12 I considered that decision and the other English decisions at some length in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688, 743, where I said, quoting Wilton-Davies' case and omitting reference to authority:
"The ordinary order is that the majority buy out the minority ... . There have been orders made that the majority sell their shares to the minority, but this has been considered to be exceptional ... "
13 I then said:
"Ordinarily, the court will not order an oppressed plaintiff to sell his shares against his will. It may [be that the court will] allow the plaintiff to elect to continue to live under the defendant's regime or sell his shares to the majority at valuation."
14 In the present case, as I have indicated, the proposal by the first and second defendants is that they should buy the plaintiffs' shares. The proposal by the plaintiffs and the third defendant is that the third defendant should buy the second defendant's shares at valuation.
15 The second defendant does not want to sell his shares. He says his unit has been his home for the last seventeen years and he does not want to sell.
16 The first plaintiff says that he would prefer not to sell. He says that it is an investment unit which he has purchased to enjoy quite a good income and in due course was hoping to pass the property to his grandson by his will, though, of course, that purpose may change as time goes on. He is prepared to sell, but is certainly an unwilling vendor, and he is also concerned about the capital gains tax that will be payable on a sale.
17 As to capital gains tax, I have been given some figures and I can estimate others in such a way as to be close to the mark without having to send the case back for further evidence.
18 If the value of the plaintiffs' shares is $340,000, the capital gains tax payable by the plaintiffs will be approximately $41,000. If the value is $300,000, it will be $20,000, with approximately $5,000 extra tax for every $10,000 value above $300,000. The plaintiffs say that they should not have to pay that capital gains tax and an order should be made adjusting the value of the shares so that in effect the oppressor pays for a sale which he has forced by his conduct.
19 The first decision to be made is who should buy and who should sell.
20 I have set out what is, on the authorities, the general principle that is to be followed. Mr Enright has submitted that the court is not bound to do that and that submission is, of course, correct but, as I have said, it is appropriate to follow the general course of authority unless there is some special reason not to.
21 Mr Enright says that this is a special case. He says there is no case in the reports that any of us have been able to find where a home unit company has been the subject of an oppression suit. It is a particular class of company in which the owners or occupiers need to work fairly closely together. None of the parties really want to sell, though on the other hand none of them are sufficiently interested in coming to some management compromise which would allow them to retain their property and to live together.
22 There are instances in the authorities where the majority has been ordered to sell its shareholding. The only reported authorities are the decision of Harman J in Re A Company; Ex Parte Shooter [1990] BCLC 384 and the decision of Rattee J in Re Brenfield Squash Racquets Club Ltd [1996] 2 BCLC 184.
23 In the first of those cases the company ran a football club. The shares were of nominal value. The real power in holding the shares was the voting power and control. The oppression was the repeated failure to hold annual meetings and to lay proper accounts before the members, and the order that was made at p 395 was to order the controlling shareholder to cease to be the controlling shareholder in the club. That was a very exceptional case and little can be done, even by analogy, to relate it to the present case.
24 I find the decision in Brenfield a little hard to understand, but it would seem that one of the factors which triggered the decision was the fact that the pre-emption provision in the shareholders' agreement had already been triggered. In spite of the submissions of Mr Enright and, indeed, the submissions of Mr Wilson for the plaintiffs, I do not think that the present situation is so exceptional that I should depart from the general approach. This approach is consistent with the whole policy of s 246AA that what the oppressed is entitled to is to be released from the company if he finds that because of the opponent's oppression he or she can no longer have their capital invested in it.
25 Accordingly, the proper order is that at his option, to be exercised within, say, twenty-eight days, the second defendant or his nominee must purchase the plaintiffs' shares in the capital of the first defendant at a value to be fixed by the court.
26 The next question is what is the value of the shares.
27 The court has received the evidence of two land valuers, Mr Carroll, on behalf of the first and second defendants, and Mr O'Neill, on behalf of the plaintiffs. Neither valued the shares. Both made the assumption that the value of the property which the company owned was the sum total of the value of the four flats. A moment's thought can see that this is not necessarily a correct assumption, because we just do not know whether the site is being used to its maximum advantage. It may be, for instance, as apparently is the case with other units in the same street that multi-storey blocks are permitted which have some harbour views and if there is a harbour view the value of the unit increases. Both valuers have merely approached the problem by valuing each of the existing units in the existing building. However, that being the approach I really have to act on that sort of evidence, unsatisfactory though it is.
