Supreme Court of NSW|1998-09-09|Before: Young J

Fexuto Pty Limited v Bosnjak Holdings Pty Limited Matter No 3799/97 [1998] NSWSC 413 (9 September 1998)

FEXUTO PTY LIMITED v BOSNJAK HOLDINGS PTY LIMITED

The Supreme Court of New South Wales Equity Division

The plaintiff essentially is a company controlled by Mr Bob Bosnjak. The first defendant, to which I will refer as "Holdings" or "the Company" is the holding company of a series of companies who collectively will be referred to as "Westbus". The principal business of Westbus is to operate buses and coaches. The map in evidence shows that Westbus has almost exclusive rights to operate buses in the area which can be described approximately as bordered by the Nepean River in the West, North Richmond in the North, Parramatta in the East and South Liverpool in the South.

The plaintiff basically seeks relief against oppression by the majority interests in Holdings. In these reasons, for brevity, I will use the term "oppression" as connoting the full phrase "conduct which is oppressive or unfairly prejudicial or discriminatory against a member or members or contrary to the interests of the members as a whole", the phrase that is actually employed in s 260(1)(a) of the Corporations Law.

It is convenient to deal with the matters requiring decision under the following heads.

3. Was there oppression in all or any of the following:-

Up until relatively recently, the shares in Holdings were held as to two-sevenths by the plaintiff, two-sevenths by the fourth defendant Feyama Pty Ltd, two-sevenths by the fifth defendant, Fexule Pty Ltd and one-seventh by Bosnjak Group Pty Ltd (Group). Recently the Feyama and Fexule shares were transferred to the sixth defendant National Bus Company Pty Limited (NBC). NBC plays a considerable role in these proceedings as will appear below.

Although it is necessary to look at the control of Fexuto in fuller detail later in these reasons, essentially it is a company controlled by Mr Bob Bosnjak. Feyama is a company controlled by Mr Jim Bosnjak. Fexule is a company controlled by Mrs Carol Bosnjak.

In order to understand the dramatis personae and the general background to this case, it is necessary to set out briefly the Bosnjak family history. That history is a good illustration of how a family can come from overseas without assets and with sheer hard work and determination develop the largest private bus and coach operation in Australia.

Mr Simun Bosnjak was born on 27 September, 1904. He came to Australia in 1938. After a while, Simun Bosnjak purchased a farm at Bonnyrigg. In November, 1947, the rest of the family was able to migrate to Australia and join Simun. At that stage the rest of the family consisted of Mrs Anda Bosnjak who had been born on 3 November, 1913 and had married Simun in Croatia, John Bosnjak who had been born on 22 April, 1935 and Bob Bosnjak who was born on 2 June, 1938.

After the family settled in Bonnyrigg, Slavko James Joseph Bosnjak, known as Jim, was born on 31 October, 1948.

In due course, Bob married Dragica and they have one child, Sandra. John married Carol. They have a child, Debbie who is employed by the family business. John died suddenly on 26 July, 1979 and Carol succeeded to his property. Jim married Gloria and they have four children Simon, James, Marie and Julie.

Simun Bosnjak died shortly after John on 27 October, 1979. Anda Bosnjak died on 31 October, 1992.

After her husband's death, Anda lived with Jim and Gloria and their family.

Simun Bosnjak left his estate to Anda. I will deal with the issues that arise under Anda's will in section 3(c) of these reasons. It is sufficient for present purposes to note that under the will as admitted to probate, the residue of her estate which included the control of one-seventh of the shares in Holdings passed to her grandsons, the two sons of Jim, Simon and James.

In October, 1995, Simon and James commenced proceedings to compel the transfer of Anda's interest in Holdings to them. Bob countered by bringing proceedings to revoke the probate on the ground that the will was the result of some undue influence. Those proceedings are still pending.

The history shows that the Bosnjak family's first foray into the bus industry was when Simun Bosnjak purchased the run from Edensor Park to Canley Vale from Cecil C Prowse for $30,000 in 1955. This acquisition included five buses and the Edensor Park Bus Depot which was on a three-quarter acre block of land on which a fibro house had been built. In 1966 Simun and Anda Bosnjak purchased two and one quarter acres directly opposite the Edensor Park Depot and constructed a home on that block, now known as 1 Bosnjak Avenue, Edensor Park into which they moved in 1967.

The Company purchased the Parramatta Bus Company in 1963 for $170,000 which included 28 buses and real property at 552-560 Church Street, North Parramatta which then was used as a bus depot.

Some insight into the then situation of what was to become Westbus can be gleaned from the report in Bosnjak's Bus Service Pty Ltd v Commissioner For Motor Transport (1970) 92 WN (NSW) 1003. This case deals with the conflict between the original Bosnjak service then numbered as Route 45 with a route operated by Calabro Bros, Route 40 from the Mulgoa Road to Cabramatta Station.

On 1 May, 1974, the family purchased the business run by W J Bale & Sons Pty Ltd at Penrith for about $465,000. The purchase included 28 buses and a depot on one acre in Mulgoa Road, Penrith.

In 1976, the Company acquired Fairlane Bus Service Pty Ltd of Fairfield for $375,000. This included 14 buses, but no land.

In 1976, the Company purchased 7.5 acres of vacant land at Northmead. This became the Northmead depot. The Company's Parramatta depot was transferred to Northmead and the Parramatta land redeveloped but retained by the Company. The head office was also moved to Northmead.

In 1981, the Company purchased some bus runs between Parramatta and Smithfield from Western Roads Bus Service Pty Ltd for $275,000.

In 1983, Bowman's Bus Service Pty Ltd was acquired for $2,500,000. The purchase included 29 buses and the St Marys Depot. The Bowman company's name was changed to Westbus Pty Ltd and thereafter this was the company that owned the bus runs and the buses.

In 1988, Windsor-Richmond Bus Service was purchased for $3,000,000 approximately. The purchase included 44 buses and the Windsor depot on 5 acres of land in Thornley Street, Bligh Park.

In January, 1989, Toongabbie Bus Service was purchased. Bob Bosnjak was against this acquisition because he said the Company's debt was too high. The purchase was to be funded out of selling buses and leasing them back from the bank. Nonetheless, the purchase proceeded on the votes of Bob and Carol Bosnjak. The cost was $3,300,000 and the purchase included 33 buses and the Seven Hills Depot. Bob Bosnjak accepted the majority's decision on the acquisition, but he never actually acquiesced in it.

In May, 1989, the owners of Calabro Bros Bus Service indicated that their company was for sale. Jim Bosnjak wished to acquire the company. Anda Bosnjak expressed the view that this company should be acquired as it had been a thorn in the flesh of the Bosnjaks for years. Bob Bosnjak opposed the acquisition. He did this for three stated reasons, first he considered that a continuing history of family disputes meant that rather than acquiring assets, there should be a split of assets between family members, secondly, he considered that the Company's debt was already too high, and thirdly, he considered that the purchase price of $7,000,000 was excessive.

