of the profits were retained in the business.
2. I refer to the 'ultimate question' as considered in Shamsallah, as summarised at paragraph 228 above. In this case, the expert remuneration evidence from Mr Sigston and, to some degree, Mr Hare, establishes that the total remuneration paid for the Relevant Period was not just on the high side, but was 'entirely out of kilter with "the going rate"'. Therefore, the ultimate question as to whether the remuneration was so high as to amount to oppressive conduct must be answered in the affirmative. The defendants' reliance on the Ritchie Report to contend the opposite is not accepted, given that I have not accepted Mr Ritchie's opinion regarding the reasonableness of the bonuses paid.
3. Sixth, I accept, as I have already said, the context for the bonuses which were paid. Ms Saunders' belief that passing the Resolution and paying bonuses was necessary to keep her sufficiently motivated to continue working in the business can be accepted, however it does not follow that the payment of excessive bonuses was not oppressive. I accept that it was in the interests of NPS and its shareholders for the business to continue, but this does not justify what could have been a 'blank cheque' for Ms and Mr Saunders. The defendants' submission that the plaintiff benefited from the continuation of the business in another way as well, being its share of the rent payments from the York Street Property, do not justify the excessive bonuses which were paid.
4. Seventh, I do not accept that the excessive payments made for the Relevant Period are not oppressive, or that the oppression is somehow ameliorated, by reason of historical underpayments. It is important to note what it is that is being discussed here. These are historical because they refer to the period between FY2006 and FY2020; that is, the years prior to the Relevant Period. They are referred to as underpayments due to a comparison of the actual payments made to market remuneration for those years. They are not underpayments by reason of any entitlement to a greater amount which was not paid.
5. The defendants submitted that as a matter of fairness, if I take the overpayments into account, I must also take the underpayments into account. Whether I accept the Sigston Report or the Hare Report insofar as historical underpayments are concerned, the expert evidence is that there were underpayments in at least some years prior to the Relevant Period when compared to market rates.
6. I do not accept that historical underpayments act in anyway as a countervailing or counteracting factor to the present determination of what is reasonable or unreasonable in the circumstances before me. That is, taking into account the data and findings of Mr Sigston and Mr Hare, historical underpayments do not in any way justify a subsequent overpayment in later years.
7. This is particularly so given the evidence before me as to the rationale for the level of payments in previous years. In this regard:

(a) there is no evidence as to why Ms Saunders was paid what she was for the period FY2006 to FY2020. In the absence of such evidence, there is no proper basis for taking historical underpayments into account;

(b) Mr Saunders was not paid for the period FY2006 to FY2013 because he chose not to be paid. In that context, I fail to see how or why historical underpayments should be taken into account; and

(c) even after he began receiving payment for his work at NPS, there is no evidence as to why Mr Saunders' remuneration was set at the levels it was. The only evidence is that he decided he wanted to be paid after FY2013 due to what he regarded as a deterioration in the relationship between he, Ms Saunders, and Mr Holmes.

1. Thus, there is no evidence to suggest that the remuneration paid to Ms and Mr Saunders prior to the Relevant Period was set at levels that were anything other than their choice. There is no evidence, for example, that they only paid themselves what NPS could then afford. Evidence such as that may provide a basis for historical underpayments when compared to the market to be taken into account, but there is no such evidence here. In this regard, I reject the defendants' submission, as set out at paragraph 234 above, that historical remuneration levels to key staff fluctuated by reference to the prevailing circumstances. There is simply no evidence to support that submission - none of the witnesses gave evidence to that effect and there is no documentary evidence about it either. If the defendants' submission was based on an inference they wished me to draw, then that should have been stated and the evidence relied upon to support the evidence should have been identified. It was not.
2. In my view, it is not necessary to take into account the historical underpayments, which are underpayments only by comparison to market rates and for which there is no explanation or, in the case of Mr Saunders for the FY2006 to FY2013 years, were a positive choice by him. Taking that approach is not unfair in the circumstances of this case, and assessing commercial fairness in this case does not require them to be taken into account.
3. To the extent that there were overpayments in the period FY2006 to FY2020, these should not be taken into account. Only excessive payments for the Relevant Period are pleaded, which is one reason for not taking them into account. It is not necessary, in order to do justice between the parties, for them to be taken into account. The same reasons set out above for not taking into account historical underpayments justify not taking into account historical overpayments.

K.3.3 What is the quantum of the excessive remuneration for the Relevant Period?

1. While the fixed remuneration packages for Ms and Mr Saunders for the Relevant Period exceed the market rates in the Sigston Report, I do not consider them so high as to be oppressive. They were not so high as to be entirely out of kilter with the going rate. Put another way, if it were not for the level of bonuses which were paid for the Relevant Period, I would not regard the remuneration paid to them for the Relevant Period as oppressive.
2. That being the case, and in light of my findings in section K.3.2 above, I consider that the overpayments should be calculated by taking the difference between the bonuses paid and reasonable bonuses.
3. Reasonable bonuses should be determined by reference to short-term incentives at 30% of the actual fixed remuneration packages plus the full amount of discretionary bonuses in the Sigston Report. I have taken 30% as the applicable percentage for short-term incentives as it is the highest in the schedules in the Sigston Report and the Hare Report for CEOs, and the highest for COOs in the Hare Report. It is to be calculated as a percentage of the fixed remuneration package because I have accepted Mr Sigston's and Mr Hare's opinions in that regard, not Mr Ritchie's. For the reasons set out at paragraph 306 above, reasonable bonuses should be calculated at the high end of market ranges. Given that bonuses were not paid for FY2023, it is only the bonuses paid for FY2021 and FY2022 which are relevant.
4. The following table sets out the results of this approach in respect of Ms Saunders:

1. The following table sets out the results of this approach in respect of Mr Saunders:

1. The amount by which the bonus payments to Ms and Mr Saunders were excessive in FY2021 and FY2022 was $6,644,431.

1. I do not accept the defendants' submission as set out at paragraph 239 above. That matter was put to Ms Saunders in cross-examination, as I have described at paragraph 82 above.
2. The defendants did not contest the plaintiff's proposition that NPS had no obligation to Ms and Mr Saunders in respect of payment of historical underpayments. Rather, their position was that if the remuneration payments were found to be oppressive, then when it came to determining the impact of that on the valuation of NPS, as a matter of fairness, the underpayments should be factored into the calculation.
3. I accept the plaintiff's position that NPS is not liable to Ms and Mr Saunders for historical underpayments. Therefore, the recording of the accrued charges on NPS' balance sheet does not represent a genuine liability. I also accept the plaintiff's submission that the accrued charges were recorded with this litigation in mind: this is abundantly clear from Ms Saunders' own evidence.
4. True it is that where no payment has been made by NPS for the accrued charges recorded in the balance sheet, any prejudice may be theoretical. However, the recording of the accrued charges in NPS' balance sheet resulted in it being an inaccurate representation of the company's financial position. In my view, it created a widely inaccurate picture, whether it be the $2,954,855 figure, which is the one pleaded, or $4,450,000. Whether there were, or are, flow-on consequences for NPS, such as the effect of this on matters such as tax liabilities, was not in evidence before me or the subject of argument. Accordingly, I do not take the possibility of flow-on consequences into account.
5. I do not accept the defendants' submission that this case is akin to the circumstances in Hylepin v Doshay. In that case, the alteration to the share register was erroneous and based on a mistaken view. It was found not to be commercially unfair as it was both a mistake and no payments or commercial benefits were affected by it.[52]
6. In my view, in the circumstances of this case, the recording of the accrued charges in NPS' balance sheet was oppressive. It did not represent a genuine liability of NPS and was done as a consequence of this litigation in order to influence the valuation of the company. The amount of the accrued charges is significant, and I consider it to be commercially unfair to represent them as a liability of NPS when that is not the case.
7. However, on its own, the issue of the accrued charges does not give rise to any tangible remedy for the plaintiff. If the accrued charges are not treated as a true liability on NPS' balance sheet, then it will not impact upon the valuation of the company.

1. Apart from Ms Saunders' unchallenged oral evidence as to the rationale for and practice of paying dividends during Mr Holmes' lifetime, there was no evidence as to any dividend policy of NPS. I note that Ms Saunders' evidence was unchallenged, as Ms Lowson was not in a position to give contrary evidence, given her lack of knowledge. Neither party called NPS' accountant, who presumably could have corroborated (or not) Ms Saunders' evidence as to the practice of recording cash payments to Mr Holmes after 2005 against his loan account and then declaring dividends to match at the end of the financial year. It seems reasonable to assume that Mr Holmes agreed with this practice, as there was no suggestion that he did not.
2. The defendants seek to characterise the expectation as being that payments from NPS' cash reserves would be made to the plaintiff on an 'as needs' basis and treated as dividends, and that following Mr Holmes' death there was no reason to make such payments or declare dividends in respect of them. The defendants also submit that not paying a dividend after Mr Holmes' death was consistent with previous practice and was entirely justified. This was because there was no suggestion the plaintiff was experiencing cashflow or funding needs that needed to be addressed by paying a dividend.
3. The defendants' position that the allegation concerning non-payment of dividends is premised on the plaintiff having a reasonable expectation of receiving dividends is only part of the consideration required here.
4. Context is crucial here. Dividends had historically been paid, but after Mr Holmes' death, they were not. At the same time as the payment of dividends ceased, remuneration payments to Ms Saunders and Mr Saunders increased dramatically. The sole director of the company ensured that the interests associated with her - being herself, her husband, and Lambert Properties - received vastly increased payments when the profit of the company increased by unprecedented amounts, via remuneration payments and a management fee. By taking those increases in that way, rather than through dividends, or a combination of methods involving dividends, Ms Saunders and her interests benefited whereas the plaintiff did not. In this regard, the situation falls squarely within that described by Robson J in Slea (No 9) as set out at paragraph 201 above, and not within the description from the same case as relied on by the defendants and set out at paragraph 241 above.
5. It is the non-payment of dividends at a time of vastly increased remuneration payments to the Saunders' interests - payments which I have found exceeded reasonable remuneration - which means that the non-payment of dividends in this case is oppressive. I accept the plaintiff's submission at paragraph 200 above and consider that it aptly applies to what has occurred in this case.
6. I do not accept the defendants' submission that no shareholder was prejudiced by the non-payment of dividends after June 2020 because net profits were retained in NPS. True it is that any retained profits remain available to be declared as dividends in the future or will be reflected in the valuation of the company, such that shareholders would benefit from retained profits. But the defendants' submission misses the key point: it was net profits that were retained, that is, profits left after expenses (including the excessive remuneration) had been met. Accordingly, all shareholders did not share in profits net of reasonable expenses.