28 Mr O'Neill puts the value of unit 4, which the plaintiffs own, as about $340,000. Mr Carroll puts it nearer $300,000. Both have common comparable sales, though Mr Carroll has a greater list of comparable sales than Mr O'Neill.
29 Looking at the comparable sales, first I think I should on Mr Carroll's evidence, which I accept, make a discount as against the sale of a strata title unit for the fact that this unit is held under company title. Again I take into consideration the difference between a unit with a harbour view and one with a harbour glimpse. On this basis, it would seem to me that the value of unit 4 is nearer $300,000 than $340,000. The comparable sales really seem to me to work out at somewhere between $305,000 and $310,000 when one makes the adjustments. Accordingly, I will find that the fair value is $310,000.
30 The next issue is whether having found that price I should add on another $25,000 for capital gains tax and also a further amount because Mr and Mrs Fedorovitch have to pay the legal costs of selling the existing unit and the legal costs and stamp duty of buying a replacement unit. At the moment I will adopt $20,000 as that cost.
31 So far as capital gains tax is concerned, there is no direct authority. In compensation cases the general attitude appears to be that the tax is not part of the compensation; see for instance Joondalup Gates Pty Ltd v Minister for Lands (1996) 33 ATR 327, a decision of Parker J of the Western Australia Supreme Court with assessors sitting as the Western Australia Compensation Court, and see also Russellan Pty Ltd v Roads and Traffic Authority (1992) 75 LGRA 263.
32 However, I believe the case that comes closest to the present is the decision of Rolfe J in Provan v HCL Real Estate Ltd (1992) 24 ATR 238. In that case the plaintiff was awarded damages for breach of fiduciary duty, he would have to pay capital gains tax on that award and Rolfe J held that it was proper that the defendant pay the tax as part of the damages.
33 Mr Davidson for the first and second defendants, submits that Provan's case is distinguishable because that was a case of damages, whereas the present does not involve any compensatory factor, it is merely a case of valuing shares.
34 Mr Davidson puts that either as a matter of jurisdiction or alternatively a matter of discretion, the court can only value the shares by taking the market value plus adjustments for the fact that the majority's conduct has lessened the value that they otherwise would have (see eg Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606), or alternatively where the oppressed has been forced to sell at the bottom of the market (see Re Bodaibo Pty Ltd (supra)).
35 I am not at all convinced that there is no jurisdiction to value the shares otherwise. The order set out in s 246AA(2)(e) leaves it completely open as to what the purchase price should be. However, I do not believe that the proper approach to the section is to include in it any element of compensation. Although one can adjust the price for the conduct of the oppressor, or perhaps in the way Vincent J approached the matter in Bodaibo, one cannot or should not give compensation under the guise of an enhanced purchase price.
36 Accordingly, I do not consider that I can add to the value of the shares a factor for capital gains tax.
37 If I had been able to do that, the question would be whether I should have allowed the whole of the capital gains tax or only a proportion. Whenever the Fedorovitchs sell this unit they will have to pay capital gains tax. The unit was bought as an investment unit. Although there is no current intention to sell, it may well be that circumstances will force a sale in the next ten years, and there may have to be tax payable when the property is realised in the estate. Accordingly, all that is really happening by the capital gains tax being paid now is that it is being paid ahead of time. Had I allowed capital gains tax I would have reduced the amount by two-thirds to compensate for those factors, and so on the figures that I have worked out would have allowed something like $9,000.
38 I think the other head is also a matter for compensation and not for adding on to the value of the shares. Mr Wilson submits that in cases like Kontos v Roads and Traffic Authority (1992) 75 LGRA 218 the expenses of acquiring a substitute property were allowed, but that is distinguishable on the basis that that is a compensation case rather than the present, which is not a compensation case.
39 Accordingly, the fair value of the shares is $310,000.
40 That only leaves the question of costs. In my reasons of 14 May I said that my inclination was that indemnity costs should be payable because the whole of the problem had come about through Mr King's reaction to a series of minor incidents. I have now heard Mr Davidson of counsel. He submits that not all the main points originally made by the plaintiffs were pressed at the trial. He also puts that the late involvement of Dr Lopacinski as a party last Monday has wasted costs.
41 Dealing with that last matter first, I really think that one of the Lopacinskis should have been a party from the beginning, but I do think that the costs this week have not really been the fault of the first and second defendants and that after 14 May everyone should bear their own costs, especially in view of the way in which the plaintiffs and the third defendant have failed in their main submissions.
42 However, despite what Mr Davidson said, I still believe that the proper order for costs up to 14 May is that the second defendant should pay the plaintiffs' costs on the indemnity basis. The exhibits may be returned.