The purchase of Calabro Bros is said by the defendants to have been authorised at a board meeting held on 29 May, 1989 at which only Anda and Bob Bosnjak were present. Jim Bosnjak was not present. He was actually in hospital, but had purported to appoint Anda as his proxy. This, of course, he had no power to do. The minutes tendered by the defendants state that a decision was made to proceed with the purchase and then Bob left the meeting. Bob denies that there ever was such a meeting. I deal with this "meeting" when I review the evidence in section 2 of these reasons. As I there indicate, there must be extreme doubt as to whether there ever was such a meeting.

However, for historical purposes, this matters little because further meetings were held at which Jim and Carol were present and Bob absent, when the deal with Calabro Bros was confirmed. Bob never changed his mind about the purchase. However, the effect of the purchase was that the Company obtained 45 buses and the Bonnyrigg Depot. The Bonnyrigg Depot was close to the Edensor Park Depot and, in due course, the route buses formerly garaged at Edensor Park were moved to Bonnyrigg.

In 1992, Holdings purchased ten acres of land at Wetherill Park with the intention of replacing the Bonnyrigg Depot in due course.

In late 1992, Holdings purchased land at Arncliffe for a depot and offices. This depot services the Coach Division of the Company, being conveniently located near Sydney Airport.

In 1994, Holdings purchased certain bus runs from Richmond Bus Service for $400,000. No buses or land were included in this purchase.

In addition to the matters I have listed, at some stage, the Company commenced operating tourist coaches in London. Recently, it has established new services from the Hills District to Sydney and Milsons Point along the M2 Motorway.

Thus from one bus run in 1955, the Company by 1994 had become the largest private bus company in Australia with about 400 buses and coaches operating from six depots.

John and Bob Bosnjak worked in the bus business from 1955. Bob worked on cleaning the buses, doing some mechanical work and acting as conductor until he reached 21 and could obtain a driver's licence for buses. Bob worked long hours for little financial reward.

Holdings was incorporated on 19 October, 1960. Up until 19 September, 1986, it was named "Bosnjak Bus Services Pty Limited". It currently has 11 subsidiary companies. These do not include Group.

The business of Westbus should be more closely defined. The business is principally the operation of route buses that link major suburban centre, buses that feed railway stations, buses to take children to school, buses and coaches to take schoolchildren on excursions, railway replacement services, tourist coach services and the holding of property including bus depots. For a while the business included the building of bus bodies using a company, Smithfield Bus and Coach Works Pty Ltd, but this business was sold in 1982.

There is little evidence as to what percentage of the business falls under which head. However, Mr Mostyn the Chief Executive Officer of the Company gave evidence that the school business was about 40% of the total business. There was also some suggestion that the services that operated out of Penrith accounted for about two-sevenths of Holdings' business.

Exhibit PX777 was a series of examples of contracts pursuant to which the Company operates its bus services. These contracts are headed "New South Wales Department of Transport. Commercial Service Contract No...".

A typical example is contract R027 which is an agreement made between the Director General of the New South Wales Department of Transport and Westbus Pty Ltd made 6 September, 1996. It recites the statutory duty of the Director General under the Transport Administration Act, 1988 to ensure the provision of safe, efficient, adequate and economic passenger services and that Westbus has agreed to provide such services. The contract then specifies that for five years, Westbus has the exclusive right to operate regular passenger services and school services in the area specified in the attached map with certain exceptions. The contract is assignable, but only with the consent of the Director General which consent is not to be unreasonably withheld. There is a right of renewal provided that the service has been satisfactory.

The schedules to the contract set out the fares to be charged, the frequency of service required, the designated routes (in this case Parramatta to Toongabbie, Blacktown to Seven Hills and Seven Hills to Kellyville routes, 700, 702, 705, 708, 709, 710, 713, 714, 715, 717 and 718) plus school services.

Returning to the history of Westbus, Holdings seemed to work well up until 1988. Between 1979 when Simun died and 1988, the management and direction was provided by Bob and Jim Bosnjak. Bob always considered himself to be a "hands on manager" and was proud of it.

Whilst Simun or Anda Bosnjak were alive, there was a family dinner at the parents' home each Sunday. These dinners included discussion as to how the business was going. The dinners became less cohesive after the first appointment of Carol Bosnjak to the board.

The problems appear to commence on 12 September, 1988. On that date, Carol was appointed a director. Bob says that that proposal was not previously discussed with him. He had two principal objections. First, that Carol was not a real member of the family as she was not a Bosnjak by blood. Secondly, the move was seen as the beginning of the process of sidelining Bob from management. Up until then, Bob reckoned that all decisions were made by Jim and himself and things prospered. However, with Carol joining Jim, Bob was in a minority and Jim's will always prevailed. Bob's evidence traces through how this state of affairs continued or was exacerbated through to the present day.

The proceedings were commenced by summons filed on 28 August, 1997. Pleadings were ordered and various editions of a statement of claim were filed. The latest is the second further amended statement of claim. I will simply refer to this latest edition as the statement of claim.

The plaintiff, Fexuto primarily seeks a declaration that the affairs of Holdings are being conducted in a manner which is oppressive and unfairly prejudicial to its interests and to those of the members of Holdings as a whole, contrary to section 260 of the Corporations Law.

The statement of claim also seeks various subsidiary orders, the most significant of which (using the paragraph numbers employed in paragraph 122 of the statement of claim) are:-

(xvi) An order that Fexuto purchase the shares formerly held by Feyama and Fexule; and

(xviii) An order that the assets and liabilities of Holdings and its subsidiaries be split up and returned to the shareholders in a manner considered to be just and equitable to the Court.

I should note that there is also a claim in paragraph 121 of the statement of claim that because Holdings is controlled by Jim and Carol, Fexuto may also mount a claim for misfeasance to claim compensation for and on behalf of Holdings. This matter did not figure prominently at the trial, being subsumed in the claim under s 260(2)(g) of the Corporations Law.

In their defence, the defendants deny oppression and say that any predicament in which the plaintiff finds itself is a result of Bob Bosnjak's conduct. However, they say that should oppression be found, the appropriate order is that they purchase Bob Bosnjak's shares at the appropriate price.

Up until the first day of the trial, the Company, the first defendant, appeared by Mr R R Stitt, QC and Mr A P Coleman of counsel instructed by Messrs Freehill Hollingdale & Page. The first defendant was a vigorous litigant during the interlocutory stages of this case. On the first day, Mr Stitt, QC announced that the first defendant would only take a watching role in the proceedings.

The other defendants appeared by Mr Rayment, QC, Mr Pembroke, SC and Mr Stevenson instructed by Messrs Hunt & Hunt. These defendants (to whom I will refer simply as "the defendants") vigorously opposed the plaintiff's application.

Mr Ellicott, QC, who appeared with Mr Drummond and Mr M Jones, for the plaintiff, opened the case by saying that there were a large number of incidents which, when added together, made a case of oppression. I will list the main incidents below. When going through this list, Mr Ellicott, QC, stressed that Holdings is essentially a family company and a quasi-partnership. He then made it clear that his client regarded some of the incidents in themselves as being obvious instances of Jim and Carol and their associated entities being in breach of the fiduciary principles set out in Regal (Hastings) Ltd v Gulliver [1942] UKHL 1; [1942] 1 All ER 378; [1967] 2 AC 134n and Phipps v Boardman [1966] UKHL 2; [1967] 2 AC 46.