1. The plaintiff submits that the Court has a broad discretion as to the mode of valuation. The Court's task is to fix a price that is fair in all the circumstances having regard to the value the shares would have had, but for the oppressive conduct.[53] The price to be paid is compensatory in nature, aimed at redressing the wrong done, so the price is not confined to ordinary valuation principles and will not always reflect the real worth of the shares.[54]
2. To the extent that the defendants suggest that fair value requires some assessment of what is fair in the circumstances to both shareholders, the plaintiff submits that fair value is aimed at redressing the role and is compensatory. As such, the Court's task is to fix a price that will remedy the oppression, rather than conduct a balancing act of fairness between both shareholders.
3. The plaintiff submits that valuation is not a precise science and methodologies adopted by the expert valuers are merely guides to determining value.[55]

1. The plaintiff submits that the date of valuation ought to be 31 August 2024. It says that the general rule is that the date of valuation is a date that is comparatively recent to the date of the order.[56] Furthermore, the appropriate date for valuation is said to be as close to the date of the Court's judgment as possible.[57]
2. The valuation experts valued NPS as of 30 June 2023 and 31 August 2024. The valuation as of 31 August 2024 is higher than that of 30 June 2023, which reflects the increased value of the NPS. In addition, the valuations as of 31 August 2024, although some projection was used, was based primarily on actual financial data, as opposed to budgets.
3. The plaintiff submits that the only basis for adopting the 2023 valuation date, which would reduce the value of a share currently held to a date almost two years ago, is the expert valuers' evidence that the 2023 date is more robust. However, the valuers have still given sworn evidence of the value of NPS as of 31 August 2024, which is evidence that can and ought to be accepted.
4. The plaintiff further submits that the date of valuation should be motivated by what is fair. The fairest date of valuation is the date that is as close to the current date as possible. Otherwise, the Court would be ascribing an outdated value to the share, which is based on or guided by sworn evidence of expert valuers.

1. The plaintiff submits that the remuneration payments made to the Saunders were excessive and should therefore be paid back to NPS or added back to the balance sheet to the extent that they are excessive per the findings of Mr Sigston.

1. The plaintiff submits that Mr Sojka accepts that Ms Murone's adjustments for abnormal expenses and non-arm's length transactions are appropriate, including adjustments for COVID-related revenue and expenses, which are considered abnormal. This is required to arrive at an accurate value of the enterprise.
2. The plaintiff makes the following observations about the expert evidence at trial:

(a) Ms Murone and Mr Sojka agreed that an adjustment would be required in the event that the Court finds that the payments received by the Saunders were excessive; that is, because they were abnormal and do not reflect a commercial level of remuneration.

(b) Ms Murone gave evidence that, should the Court find that the accrued charges will never need to be paid by NPS, then the amount would not be a liability, so no adjustment for those would be made.

(c) Mr Sojka agreed that in the event the Court finds that there is an overpayment it will need to be added back as a surplus asset.

1. In the Joint Valuation Report, Mr Sojka made the following adjustments to his valuation of the plaintiff's share in NPS:

1. The plaintiff submits that Mr Sojka's adjustment to his 2023 valuation was after working through some of the key points with Ms Murone. Meanwhile, Mr Sojka's adjustment to his 2024 valuation was made because he had been provided with the actual financial performance of NPS, which had improved from that which was budgeted. The plaintiff submits that Mr Sojka's later opinion is based on more current date and is more accurate. Further, the maintainable earnings figure in Mr Sojka's first report was a blended number arrived at by weighting two different periods. Meanwhile, the revised number in the Joint Valuation Report was based on financial results that had subsequently been provided.
2. The plaintiff submits that, in oral evidence, Mr Sojka was taken through an exercise and asked to assume that there have been overpayments, and to ignore the minority discount. He was asked to do so as of 30 June 2023 and as of 31 August 2024. He said that tax would need to be accounted for. However, in its written closing submissions, the plaintiff submits that tax ought to be ignored because NPS will not need to pay tax on this amount, but Holmes Properties will need to pay tax on any ultimate buy out figure. Therefore, to take into account tax in the valuation process would be to tax Holmes Properties twice unnecessarily. Therefore, taxing it as part of the valuation process, which will not in fact be paid, and then taxing it again once paid to the plaintiff, is a double taxation.
3. The plaintiff submits that Mr Sojka was of the view that a minority discount ought to be applied. While the valuers agreed that a 15 per cent discount would be appropriate if applied, it is ultimately a legal issue. Delany J held in Joint v Program IT Pty Ltd that:[58]

The law is clear that if oppression is established, there should be no discount on account of the interest being a minority interest.

1. The plaintiff submits that his Honour cited the Full Federal Court decision in Dynasty Pty Ltd v Coombs[59] for this proposition. Delany J's view in Joint v Program IT has been quoted and relied on subsequently by Button J in Re Skytraders Pty Ltd (No 2),[60] and by Osborne J in ANIT Australia.[61]
2. The plaintiff submits that, if Mr Sojka's opinion is accepted, and Mr Sigston's opinion that the Saunders were overpaid $7,230,231 is accepted, and no minority discount is applied, the value would be as follows as of 30 June 2023:

Maintainable EBITDA: $1,000,000

Multiple: 3.375

Assessed Business Value: $3,375,000

Surplus Assets: $8,215,000

Overpayments: $7,230,231

Equity Value: $18,820,231

One-third Share: $6,273,410,33

1. The plaintiff submits that, if the same exercise is followed as of 31 August 2024, the following value results:

Maintainable EBITDA: $1,900,000

Multiple: 3.375

Assessed Business Value: $6,413,000

Surplus Assets: $6,387,000

Overpayments: $7,230,231

Equity Value: $20,030,342

One-third Share: $6,676,780.66

1. The plaintiff makes the following further observations and submissions about the expert evidence:

(a) Mr Sojka's surplus assets as of 30 June 2023 of $8,215,000 does not include an adjustment for overpayments or underpayments.

(b) Mr Sojka's assessed business value for 31 August 2024 takes into account underpayments of $2,900,000. If the Court were to find that there is no liability for underpayments, it would follow that the assessed business value as of 31 August 2024 would need to be increased by $2,900,000. That would place a value on Holmes Properties' share of $7,643,234.66.

(c) Ms Murone accepted that her valuation as of 31 August 2024 contained a margin for error. Ms Murone's evidence was that the valuation process for 31 August 2024 was much less rigorous than the process undertaken for the valuation as of 30 June 2023.

(d) In the Murone Report, Ms Murone arrived at a maintainable EBITDA figure of $800,000, which she revised up to $1,100,000 following receipt of NPS' actual, rather than budgeted, financial information. However, Ms Murone did not have an opportunity to test the actual financial information received, which could have been relevant to characterising the information as maintainable. Notwithstanding her inability to test the financial information by conducting interviews, it is not clear that it would have had an impact in any event. Ms Murone's evidence was that, in arriving at her valuation, she took into account actual earnings for FY25 but also considered the historical information. Further, Ms Murone considered future contract risk, which is reflected in the multiple that was selected in the valuation process.

(e) Ms Murone accepted that the valuation she can be most confident in is her most recent valuation for the 30 June 2023 date.

(f) In relation to abnormal expenses and profits in the COVID years, Ms Murone's evidence was that both profit and remuneration require an adjustment because they were abnormal.

(g) Ms Murone arrived at a valuation of NPS of $17,994,000, which means the plaintiff's share as at 31 August 2024 is worth $5,998,000.

1. The plaintiff submits that, given some of the problems that arose with Ms Murone's valuation during her evidence at trial, Mr Sojka's opinion ought to be accepted, but with an adjustment for overpayments (but not for taxation) and with no minority discount applied.
2. The plaintiff's submission is, therefore, that the fair value of its share is $7,643,234.66.

L.2 Defendants' submissions regarding value of NPS

1. The defendants submit that, in valuing the plaintiff's share in NPS, the role of the Court is to arrive at a fair price to be paid and it is not required to focus on traditional valuation concepts and methods. The price to be paid may not reflect the actual or real worth of the shares as it is intended to be 'compensatory in nature and is aimed at redressing the wrong done (the oppressive conduct)' and will usually take into account various adjustments to remove the effect of the oppression.[62]

1. The defendants submit that there is no firm rule by which the valuation date is selected; rather, the 'overriding requirement is one of fairness and justice to both parties in all the relevant circumstances of the case'.[63]
2. The defendants submit that the Sojka Report included a valuation of NPS as at 31 August 2024 while the Murone Report did not. As part of the Court-ordered conferral, Ms Murone sought to undertake a valuation by reference to that date. This was despite having not been engaged to perform that task and where the information sought by and provided to the experts for the purpose of the conferral was considerably more limited than had been provided to them for the purpose of the preparation of the Murone Report and Sojka Report respectively.
3. The defendants submit that, unsurprisingly, both experts confirmed that, of the valuations undertaken by reference to alternative dates, each had the most confidence in their revised 30 June 2023 valuations. Having regard to that evidence and the material deficiencies with Ms Murone's contribution to the Joint Valuation Report, any value attributed by the Court to NPS should be informed by the assessed value of NPS as at 30 June 2023 rather than 31 August 2024. Also supporting that approach is the fact that 30 June 2023 is proximate to when the proceeding was issued, such that its adoption as the valuation date reflects a relatively common approach to selecting a valuation date.[64]

1. The defendants submit that Ms Murone saw fit to make material value adjustments in her report by reference to the quantum of the remuneration payments despite recognizing that she is not a remuneration expert. In addition to increasing the EBITDA attributed to NPS for the purpose of her valuation on account of such adjustments, Ms Murone also increased the value of NPS' assets by adding the post-tax amount of the overpayments to the surplus assets.
2. The defendants submit that this aspect of Ms Murone's approach (which Mr Sojka did not adopt) accounts most materially for the differences in the valuations arrived at by them. The differential in maintainable EBITDA is a point of departure but the difference is relatively modest. The defendants submit that where doubt attends the reliability of Ms Murone's contribution to the Joint Valuation Report, Mr Sojka's calculation should be adopted.
3. For the reasons already set out in paragraphs 233 to 235 above, the defendants submit that if overpayments are to be added back as surplus assets for the purpose of valuing NPS, then these should be adjusted for historical underpayments. In other words, it would be the overpayments, less the historical underpayments, which would be added back as a surplus asset. The post-tax adjustment would also need to be made.