As often occurs in this type of litigation, the 17 headings of oppression mentioned in the statement of claim received greater or less attention during the trial. In the plaintiff's closing address, nine categories of oppression were dealt with and I will deal with these nine matters in due course. However, it will then be necessary to consider the total picture in the light of the applicable principles to determine whether there has been oppression. I will do this in section 4.

This was principally a documentary case, so that impressions of the witnesses may not ultimately be vital. The basic facts and indeed most of the facts, were deposed to by witnesses of both sides, though from different perspectives. There is thus not much need to determine who is truthful and who is not. As in all cases, this problem did occur to some minor extent. Thus it is useful to review the witnesses who gave evidence.

The first witness for the plaintiff was Mr Bob Bosnjak.

Bob Bosnjak swore four large affidavits which were read in chief. He was cross-examined by Mr Rayment, QC for three days. Bob Bosnjak was painted by his opponents as a man who tended to lose his temper. However, he kept his temper superbly under cross-examination. Despite this, a good deal of the cross-examination was very effective. Mr Rayment, QC showed quite convincingly that a lot of what Bob Bosnjak was saying was contrary to contemporaneous documents.

I formed the general opinion that Bob Bosnjak deeply and conscientiously believes that he is being oppressed. He is the older surviving son of the founder of the company. He considers that up to 1988 the company worked well. He considers that this was primarily as a result of his skills and that his younger brother, Jim, was more of a show pony who spent many hours in industry committees, but little time in the Company's business. He acknowledges that his mother was a director and that she was a strong force, but says that she never functioned as a director. However, he considers that as a woman and not only a woman but one who could not speak English, she had no significant part to play in the Westbus business.

Bob Bosnjak was very emotionally affected by the appointment of Carol Bosnjak as a director in 1988. That emotional torment has to a great extent led to Bob Bosnjak being obsessed and seeing a conspiracy in almost everything that was done in the Company. He resented the fact that his input was not invited when proposals were being made to the board. That resentment led to Bob Bosnjak opposing virtually every proposal that was put to the board. It also led to Bob Bosnjak saying over and over again in evidence that he was being publicly degraded and humiliated by managers who were sympathetic to Jim and Carol, particularly the present Chief Executive Officer, John Mostyn.

The obsession led to Bob Bosnjak seeing a conspiracy in even the most trivial matters such as the fact that Debbie Bosnjak had a key to the stationery cupboard, but he did not. The obsession has led Bob Bosnjak to reconstruct events in a particular light. That light has often given a false impression as to what really occurred. I did not regard Bob Bosnjak as a completely reliable witness.

The next witness called was the well known accountant Mr John William O'Brien. His credit was not in issue. However, his main evidence was to comment from a financial point of view on some of the actions of the Company and the effect of certain proposals.

The next witness called was Dr Safraz who was the general practitioner who attended Anda Bosnjak and also attends Bob Bosnjak. He was called to show that Anda Bosnjak did not speak English and was unlikely to move about much. The doctor's evidence was credible, but he really was not in a position to speak categorically on the relevant matters.

Mr Gotze followed. He was called to show that there would be no real difficulty in dismembering the Bosnjak empire, if the Court so ordered. However, I found his evidence of little value. Mr Gotze was mainly concerned with the bus industry in Victoria. He was not able to give much cogent evidence as to the type of services operated by the Company. He did not know of any private bus company that had been dismembered, but did identify government services that had been privatized in Melbourne, Adelaide and Perth.

Mr Hancock, Bob Bosnjak's accountant was the next witness. He was called to give evidence as to the use by Jim Bosnjak of Company funds. His evidence was disappointing as he had not done the relevant work himself and was unfamiliar with the work that had been put into the report he had signed by his six employees. I found his evidence of little value.

Mr Watts was the next witness. He had been an executive of Volvo Bus who had become the manager of the Coach Division of the Company. He gave evidence of an incident in June, 1993 when he received two conflicting sets of instructions from Jim and Bob Bosnjak as to whether the Edensor Park Depot should be closed and the coaches kept at that site be transferred to the Arncliffe Depot which was the headquarters of the Coach Division. He gave some evidence as to the different management styles of the two brothers. It is clear that Mr Watts was favourably disposed to Bob Bosnjak.

Jim Bosnjak was the first witness for the defendants. He was cross-examined for three and a half days by Mr Ellicott, QC. He obviously had been advised that he should keep calm under cross- examination (because he actually said so in the witness box) and he almost always remained calm. He said in re-examination that he had thought he had had a hectic time during cross-examination. He came across as a careful man with an outgoing personality.

However, cross-examination did bring out the fact that some of Jim Bosnjak's recollections were faulty as being inconsistent with contemporaneous documents. Some matters of which he disclaimed knowledge did in fact come to his notice at the time though he could well have forgotten. An illustration is the matter of the 60% quorum needed to transact business at general meetings. Further, he sometimes considered that he had followed advice of his accountant or solicitor when he had either completely misunderstood it or gone against it. An illustration was where he issued the notice convening the Extraordinary General Meeting for July 1993 "By Order of the Board" when he was advised that Feyama Pty Ltd would need to requisition the meeting.

Jim Bosnjak was cross-examined at considerable length on volume 13 of the plaintiff's bundle which contained many notes of Price Waterhouse & Co (his accountants) including letters from Mr Jim Marsden (Jim Bosnjak's then solicitor) to Ms Margaret Gibson of Price Waterhouse. It is quite obvious that both Margaret Gibson and Jim Marsden were acutely aware of the necessity for a 60% quorum and the other problems involved in holding the July, 1993 Extraordinary General Meeting. Jim Bosnjak was at pains to point out that none of these documents bore his name or signature. Neither Margaret Gibson nor Jim Marsden were called. It is very difficult to accept that none of these matters which were causing Jim Bosnjak's advisers so much concern were not transmitted to him, especially as the relevant meeting was held at Price Waterhouse's premises.

Again, some part of the material presented by Jim Bosnjak was a little unrealistic. One of the reasons for opposing Bob's "split of assets scheme" was because the Company would be injured through not being able to buy Busway's Blacktown routes (the only enclave in the whole West Liverpool-Parramatta-Richmond-Penrith area not controlled by Westbus) when the elderly Mr Rowe who is said to own it dies. The evidence tends to support Bob Bosnjak's opinion that this is fantasy as Busways controls other bus services as well as those in Blacktown. The other reason given, namely the government's proposal to have a super bus lane from Liverpool to Parramatta via Fairfield Hospital which could not be taken advantage of unless Westbus had more or less a monopoly is also, to my mind, specious.

Carol Bosnjak was the next witness. She was sworn in and affirmed the truth of her affidavits. I then adjourned for what I thought would be a few minutes so that she could swear her amended defence before cross-examination proceeded. However, she then became ill and never returned to the witness box.

At that stage of the trial, I had already read Carol Bosnjak's affidavits. There were competing applications as to what I should do with those affidavits. After considering those submissions, I decided to admit part of the affidavits into evidence and noted that I would discount the weight of those parts because the witness was not available for cross-examination.

Mr Ellicott, QC made submissions that Carol Bosnjak's absence from the witness box was a very significant matter. I would agree that it was significant, though would not go as far as "very significant." It was obvious from what I was told that Carol had become unfit to continue in the box as a result of psychological problems. The cause of those problems was just a matter of speculation.

John Mostyn was the next of the defendants' witnesses to be cross-examined. He appeared nervous when taking the oath and was over cautious in considering whether he would make any admissions as invited by Mr Ellicott, QC.

However, as the careful, well prepared and skilful cross-examination proceeded, the reasons for the nervousness became apparent.

He had problems in verifying everything that appeared on his Curriculum Vitae. His only academic qualification seems to be from a private institution offering a course in what it called "motivational science" in a place called Croton-on-Hudson somewhere in New York State. There was debate in addresses as to whether this was an institution of repute. In the end, Mr Ellicott, QC ended this debate by saying that if it was reputable, Mr Mostyn must have been a poor scholar.

Mr Mostyn claimed that he had some experience in the transport industry. However, this was limited to managing heavy earth moving equipment and trucks as an employee of Theiss Bros Ltd and he had no experience with passenger transport.

Mr Mostyn came across very poorly. He was supposed to be a person who had skills in dealing with the situation where a company was not performing as a result of a dissident director not being able to change with the times. He demonstrated no such skills.

Bob Bosnjak and Mostyn clashed at their very first meeting. I will set out the details in section 3(b) of these reasons. Whilst that clash may not have been Mostyn's fault in any way, the clash so wounded him that thereafter he was incapable of holding the scales between the various directors. This was the purpose of his appointment according to the evidence of both Jim Bosnjak and Mostyn.

Although Mostyn denied it, he was quite obviously Jim Bosnjak's right hand man by May, 1995 at the latest. He never ever agreed with any proposal Bob Bosnjak put up. He only disagreed with Jim or Carol Bosnjak on two occasions that were the subject of evidence, though there might have been some others. He was appointed Jim Bosnjak's alternate director in May, 1995.

Mostyn actually said in evidence that Bob Bosnjak's suggestions were so irrational that he could not accept them. As Mr Ellicott, QC put to Mr Mostyn this answer in itself shows his incapacity to do the task he was appointed to do.

Mr Mostyn was followed by Robert Ash, the financial controller of the Company. He gave his evidence in a calm fashion, and was not obviously partial to any party.

Mr Stanko, the Director of Bus Services of the Victorian Department of Infrastructure gave some evidence as to how the tender process for the former MET buses was carried out. (MET bus was the trading name of the Victorian Government bus and tram services probably deriving from when these vehicles were operated by the Melbourne & Metropolitan Tramways Board). There was no challenge to his credit. His evidence was to the effect that the Victorian Government was disappointed in the response to its presentation. Only three companies put in expressions of interest. These were NBC, a New Zealand Company and a unit of the Public Transport Commission itself.

Mr Peter Oliver was the next witness. Both sides recognized Mr Oliver as an excellent manager in the industry. His credit was not in issue. He gave his evidence clearly with reasoned propositions.

He was followed by Mr Cammareri who is the purchasing and technical officer for Westbus. He had mostly been stationed at Edensor Park. On one occasion he had an argument with Bob Bosnjak who sacked him, but, two days later, Jim reinstated him. His evidence is only relevant as to the use of the Edensor Park Depot and whether Westbus staff did work for NBC. He gave his evidence calmly and his credibility was not affected in cross-examination.

Mr Cook was the next witness. He is the driver trainer and service manager of Westbus. His credibility was unaffected in cross-examination. His evidence mainly went to the use of Edensor Park and was not vital.

Mr Debono, the general manager was next. Again he gave his evidence quietly and competently and was not fazed by cross-examination. There are, however, some odd things about his evidence relating to his appointment as general manager which I have noted in section 3(b)(iii). However, Mr Debono's credibility plays no part in this decision.

The final witness on the merits was Debbie Bosnjak. She gave brief evidence. She appeared to be very naïve, but she was not in the box long enough for me to make any complete assessment. Again, her credibility is not in issue.

Two other witnesses who gave evidence for the defendants by affidavit were not cross-examined. These were Messrs Boffa and Wright. The former is the financial controller of NBC, the latter NBC's fleet and purchasing manager. Each gave evidence that there was little working together of NBC and Westbus. Neither gave vital evidence.

It is also necessary to note the witnesses who were not called. Roger Graham who was closely associated with Westbus, and who was also intimately involved in the Victorian Government's privatization plan was not called. It is a fair comment that Mr Graham may well have been able to contribute to the knowledge about the successful tender by the National Bus Company and that he is in Jim Bosnjak's camp.

Other witnesses who might have been called by the defendants, but were not were Gloria Bosnjak, Jim Marsden, a solicitor, and Margaret Gibson of Price Waterhouse. Witnesses that might have been called by the plaintiff were his wife, Dragica and his daughter, Sandra. I will draw the usual inferences from their failure to give evidence.

Despite the fact that there were over thirty lever arch files full of documents in evidence, there were what I considered to be severe gaps. I was given precious little information as to the details of Holding's business. I was told that there might be interest by some overseas company wanting to bid for the Company and the word "Stagecoach" was mentioned, but there were no details given. There were no details of how the bus industry may have developed from the time when there were conductors on semi-rural routes filling out way-bills as their bus passed each section marker to how, at the present day, one person operators of a large fleet of buses pay in their daily takings to the Company's computer.

One of the problems for Bob Bosnjak is the lack of corroboration of his evidence as to the attitude of Jim and Carol. Of course, corroboration is not necessary as a matter of law. However, when there are as here two diametrically opposed accounts of attitudes and facts, corroboration is important. Although some matters are to be considered by the impact felt by Bob Bosnjak and, to that extent, his subjective perceptions are relevant, other matters have to be judged by objective facts.

Bob Bosnjak says that he was constantly humiliated by the conduct of Jim and Carol Bosnjak and the conduct of Mostyn and others acting under their direction. There was no other witness who corroborated this, though many heard Bob Bosnjak's complaints to this effect.

On the other hand, Jim Bosnjak with complete sincerity volunteered perhaps the most surprising statement in the trial. I quote from T 441 " The shareholders, I have to say, have never been taken into consideration in any move that Westbus has made in the last 20 years." There was an attempt in re-examination to say that this was referring to holding shareholders' meetings. I gleaned the general flavour in the evidence that the company really was worked for some years after Simun's death as a two man company. However, before her death Anda intervened from time to time as later did Carol.

Two lever arch files of so called board minutes were tendered by the defendants. It would seem that no actual minute book was kept as required by the Corporations Law: the "minutes" appear to have been kept in a folder. Bob Bosnjak made it clear that he doubted the veracity of at least some of these minutes. Bob Bosnjak endeavoured to have his daughter present to record true minutes. This was thwarted. Bob then took a tape recorder into the meetings. There were objections to this, but, he was permitted to record what he himself said at meetings.

It is fairly clear to me that the "minutes" of the alleged meeting of 29 May, 1989 which are recorded as "outlined by Mrs Anda Bosnjak" attempt to record something that did not actually occur. Although Anda Bosnjak's command of English was greater than Bob would give her credit for, it was not sufficient to be involved in a meeting to the extent disclosed by these "minutes". This fact, and the attempt to give Anda Bosnjak a proxy to vote for Jim Bosnjak at this meeting because Jim took the opportunity to give a proxy when his mother visited him in hospital, do not enhance the credit of Jim Bosnjak. However, in general, although the minutes were not actually adopted at a meeting at which Bob Bosnjak was present, I consider that I should accept them as fair evidence of what took place at the relevant meeting.