1. The defendants submit that the plaintiff's issuing of this proceeding was a regrettable pre-emptive step. As described in section I.1 above, Ms Saunders had actively sought to engage with the plaintiff regarding a separation of the parties' interests in NPS and the York Street Property. A meeting was proposed, cancelled and then never rescheduled. An approach via email by Ms Saunders to the plaintiff's director was rebuffed, only for this proceeding to be issued days later without notice.
2. The plaintiff seeks that Lambert Properties or Ms Saunders purchase its shares, rather than an order that NPS buy back those shares with a reduction of share capital (as provided for by s 233(1)(e)). The defendants submit that the plaintiff's selection of that form of relief can be assumed to be the more advantageous outcome for the plaintiff but will cast a burden upon Ms Saunders or her company.
3. The defendants submit that, in addition to issuing this proceeding pre-emptively, the plaintiff did not avail itself of the process for the transfer of NPS shares provided for in the SHA, including the specified method of valuation of such shares. Had that agreed process been engaged - in addition to a likely minority discount (referable to lack of control and quantified by Mr Sojka and Ms Murone at 15%)--the plaintiff could have expected to have secured a price for its shares that reflected a marketability discount (attributable to the relative lack of market for shares in a company such as NPS). For instance, under clause 6 of the SHA, if the plaintiff's share had not been purchased by Lambert Properties within the 30-day 'Offer Period', the plaintiff would have had a period of less than three months in which to transfer its share to a third party acceptable to Lambert Properties on terms no more favourable than those terms first offered to Lambert Properties. Ms Murone accepted in oral evidence that a marketability discount could be as high as 40-50%.
4. The defendants rely on Strategic Management Australia AFL Pty Ltd v Precision Sports and Entertainment Group Pty Ltd (No 3),[65] where Sifris J, in the course of fixing the 'fair value' of shares to be purchased under a buyout order, referred to 'the discount amount for the minority interest (20%) and the lack of marketability of the shares (35%) and any other adjustments considered desirable in the circumstances, in order to arrive at a fair value'. In undertaking an evaluative assessment, Sifris J concluded:

...the minority shareholding cannot simply be ignored. It is most unlikely that any purchaser of a minority interest, if there was one, would simply pay 40% of the net asset value. Although this may not strictly be relevant given the nature of the valuation, it is artificial, unrealistic and unfair to require a co-shareholder to pay what (on one view) is suggested to be a fair amount or value for the shares ($400,000) in circumstances where that amount could never (otherwise) be obtained.[66]

1. The defendants also rely on Leviston v PQ Management Pty Ltd, where Derrington J stated the following: [67]

Whilst it can be accepted that the Court is not in any way bound in the exercise of power under s 233 by the share valuation method agreed between the parties in a shareholders agreement, that is not to say that it is irrelevant. On the contrary, it may provide an indication of what the parties, when entering into the agreement, had considered was a fair method of valuing a departing member's interest in the company.

1. In Leviston, it was determined that the valuation of the plaintiff's shareholding in the subject company, for the purpose of formulating a buyout order, should 'roughly follow the price for which [they] would have been transferred if they [the shares] had been sold under the Shareholders Agreement'.[68]
2. The defendants submit that, taking into account the aspects of the plaintiff's conduct identified above and the nature of its shareholding (33.33% of the shares in a two-shareholder company that is governed by the terms of the SHA, including the restraints on share transfers imposed by clause 6), the Court should exercise its discretion to apply a material discount. This is based upon the market value being attributed to the plaintiff's share in granting a buyout order of the type sought by the plaintiff. While Mr Sojka has applied a minority discount of 15% in his assessments of value in the Joint Valuation Report, the quantum of that discount does not properly account for the above factors.
3. The defendants submit that if the plaintiff is to obtain an order for the purchase of its minority share in NPS, by means of this proceeding and without recourse to the process mandated by the SHA, fairness dictates that a discount of at least 30% be applied to the 30 June 2023 valuation by Mr Sojka (as revised in the Joint Valuation Report). Adopting that approach (applying a 30%, rather than 15% discount, to Mr Sojka's valuation), a fair price to be paid for the plaintiff's share in NPS is $3,526,000.

1. It is helpful for me to start with a summary of the parties' final positions regarding valuation.
2. The plaintiff contends for a valuation of its share in NPS in the amount of $7,643,234.66. On the other hand, the defendants contend that the plaintiff's share should be valued at $3,526,000.
3. The key differences between the parties are:

(a) valuation date: the plaintiff says 31 August 2024; the defendants say 30 June 2023;

(b) maintainable EBITDA: the plaintiff says this should be adjusted for excessive remuneration payments; the defendants disagree, but note that while it produces a difference it is not very large;

(c) overpayments: the plaintiff says these should be added back as surplus assets, without any adjustment for taxation or historical underpayments; the defendants say that overpayments should not be added back, but if they are, then those adjustments should be made; and

(d) minority/marketability discount: the plaintiff says there should be no discount; the defendants say there should be a 30% discount to account for the plaintiff's share being a minority share and for marketability reasons and as a consequence of the plaintiff's conduct.