I should make one final comment about the evidence. The defendants and the Company spent tens of thousands of dollars in getting legal and accounting advice from leading firms of solicitors and accountants. Some of the advice given was misunderstood, probably because those who were given the advice only heard the part they wanted to hear. However, it is a matter of concern that some of the advice was quite inadequate. On one occasion solicitors gave advice in a letter that junior counsel could give for a couple of hundred dollars. The solicitors charged over $20,000 including time taken "for legal research". Despite this research time, the solicitors missed the vital article respecting the quorum as did the high powered accountants.

The problems between the main people in this case start with the appointment of Carol Bosnjak as a director on 12 September, 1988. Bob Bosnjak was extremely upset by this appointment. He made his attitude abundantly clear. As a result members of the clan who had previously been quite friendly ceased to speak to each other. Solicitors' letters passed from one to the other. On 1 June, 1989, at the strong suggestion of Anda Bosnjak, Carol Bosnjak tendered her resignation from the board in tears.

Bob said that he opposed Carol's appointment as a director because her appointment destroyed the concept of a family business as Carol was not a Bosnjak by blood. I did not accept this.

I formed the impression that one of the reasons Carol was not accepted as a director in 1988 was because she was a woman. This impression was gained from T93 ("I do not go around talking to women about this and that"), T68 where he said that at the weekend family meetings business was mainly discussed with his father as ("my mother got tied up in the kitchen with my wife and my sister-in-law") and T128 ("I do not know what these women do all day") despite Bob Bosnjak's denial at the latter page.

Again, whilst Bob Bosnjak acknowledges that Carol has a one-third interest, I agree with the submission of the defendants' counsel that this really means that she has a one third share in the profits and not that she has any right to govern.

Indeed in his affidavit, PA03 paragraph 52, Bob Bosnjak lists as his first reason for opposing Carol's appointment to the board was that his father had made it clear that the Company was a family company "which should therefore be managed by family members, namely, his sons".

However, Bob's main reason for opposition was that the balance of power changed. Up until 1988, Bob Bosnjak was chairman who tended to get his own way. Even up to 1993, when Terry Watts was manager, Bob Bosnjak's will tended to prevail, often to the protests of Jim. However, little by little, Jim and Carol changed the balance to the opposite position.

It is not uncommon in cases where there is a family who have moved from overseas to Australia that the eldest male occupies a very significant position. Bob Bosnjak became the older surviving male in 1979. He would and did expect that due respect be paid to him and his wishes. This does not always happen in modern day Australia. However, when it does not, the person concerned suffers considerable emotional torment. Although counsel for Bob Bosnjak said in their written submissions in reply that this categorization of Bob Bosnjak was unrealistic, my view was that it had a good deal to do with what has occurred in the instant case.

Bob Bosnjak's reaction to Carol's appointment was strange and strong. He had a solicitor write to his mother in English demanding that she sign the acknowledgment at the foot of the letter threatening that if she did not, the family would not be able to be brought together again. Again, I cannot see any purpose in this move unless it is the senior male asserting his will.

The episode surrounding this letter does not bring any credit to Bob Bosnjak. Indeed, the whole of this incident shows behaviour by him that one would not have expected in the senior member of the family. None of this material goes to any oppression extant at the time of filing the summons. It is, however, vital background material.

3. (b) Legitimate Expectations of Management Rights

The House of Lords held in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, that it is just and equitable to wind up a company which is a quasi partnership if it is in deadlock. The plaintiff says that this principle also applies, mutatis mutandis to cases of oppression. Of course, there is no actual deadlock in the instant case, though the situation is closely analogous.

The concept of a legitimate expectation originated in administrative law. Its first use in a company oppression case appears to be by Hoffmann, J as his Lordship then was in Re a Company [1986] BCLC 376, 379, where, in an application to strike out a statement of claim alleging oppression a plaintiff had been dismissed as managing director. His Lordship set out the principle in greater detail in Re Posgate & Denby (Agencies) Ltd [1987] BCLC 8, 14, when he said,

"...the concept of unfair prejudice...enables the court to take into account not only the rights of members under the company's constitution, but also their legitimate expectations arising from the agreements or understandings of the members inter se. There is an analogy in Lord Wilberforce's analysis of the concept of what is `just and equitable' in Ebrahimi v Westbourne Galleries Ltd.... The common case of such expectations being superimposed on a member's rights under the articles is the corporate quasi-partnership, in which members frequently have expectations of participating in the management and profits of the company, which arise from the understandings on which the company was formed and which it may be unfair for the other members to ignore....

"Although the answer to this question must in each case depend on the particular facts, it is well to recall that in Ebrahimi v Westbourne Galleries Ltd, Lord Wilberforce said that in most cases the basis of association would be `adequately and exhaustively' laid down in the articles. The `superimposition of equitable considerations' requires, he said, something more. This was said in the context of the `just and equitable' ground for winding up, but in my judgment it is equally necessary for a shareholder who claims that it is `unfair' within the meaning of s 459 for the board to exercise powers conferred by the articles to demonstrate some special circumstances which create a legitimate expectation that the board would not do so. Section 459 enables the court to give full effect to the terms and understandings on which the members of the company became associated but not to rewrite them."

Section 459 of the English Companies Act, 1985 is similar to s 260 of the Corporations Law.

It is to be noted that Hoffmann, J in Re Posgate & Denby (Agencies) Ltd does not deal with the case where the company was originally incorporated under a certain regime but problems have arisen as a result of events that occurred years afterwards. However this sort of situation did occur in various reported cases. Re a Company [1986] BCLC 376 is one example, a more illustrative one is Quinlan v Essex Hinge Co Ltd [1996] 2 BCLC 417. In that case, the company was incorporated in 1936. The plaintiff was employed by the company in 1961. In 1965, he was allotted shares in the company for which he paid and was given a managerial role. He was dismissed in 1992 and brought proceeding under the English equivalent of s 260 on the basis that he had a legitimate expectation when he purchased his shares that he would continue to have a managerial role. Hamilton, AJ found at 426 that the plaintiff had established a legitimate expectation and ordered the majority purchase the plaintiff's shares without any discount for the fact that they were a minority interest.

An illustration of a case where a claim of legitimate expectation failed is Re Leeds United Holdings plc [1996] 2 BCLC 545. In that case there were three persons holding shares in a company which gave them management rights. By a two to one majority, these persons as the board agreed to recommend a takeover of the company. Even if there had been a legitimate expectation about management, there was no legitimate expectation that the majority would not sell their shares, and, even if there were, such expectation did not relate in any way to the conduct of the company's affairs (pp 559-560).

The English Court of Appeal considered the doctrine with approval in Re a Company [1997] 2 BCLC 739.

The court thus looks at the constitution of the company to see if it founds a legitimate expectation such as relied on by the plaintiff. However, even if there is nothing in that constitution, the court will, in appropriate cases, look to the understandings of the parties when they entered into the corporate quasi-partnership.

The court looks at the question by considering the impact on the oppressed, not on the intention of the alleged oppressor. Oppression is to be considered "in terms of the impact on the oppressed, not in terms of the intention of the oppressor, except to the extent that the word itself has some moral or emotional content": Re M Dalley & Co Pty Ltd [1968] HCA 82; (1968) 1 ACLR 489, 492; Re Quest Exploration Pty Ltd (1992) 6 ASCR 659, 669.

Three provisos should be spelt out loudly and clearly. The first is that the mere fact that the company is a quasi partnership is insufficient to raise a legitimate expectation that each partner will be able to take part in management. The second is that mere failure to agree between the majority and the minority is not usually of itself sufficient to demonstrate oppression (see Re Five Minute Car Wash Service Ltd [1966] 1 WLR 745, 751; Re Quest Exploration Pty Ltd supra at p 668). The third is that the legitimate expectation does not last forever. It will be lost, if it is no longer practicable for the right to the expectation to continue.

Authorities outside England do not refer to the expression "legitimate expectation" as such, but the cases apply the same type of consideration. A good example is Re Norvabron Pty Ltd (No 2) (1986) 11 ACLR 279, 292. In Thomas v HW Thomas Ltd [1984] 1 NZLR 686, 695, which was approved by the High Court in Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459, the principle was accepted, but was not extended to the case where the minority's complaint was not exclusion from management, but rather the majority conducting the company so as not to obtain proper commercial returns from its assets.

It should also be noted that the doctrine of legitimate expectation may apply in reverse. Thus, in a family company, the history of how things were done including an historic policy of not borrowing may excuse what might otherwise appear to be oppression; see eg Re DG Brims and Sons Pty Ltd [1995] QSC 53; (1995) 16 ACSR 559.

Thus, it is necessary to see (i) whether the legitimate expectation that Bob Bosnjak would have a share in day to day management arose; (ii) if it did, whether it still exists; and (iii) if it still exists, whether it has been frustrated. I will deal with these three issues in turn.

(i) Was there a legitimate expectation formed by Bob Bosnjak?

As the cases make clear, the constitution of the Company as registered, and particularly its Articles of Association, are the most significant factor in determining whether there was a legitimate expectation.

Holdings was incorporated under the name "Bosnjak's Bus Service Pty Limited" on 19 October, 1960. It changed to its present name on 16 September, 1986.

There are currently 2,323,939 shares in Holdings, of which the plaintiff owns 663,983, representing 2/7th of the total issued shares. Fexuto itself was incorporated in 1976 as part of the restructure of the family concerns organized by Simun Bosnjak. Before then, at least from June, 1975, there were seven issued shares held as to one share each by Simun, Anda, John, Carol, Bob, Dragica and Jim Bosnjak. Up until December, 1975, Simun and Anda were the only directors. On 31 December, John, Bob and Jim Bosnjak were appointed as additional directors.

It would seem to me that as far as Bob Bosnjak is concerned, if some legitimate expectation was formed, it must have been formed on and after 31 December, 1975.

The Articles of Holdings were composed when Simun and Anda Bosnjak were alive and the former was very much in charge of the Company. Pursuant to article 11(b), Simun Bosnjak was issued with the "Governor's Share" which entitled him to exercise virtually complete control of Holdings. Article 12 made Simun Bosnjak the Governing Director during his lifetime. Simun and Anda were the first directors (art 86).

Thus, from 1975 until Simun's death in 1979, there was no legitimate expectation of Bob Bosnjak to be intimately involved in management. At the most, there would have been a weak expectation that John, Bob and Jim would run the company after Simun's death. I have called this a weak expectation because the Articles provided for Simun to appoint a governing director after his death. In fact he did not do so, but no-one was to know this until after Simun's death.

After Simun's death in 1979 and until Anda's death in 1992, there were (apart from a time in 1988-9 when Carol was a director) three directors, namely Anda, Bob and Jim.

There was a dispute between the parties as to how far Anda participated in the decision making processes in the company. Bob Bosnjak says that Anda was virtually unable to speak English and had limited mobility. He says that in this period, he and Jim Bosnjak made the decisions jointly or not at all.

Carol Bosnjak swore that she did not speak Croatian, which was Anda's first language, though she could understand some basic Croatian words. However, she says that she was able to converse with her mother- in-law, the latter using broken English. I have already referred to Dr Sarfraz' evidence which, although not of that much weight, tended to support Carol Bosnjak's evidence.

Jim Bosnjak said that during this period, corporate life was tolerable because Anda would join in the decision making process and so avoid deadlock. I think this is more likely to be the case than the scenario painted by Bob Bosnjak. The preponderance of the evidence is that Anda Bosnjak spoke English to a greater degree than Bob Bosnjak would concede. Furthermore the undisputed evidence is that Anda Bosnjak did involve herself in key decisions such as the acquisition of Calabro Bros Bus Service.

Anda Bosnjak lived in the same house as Jim and Gloria Bosnjak and their family. She tended to favour Jim Bosnjak. I consider that it is more likely than not that she did participate in business decisions to the extent outlined by Jim Bosnjak.

Thus during this period, I consider that there was a mechanism for breaking the deadlock and the position was not as Bob Bosnjak suggested that decisions were either made by Bob and Jim together or not at all.

However, even if the fact were, as Bob Bosnjak says, that Anda took little part in the management, under the constitution of the Company she had that right and that would tell against Bob forming a legitimate expectation that he was to have a continuing role in management.

After, Simun's death Article 62 which provides for a quorum at general meetings, became of particular significance. The article said that the quorum was two. However, for all business other than "nominating a Chairman declaring a dividend recommended by the Directors re-electing retiring Auditors and Directors and voting their remuneration on a scale not exceeding that for the then preceding year" members had to be present in person who held at least 60% of the issued shares entitled to vote. At all material times, Jim and Carol controlled only 4/7ths (57.1428%) of the voting shares.

It is true that between 1989 and mid-1993, Bob and Jim in fact had day to day management and control of Holdings. However, as I have said previously, that fact alone is insufficient from which to construct a legitimate expectation of continuing involvement in management.

Thus I fail to see how, in the instant case, despite the Company having the appearance of a corporate quasi partnership, there was any legitimate expectation as relied on by Bob Bosnjak.

In Tay Bok Choon v Tahansan Sdn Bhd [1987] 1 WLR 413, 417-8, Lord Templeman giving the decision of the Privy Council said, "Although no specific undertakings may have been given an obligation is to be implied or inferred from the conduct of the parties to allow the petitioner to participate in management and to be a director unless by withdrawal of his support or for some other good reason a change in management and control became necessary." (The underlining is mine).

These thoughts were taken up by Robert Walker, J in R & H Electric Ltd v Haden Bill Electrical Ltd [1995] 2 BCLC 280, 295:-

"Lord Templeman qualified the expectation of the petitioner in that case by limiting it to the period until `for some other reason a change in management and control became necessary'; and that qualification is no doubt appropriate in any similar case, including the present case. The personal troubles between Mr Pitt and Mr Watkins...made it inevitable that there should be a change in management and control, and Mr Watkins' alliance with the Hoggs...made it inevitable that Mr Pitt should be the one to go."