L.3.2 Principles in respect of valuations for shareholder oppression cases

1. In Renex, I surveyed and summarised the authorities regarding the general principles regarding valuation in the context of shareholder oppression cases.[69] Without repeating all that here, in short:

(a) the Court's discretion to order a buyout is very wide;

(b) the Court's task is to fix a price that represents fair value in all the circumstances. The Court is not constrained by ordinary valuation principles;

(c) the purpose of a buyout order is to compensate the oppressed shareholder for the oppression which has taken place;

(d) if oppression has taken place, the Court is free to override an earlier agreement between the parties as to the manner of valuing shares for transfer purposes; and

(e) as a consequence of these principles, the price to be paid is aimed at remedying the oppression and will not always reflect the actual or real worth of the shares which might be obtained on the open market.

1. I also surveyed the authorities on the relevant principles regarding the valuation date in Renex.[70] Again, without repeating all of that here, in short:

(a) there is no definite rule as to the appropriate date for determining the value of shares for the purpose of setting a price for the buyout;

(b) the overriding requirement is one of fairness and justice to both parties in the circumstances of the case;

(c) the date on which proceedings commence is a date regularly used for valuation of shares in oppression proceedings; and

(d) other commonly used dates for valuation include as at the date of the order, immediately before the acts of oppression, and as at the date of the last balance sheet.

1. Given that the only valuations I have are as at 30 June 2023 and 31 August 2024, the task here is really to choose one of those dates as the valuation date.
2. In my view, the appropriate valuation date here is 30 June 2023. My reasons for this are set out below.
3. First, it is the valuation date closest in time to the commencement of this proceeding, which as noted above is a date regularly chosen in these sorts of cases.
4. Second, there is an arbitrariness to 31 August 2024 as a valuation date: it seems to be a product of the defendants' instructions to Mr Sojka, as he was instructed to prepare valuations as at 30 June 2023 and 31 August 2024. There is no explanation in those instructions as to the choice of 31 August 2024. Given that the letter of instruction to Mr Sojka from the defendants' solicitors is dated 13 September 2024 and the documents provided to him included NPS' management accounts as at 31 August 2024, I infer it was chosen by the defendants' solicitors by reason of its proximity to the date Mr Sojka would provide his report.
5. Third, both experts, but particularly Ms Murone, were more confident in their valuations as at 30 June 2023 than they were for 31 August 2024. Both thought their opinions for the earlier date were more robust due to the amount of information available to them for each of the dates.

1. Given my findings that the remuneration payments made to Ms and Mr Saunders for the Relevant Period were excessive, it follows that adjustments of the type done by Ms Murone to assess maintainable EBITDA must be made.
2. Since the assessment of maintainable EBITDA involves normalising various items in the actual results for what can be regarded as maintainable going forward, if the actual remuneration paid is abnormal then it needs to be normalised when undertaking a capitalisation of future maintainable earnings approach to valuation.
3. Given that Ms Murone's assessment of maintainable EBITDA involved an adjustment for commercial remuneration and Mr Sojka's did not, I prefer Ms Murone's method in respect of maintainable EBITDA.
4. I do not accept the defendants' implied criticism of Ms Murone's approach in this regard, as set out at paragraph 362 above. Ms Murone used the information available to her in the Hare Letter and later, when preparing the Joint Valuation Report, the expert remuneration reports. She expressly stated that she was not a remuneration expert and it was appropriate for her to use those materials as the basis for making the adjustments to the EBITDA.

1. As already set out earlier in these reasons at section K.3.3 above, I have come to the conclusion that the quantification of the amount by which the remuneration paid to the Saunders for the Relevant Period was excessive was the sum of $6,644,431. I regard this as the overpayment for the purposes of the valuation. For the reasons already expressed, I have rejected the defendants' proposition that the historical underpayments should also be factored into the calculation.
2. I accept the approach taken by Ms Murone and endorsed by Mr Sojka that when adding back the overpayment, it must be reduced by 25% due to taxation. The rationale for this was clearly and persuasively explained during the concurrent oral evidence, and I accept it. The plaintiff's submission to the contrary seems to me to be based on a fundamental misunderstanding of what and whose tax was being accounted for, and I reject the plaintiff's submission that I should not make any discount for taxation.
3. Accordingly, the amount which should be added back to surplus value by reason of the overpayment, adjusted for taxation, is $4,983,323 (that is, 75% of $6,644,431).

L.3.6 Whether to apply a discount for minority interest and/or marketability and/or the plaintiff's alleged conduct

1. I do not consider it appropriate or necessary for a discount to be applied to the plaintiff's share on the basis that it is a minority interest in NPS. I agree with the approach taken by Delany J in Joint v Program IT, in which he applied the Full Federal Court decision in Dynasty Pty Ltd v Coombs.[71] Where oppression has been found, it is generally not appropriate to apply a minority discount to the value of the minority shareholder's shares.
2. I reject the defendants' submission that the value of the plaintiff's share should be reduced by reason of its alleged conduct. As set out in section K.1 above, I have already rejected the defendants' submission about that conduct. Therefore, there is no basis to apply a discount for the allegations which I have rejected.
3. Given that oppression has been found, the defendants' criticism that the plaintiff seeks a valuation on a different basis to that contained in the SHA must be rejected. The Court is, and must be, free to override the SHA where it makes a finding of oppression.[72] To do otherwise risks not properly compensating the plaintiff for the effects of the oppression. Further, 'it would be unfair that the oppressed shareholder be bought out on the fictional basis applicable to a free election to sell the shares in accordance with the articles "or indeed on any other basis which involved a discounted price"'.[73]
4. There is another reason to reject the defendants' position that the plaintiff's share should be discounted by 30%. That is that the discount level chosen is completely arbitrary. Apart from the expert valuers' agreement that if there is to be a minority discount, 15% is reasonable, there is no evidence to support the defendants' position. The question posed to Ms Murone by defendants' counsel as to a marketability discount and her answer does not provide any real support for the defendants' position, particularly where it was only marketability that was put to her and not the plaintiff's alleged conduct as a basis for the discount.