This passage may well be the clue to the resolution of the current dispute as the bulk of the evidence concerned Bob Bosnjak's view that he was isolated and removed from any effective voice in management where he had a legitimate expectation to be involved despite his clashes with others. However, it is expedient to examine other ways in which legitimate expectation may cease.

Another cause of ending a legitimate expectation to be involved in management is where the company becomes so changed in structure or size that the legitimate expectations of others brought about by changing the constitution of the company would be thwarted if the petitioner's expectation was to continue. An illustration is provided by Re Blue Arrow plc [1987] BCLC 585. In that case, the company had been founded by the petitioner and the Articles preserved the office of President to be held by her. The company had some times afterwards been floated and ceased to be a quasi partnership. One reason for the petitioner failing in her oppression suit over her being displaced as President was that the change of Articles and the float, meant that her expectations of earlier years could no longer be regarded as compatible with the expectations of the recent investors.

There is no doubt, whichever version of the facts I accept that relations between Bob and Jim became strained to the degree that they could not work together.

It is really unnecessary to go further than to refer to Mr Ellicott, QC's submission that his client's case was that Bob should be the purchaser as Jim and Carol were no longer worthy to use the name Bosnjak. Such a feeling in itself shows the impossibility of working together.

Indeed the statement of claim itself shows the same. Paragraph 48 of the statement of claim and the principal particulars thereto are as follows:-

48. Since 19 July 1993 Jim Bosnjak and Carol Bosnjak have jointly controlled the management and affairs of Holdings and the Bosnjak Group and its business activities to the exclusion of Bob Bosnjak.

(a) Jim Bosnjak and Carol Bosnjak jointly represent a two thirds voting majority at all meetings of directors of Holdings held since 19 July 1993;

(b) Jim Bosnjak and Carol Bosnjak have since 19 July 1993 voted as

one at all meeting of directors of Holdings, to the exclusion of the

views of Bob Bosnjak, in relation to all significant items of business

(e) Mostyn, in exercising the delegated authority referred to in paragraph 38(a) above, and all other senior management of Holdings take instructions and directions directly from Jim Bosnjak and Carol Bosnjak and John Mostyn pursuant to the said delegated

(f) Most, if not all, issues affecting the day to day management of Holdings have been and are conducted by Jim Bosnjak, Carol Bosnjak, John Mostyn, Robert Ash and senior management of Holdings without reference to and to the exclusion of Bob Bosnjak.

The same sort of allegations are also clearly made in earlier parts of the statement of claim, viz:

34. Prior to 19 July 1993 the day to day management and affairs of Holdings had been conducted jointly by Bob Bosnjak and Jim Bosnjak as full time executive directors of Holdings.

35. As a direct consequence of the success of the NBC Tender referred

to in the paragraphs below, Jim Bosnjak and Carol Bosnjak were

unable to devote all of their time to the management and affairs of

Holdings, they being required to devote significant time to the business, management and affairs of National Bus Company.

36. By reason of the absence of Jim Bosnjak and Carol Bosnjak in Melbourne attending to the affairs of National Bus Company, the

day to day management of the business and affairs of Holdings

37. On 13 January 1995 Jim Bosnjak and Carol Bosnjak caused the appointment of John Mostyn ("Mostyn") as Chief Executive Officer of Holdings and thereby the Bosnjak Group, which appointment was opposed by Bob Bosnjak.

These allegations of fact are not all established by the evidence. However, the fact that they are made in itself shows that the point has been reached where the brothers cannot work together and any legitimate expectation has ceased.

Finally, there is paragraph 100(e) of Bob Bosnjak's affidavit PA03 in which he swears that a principal reason for his non-involvement with the Melbourne tender was the level of disputation that had occurred up to 1993 and continued to increase.

I will review the principal facts disclosed by the evidence more fully in section 3(b)(iii), but it is sufficient here to note a few major matters.

Although it is a gross oversimplification, Bob Bosnjak sees himself as a conservative cost conscious hands on director. Jim Bosnjak sees himself as a man with a wider vision, more prepared to take risks and to rely on administrative staff. Bob Bosnjak likes to stay within Westbus and organize: Jim Bosnjak considers it to be important to be involved in wider groups and has become Chairman of the Bus Proprietors Association. Bob rails at Jim for this which he sees as a "show pony" activity contributing nothing to Westbus. This philosophical difference or difference in management style is deep rooted and naturally leads to clashes.

During the period between Anda's death on 31 October, 1992 and July, 1993, when Jim and Bob were the only directors, it seems clear that the de facto position was that either there was agreement between the two or the status quo remained. This was quite acceptable to Bob as he usually preferred the status quo. Bob indeed thought of these as the golden days in which he sat in his large office at Northmead, was seen as the "boss" by the staff and could effectively veto any initiative by Jim either by disagreeing or simply by not participating in a meeting.

On the other hand Jim was frustrated by this scenario. He just could not succeed in any initiative unless he could talk Bob into agreeing with it. He did this on a quite a few occasions, but his frustration is evident.

During this period, the Nepean Nipper operation commenced in Penrith. This was a strategy where ordinary size buses were replaced by 16 mini buses signwritten as "Nepean Nipper" whereby smaller buses could provide a more frequent service on more routes. The Nepean Nipper service was launched in February, 1993 with great publicity. Both Bob and Jim Bosnjak were present at the launch. Bob points to this innovation as an example of the two brothers working together and Bob being involved in innovation. Jim says that somebody ordered 16 mini buses and a use had to be found for them. Although I favour Bob's version, I do not think that one example of co-operation, even though a significant example, proves any real point.

After the July, 1993 meeting, the position changed. Carol was an additional director. On one occasion she voted with Bob Bosnjak on a motion he proposed to close the Edensor Park depot. She did this even though Jim Bosnjak strongly opposed the closure because he (at least now says that he) did not want the company to lose existing use rights. However, on every other occasion, including every occasion when Jim proposed a motion at a directors' meeting, Carol voted with Jim. Jim says that Carol has a mind of her own and was not his puppet. Bob says he knew from the beginning that Carol would just go along with everything Jim wanted to do.

In addition to the frustration felt by any perpetual dissenter at board meetings, Bob felt the impact of the appointment of executives who were predominantly loyal to the majority of the board. This meant that instead of being seen as "the boss", he considered that he was being bossed about by underlings.

It is clear that, in particular, there were clashes between Bob Bosnjak and John Mostyn. I will deal with these in detail in the next subsection. Whichever version of the facts one takes, or whoever was at fault, Bob Bosnjak was not able to work as part of a management team with Jim Bosnjak or with Carol Bosnjak. Or, to put it the other way round, Jim Bosnjak was not able to work in a management team with Bob. On the authorities to which I have already referred, that meant that any legitimate expectation to be involved in management by Bob Bosnjak ceased.

There is also another reason why any legitimate expectation may have ceased before these proceedings were commenced.

It was held in a recent administrative law case, R v Secretary of State for the Home Department; Ex Parte Hargreaves [1996] EWCA Civ 1006; [1997] 1 WLR 906; [1997] 1 All ER 398, a legitimate expectation is not set in stone, but must be subject at least to ordinary changes of policy and circumstances that will occur in time. The same holds true in company law. A person's legitimate expectation cannot ordinarily be a barrier to the company altering its constitution by the ordinary means.