L.3.7 The fair value to be paid for the plaintiff's share in NPS in the circumstances of this case

1. It is convenient to note at this juncture that I reject the plaintiff's submission that Mr Sojka's valuation, modified to add back overpayments and without any minority discount, should be preferred. In my view, the plaintiff's approach in this regard was an opportunistic attempt to increase the value of NPS and its share. Further, I do not accept the plaintiff's submission that Ms Murone's opinion was somehow diminished by the calculation errors identified during the trial, even though that submission aligned with that of the defendants. As already noted, the errors were identified, explained, and corrected. That does not undermine Ms Murone's adjusted figures.
2. In my view and in light of the above discussion, the fair value to be paid for the plaintiff's share in NPS in the circumstances of this case is as set out in the below table.

Sojka surplus assets as per Updated Joint Valuation Report + overpayments adjusted for taxation as per paragraph 389 above

1. I realise that the expert valuers indicated that further adjustments to those made by Ms Murone may need to be made to payroll tax and Workcover as components of maintainable EBITDA, depending on what the Court found in respect of the remuneration issue. Since Ms Murone had already factored those aspects into account, although the amount of remuneration she adjusted for was likely slightly different to what I have found, I do not consider any further adjustment for those items necessary. They are likely to be immaterial, and I was not given the method for calculating those components.
2. Accordingly, I find that the price to be paid for the plaintiff's share in NPS is $5,638,000.

1. It was common ground by the time of trial that if the Court found oppression, then a purchase of the plaintiff's shares was the appropriate remedy. By the time of oral closing submissions, this position had been further refined: if there was to be a purchase, the defendants' preference was for a buyback of the plaintiff's share by NPS, rather than a purchase by Ms Saunders or Lambert Properties. The plaintiff accepted this position. It would only be if the order that NPS buy back the plaintiff's share was not complied with that Lambert Properties should be ordered to buy it.
2. Accordingly, orders will be made that NPS buyback the plaintiff's share in NPS at the price of $5,638,000.
3. Therefore, there is no need for me to consider the alternative relief of winding up NPS.

1. For the above reasons, I have found for the plaintiff and NPS will be ordered to pay the plaintiff $5,638,000 for its share in the company.
2. The parties are to confer as to the form of orders to give effect to these reasons, including as to matters such as interest and costs.
3. By 4pm on 22 August 2025, the parties are to:

(a) provide my Chambers with an agreed form of orders; or

(b) if the form of orders are not agreed, each party's preferred form of order.

1. If paragraph 403(b) applies, the proceeding will be listed for 29 August 2025 at 10am for the making of final orders.

[1] As is common in cases of this type, the company is a party to the proceeding but has not played an active role in it. Where I refer to 'defendants' in this judgment, I am referring only to the first and third defendants.

[2] In this judgment, I will refer to Christopher Holmes as Mr Holmes and to his brother as Rob Holmes.

[3] This included a bonus of $1,075,000 referable to FY2022.

[4] He also gave an opinion about long term incentive plans, but concluded these were very rare for small proprietary companies.

[5] The plaintiff submits that it is not clear from Ms Saunders' evidence whether she reduced the salary by 3% each year going back to 2006 or started with the figures in the Hare Letter and increased by 3% for each year from 2006. The plaintiff submits that it would be incorrect to apply the latter as Mr Hare's figures were for reasonable remuneration as at July 2020, not 2006. I do not accept this submission, as I think Ms Saunders' evidence was clear: she applied the former approach.

[6] Noting that by the time of closing address, the plaintiff contended for Mr Sojka's valuation (modified so as to account for the overpayments) rather than Ms Murone's, which I will come to in a later section.

[7] This comprises $1,190,000 for the years 2006 to2013 when he was not paid at all, plus $471,932 for the years 2014 to2019.

[8] Their respective approaches to remuneration will be explained in more detail later.

[9] To assess normalised EBITDA, Ms Murone had reviewed the financials back to 2018.

[10] Section 234 of the Act sets out who can apply for an order under s 233 in relation to a company.

[11] Corporations Act, s 467(4).

[12] [2024] VSC 244, [93]-[97] (Renex).

[13] [2024] VSC 540, [346]-[351] (Lendly).

[14] Re SRW Nominees Pty Ltd [2019] VSC 547, [33]-[36] (SRW Nominees).

[16] In the matter of ANIT Australia Pty Ltd [2024] VSC 705, [344] (ANIT Australia).

[18] Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, 360 [176].

[19] Re Spargos Mining NL [1990] WASC 32; (1990) 3 ACSR 1, 44 (Spargos Mining).

[20] Knight's Quest Pty Ltd v Daiwa Can Company [2018] VSCA 349; (2018) 366 ALR 557, [130] (Knight's Quest).

[22] O'Neil v Phillips [1999] UKHL 24; [1999] 1 WLR 1092, 1102; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97, [422].

[23] Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152, [39(c)] (Tomanovic v Argyle).

[24] Donaldson v Natural Springs Australia Limited [2015] FCA 498, [248]-[249] (Donaldson).

[25] Peter Exton & Anor v Extons Pty Ltd & Ors [2017] VSC 14; (2017) 53 VR 520, 529 [34] (Extons).

[26] SRW Nominees, [42], [44]; Extons, [39].

[31] Relying on Knights Quest Pty Ltd, [130].

[32] Relying on Resource Equities Ltd (subject to deed of company arrangement) v Garrett [2009] NSWSC 1385, [95], [96].

[33] Shamsallah Holdings Pty Ltd v CBD Refrigeration and Airconditioning Services Pty Ltd [2001] WASC 8 (Shamsallah); French v Smith [2004] VSCA 207.

[34] Sanford v Sanford Courier Service Pty Ltd (1986) 10 ACLR 549; Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; Roberts v Walter Developments Pty Ltd (1992) 10 ACLC 804 and on appeal (1992) 10 ACLC 1734; Shum Yip Properties Development Ltd v Chatswood Investment and Development Co Pty Ltd (2002) 40 ACSR 619; 166 FLR 451; [2002] NSWSC 13; Cooke v Fairbairn [2003] NSWSC 232.

[35] Re City Meat Co Pty Ltd (1984) 8 ACLR 673; Slea Pty Ltd v Connective Services Pty Ltd (No 9) [2022] VSC 136 (Slea (No 9)), discussing Roberts v Walter Developments Pty Ltd (1997) 15 ACLC 882, 903 - 904. See also Reid v Bagot Well Pastoral Co Pty Ltd [1993] SASC 4323; (1993) 12 ACSR 197, 206.

[36] Slea (No 9)), [593] (citations omitted).

[37] [2008] VSCA 210, [136]-[137] (citations omitted).

[39] [2024] VSC 320, [66] (Sleeping Duck).

[40] Shirim Pty Ltd v Fesena Pty Ltd [2000] NSWSC 878; (2000) 35 ACSR 221, [71] (Shirim); Donaldson, [250]; Ananda Marga Pracaraka Samgha Ltd v Tomas (No 6) [2013] FCA 284; (2013) 94 ACSR 199, [471]; Tomanovic v [2010] NSWSC 152, [41].

[42] Barjeba Pty Ltd v Bogg [2023] WASC 232, [115], citing Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1, 26 and Joint v Stephens [2008] VSCA 210, [138].

[46] [2021] FCAFC 201, [205] (Hylepin v Doshay).

[47] Slea (No 9), [593] (citations omitted).

[48] While s 254T has been in a different form since 2010 to its predecessor, which provided that a dividend could only be paid from the company's profits, now a company must not pay a dividend unless certain conditions are met (including a surplus of assets over liabilities, fairness and reasonableness to shareholders as a whole, and the payment must not materially prejudice the company's ability to pay its creditors).

[49] In this regard, I rely on the defendants' solicitor's instructions to Mr Ritchie, CB 115-116, and on the plaintiff's solicitor's instructions to Mr Sigston, CB 186-187, which on this issue contained identical information. In addition, I have included an amount on account of provision of/payment of motor vehicle as set out in the Sigston Report (CB 193-194), noting that he has adopted the amounts for those set out in the Hare Report. As there is no evidence as to how the Lambert Family Trust dealt with the management fees as between Ms and Mr Saunders, I consider it reasonable to adopt Mr Sigston's approach of splitting those equally between them.

[50] It was common ground that the bonus of $1,075,000 paid to Ms Saunders in FY2023 was referable to the FY2022 year, so I have included it as a payment in respect of FY2022. This is consistent with the Sigston Report.

[53] Re Scientific Management Associates Pty Ltd [2019] NSWSC 1643, [309] (Scientific Management); ANIT Australia, [434].

[54] Scientific Management, [309]; Smith Martis Cork & Rajan Pty Ltd v Benjamin Corp Pty Limited [2004] FCAFC 153; (2004) 207 ALR 136 (Smith Martis Cork); Shirim.

[55] Scientific Management, [309]; In the matter of OTS (Australia) Pty Ltd [2017] NSWSC 175, [59].

[56] Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 84 ACSR 121; [2011] NSWCA 104, [298].

[57] Mopeke Pty Ltd v Airport Fine Foods Pty Ltd (2007) 61 ACSR 395; [2007] NSWSC 153, [94]-[96].

[58] [2020] VSC 867, [4] (Joint v Program IT) (citations omitted).

[59] [1995] FCA 1447; (1995) 59 FCR 122, 145 (Dynasty v Coombs).

[60] [2022] VSC 523, [36].

[63] Foody v Horewood [2007] VSCA 130, [37].

[65] [2017] VSC 35, [44].

[66] [2017] VSC 35, [48].

[67] [2022] FCA 787, [165] (Leviston).

[69] Renex, [639]-[642], referring to Smith Martis Cork, [70]-[78] and to Wain v Drapac (No 2) [2013] VSC 381, [39].

[71] Dynasty v Coombs, 145. See also Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667, [66]-[71]; ANIT Australia, [437].

[73] Smith Martis Cork, [78], citing Nourse J in Re Bird Precision Bellows Ltd [1984] Ch 419, 430.