As has been seen, Holdings started from very humble beginnings to become the largest private bus company in Australia. It is very hard to conceive how a management style which was suitable for a small bus service out of a few suburban railway stations was necessarily suitable for a large concern.

Indeed, it is a generally accepted sociological fact that when an organization exceeds about 150 people, it is no longer practicable to operate it on a personal relationship basis and that some hierarchical structure becomes necessary. It is clear that, at some stage of its growth, the business moved through that barrier.

In my view, the mere expansion of the Company indicates that it was no longer possible for the 1989 status quo to continue so far as management was concerned.

(iii) If the legitimate expectation exists, has it been frustrated?

In view of my answers to the previous two sub-questions, this is of no moment so far as oppression based on legitimate expectation is concerned. However, the material discussed below is very significant when analysing the total effect of the conduct of the majority.

I should commence discussion with a typical extract from Bob Bosnjak (T182):-

"...as I have said before, Mostyn was put there by Jim Bosnjak to be a hitman for Jim Bosnjak. I get a letter, as a director, a responsible director, with 42 years of work in the Westbus and Bosnjak Holdings organisation, there are one or two letters coming to my house on a fax - if they are not on a fax they are underneath my door in the office - humiliating me in every form that he could from the beginning, when he started, right up to today - not only myself, my family, my daughter - humiliating me. Of course I feel oppression, and I continue to feel oppression when we have got a person like that who just writes a letter to one director, it doesn't matter what I say, humiliating me, the family and me, taking everything away, my rights and everything else. Humiliating."

This passage shows the gravamen of the complaint and indeed the difference between the two opposing cases.

Board meetings were not pleasant affairs. I have already mentioned the unreliability of the minutes in at least some respects and that Bob Bosnjak in due course tape recorded what he himself said at board meetings. One of Bob Bosnjak's tapes is in evidence. The tone of Bob Bosnjak's voice and the content of his speech on that tape was almost enough in itself to demonstrate to my satisfaction that it is not possible for there to be management or direction by both Bob and Jim Bosnjak.

In his affidavit Bob Bosnjak sets out the events which led up to Mr Mostyn's appointment. He says that the proposal was first raised at the board meeting of 26 October, 1993 when Jim Bosnjak said that he considered that Holdings should advertise for a general manager. Bob opposed this suggestion on the basis that it was unnecessary and complained that any management problem flowed from the time that Jim and Carol were spending in Melbourne in connection with the affairs of NBC. Bob Bosnjak reiterated this at the directors' meeting of 10 January, 1994. Jim and Carol denied the truth of this allegation.

There were further meetings at which the appointment of a general manager was discussed during 1994. Unfortunately, Bob Bosnjak became upset that the detailed proposals were being worked on by Mr Debono without his input. Bob Bosnjak walked out of a directors' meeting on 29 November, 1994 after saying, "This is not the way to operate. I am not being given any opportunity to provide any input to these proposals. This is just blackmail and dictatorship by you, Jim, as Carol will just follow you automatically. I object to all of these proposals because they are determined behind my back."

According to Mostyn's affidavit, he first met Jim Bosnjak on 22 November, 1994 being introduced by Ian Burns of the personnel consultants, Morgan & Banks.

Mr Mostyn says that he was initially appointed by the board to carry out a review of the Company's operations in late November, 1994.

Mr Mostyn says that he knocked on Bob Bosnjak's office door on 1 December, 1994. He says that he was invited to enter and offered to shake hands which gesture was refused. He says that Bob Bosnjak leapt out of his chair and said, "I don't know you, you f........ mongrel. Who are you? I don't recognise you. I don't want you. Get out or I'll call the police and have you removed. This is my company and I'll see you never get paid. Get out. Get out." He says that Bob continued to yell in this vein and then pointed at Jim Bosnjak and said, "And take no notice of that show pony fella. I run this place."

Bob Bosnjak was cross-examined on this evidence at T159 and following. He denied that this "conversation" took place. He agreed that he had referred to Jim Bosnjak as a "show pony", but never in front of the staff.

On 13 December, 1994, Mr Mostyn says that he went into Bob Bosnjak's office and they had a quiet conversation. During this conversation, Bob Bosnjak told Mostyn that he considered that Jim and Carol had influenced his mother to betray Bob in her will. Bob ended the conversation by saying, "I'm not going to help you. I did not want you here. I don't trust you." In conversations over the next month, Bob Bosnjak continued to say that he had been betrayed by his mother and his brother Jim who had recruited Carol to help them. He further said that he would oppose Mostyn because he was in the majority's pockets.

On 13 January, 1995, Bob Bosnjak endeavoured to postpone the decision until an audit had been completed. This was unsuccessful and Mr Mostyn was appointed by the board that day on an interim basis, Bob Bosnjak voting against the appointment.

Mr Mostyn was appointed Chief Executive Officer to commence on 16 January, 1995. He attended a board meeting on that day. Mostyn says that at that meeting Bob Bosnjak continually interrupted by saying, "You have got yourself a hit man. Don't think I will let go of day to day management. This is my company. I spent 40 years building it and I will run it as I like. You can sit here all day, two to one, two to one, and I will take no notice."

On the same day, Bob Bosnjak said to Mr Mostyn privately, "I do not agree with your appointment. I run this place and will continue to run it. I want to know on a daily basis what you are doing. You must clear with me any directions to managers or any changes. I want a written detailed report of your daily activities every week. I don't want you to use the office at Edensor Park. You must stay here." ("Here" meant Northmead). Needless to say, Mostyn did not comply.

In May, 1995, Mr Mostyn's appointment was made permanent.

I am fairly sure that the first of these clashes cannot be said to be the fault of Mostyn. Indeed it can be said that the problems have come about because both Bob Bosnjak and John Mostyn are people of domineering personalities. However, fault does not really matter. The question I am presently considering is whether management involving Bob Bosnjak has become unviable regardless of fault.

It is common ground that there were constant clashes between Bob Bosnjak and John Mostyn thereafter. On one occasion Bob Bosnjak said to Mostyn, "Get out of my sight, you mongrel." The most significant clash occurred when each gave contrary directions to a receptionist, Mrs Agnes Grima. Mrs Grima obeyed Bob Bosnjak and was dismissed. She unsuccessfully appealed to the NSW Industrial Relations Commission in which case both Bob Bosnjak and John Mostyn gave evidence.

The high point of this antipathy is the Grima incident and the notice on the notice board on 19 May 1995 under which Mostyn instructed staff to refuse directors access to records without Mostyn's approval (defts' volume 3 page 216).

There is material to show that Jim Bosnjak and Mostyn would on at least some occasions get together to bait Bob Bosnjak. There is also material to show Mostyn's mind may have been poisoned by Bob Bosnjak's attitude. However, these are just gratuitous pieces of nastiness and do not affect the result of the case.

Fexuto Pty Limited v Bosnjak Holdings Pty Limited Matter No 3799/97 [1998] NSWSC 413

At a glance

Court

Decision date

Before

Source

Judgment (583 paragraphs)

Fexuto Pty Limited v Bosnjak Holdings Pty Limited Matter No 3799/97 [1998] NSWSC 413 (9 September 1998)

Parties

Cases Cited (17)