In that case the court was required to determine the date of valuation of the shares of an oppressed minority shareholder that were ordered to be purchased pursuant to a provision in the English Companies Act that is relatively similar to s 232 of the Act. Nourse J concluded that, in the circumstances before him, fairness required that the petitioner's shares be valued at the date of the presentation of the petition. His Lordship came to that conclusion primarily because the development of the company since the appellant left it, and the increase in its share price, occurred essentially due to the respondents' efforts so that it would have been unfair if the appellant were to gain the benefit of those efforts by having the shares valued at the later date.[13]
37 The relevant valuation date selected in the several authorities to which Nourse J referred in his reasons confirms his view that there is "no [general] rule at all" as to the selection of the valuation date and that the overriding requirement is one of fairness and justice to both parties in all the relevant circumstances of the case. Thus, in Scottish Co-operative Wholesale Society Ltd v Meyer[14] the shares were ordered to be purchased at the value they would have had at the date of the petition if there had been no oppression. Similarly, in In re Jermyn Street Turkish Baths Ltd[15] Pennycuick J ordered that the assets of the company be valued as at the date of the petition. And in In re A Company (No. 002567 of 1982)[16] Vinelott J considered that, because the petitioner had unreasonably rejected previous fair offers for the purchase of the shares, they should be valued as at the date of submission to arbitration or for expert valuation, rather than retrospectively from the date of his exclusion from participation in the affairs of the company. However, his Lordship said that he could conceive of many cases where fairness would require that the valuation should relate back to such an earlier date.
Sufficiency of reasons
38 It is convenient to deal first with the claim that his Honour failed to provide sufficient reasons for this and a number of other decisions in the case. It was said for the appellant that, in light of the delay in handing down the liability decision, his Honour failed to make plain in his reasons that the delay had not affected his decision. Counsel argued that in view of the delay his Honour should have taken "extraordinary efforts to provide an articulation of a clear and logical process of reasoning of the key findings in his judgment". More particularly, it was said that his Honour failed "to articulate reasoning for preferring 30 June 2002 [and] for finding that the acts of oppression ... did not give rise to a separate ground of compensation in addition to the fair value [of the shares]". It was further contended that his Honour failed "to articulate any reasoning whatsoever" in relation to the decision that 6 per cent rather than the penalty interest rate was the appropriate interest to award the appellant.
39 The appellant did not, however, explain the basis of the claim that the judge's obligation to provide clear reasons went beyond the requirement that applies in every case but imposed on him the duty to make "extraordinary efforts" in that regard. Every judicial officer is under an obligation to provide such explanation for the decision as would enable the appellate court and the parties to understand the path of reasoning by which the decision was reached so that they would be in a position to determine if it contains an appellable error.[17] Although the degree of detailed reasoning required to be provided in support of a decision depends upon the nature of the case and the issues thrown up by it,[18] it seems to me that whether a long, or a short, period elapses between the completion of argument and the decision does not alter the essentials of this requirement. In any event, as I explain later, his Honour provided sufficient reasons for the impugned decisions.
40 It was also not apparent from the submissions whether it was asserted that the claimed delay affected his Honour's decision on the valuation question such as to vitiate it. Again, whether the delay was short or long cannot directly affect the correctness of the decision. As I understand it, counsel said, albeit without apparent enthusiasm and without any reference to authorities or principle, absent a "confirmation" in the judge's reasons that the delay did not affect his decision on the valuation date, it might be thought that his Honour chose 30 June 2002 as the relevant date in order not to penalise the respondents for the delay. If 30 June 2003 had been chosen, it was pointed out, it would have required the respondents to pay a higher price for the appellant's shares. In my view, there is nothing in this point. As I have said, for the reasons I give later, I consider that, although it might be said that his Honour's reasons should have been more extensive, they constitute a sufficient explanation why he chose 30 June 2002 as the relevant date and there is nothing in those reasons that suggests that it was because otherwise the respondents would be penalised by having to pay a higher amount for the appellant's shares. In any event, the valuation decision was handed down on 1 July 2004 and I think that it is fanciful to suggest that a reasonable person might consider that the delay in the delivery of the liability decision might have influenced his Honour in choosing the date of valuation. If anything, such considerations would have pointed to the choice of the later date.
41 I now turn to consider briefly the specific claim of the appellant that his Honour's decision as to the date of valuation is vitiated because he failed to provide sufficient reasons for his conclusion on the matter. I think that there is no merit in that claim. His Honour's reasons make it sufficiently apparent why he chose 30 June 2002 as the relevant date. The date was determined, as I have said, on the basis of fairness; and in coming to the impugned conclusion his Honour made it apparent in his reasons that he took into account a range of matters. More particularly, his Honour had regard to the long period of time that had elapsed between the appellant leaving Musashi and the date of the liability trial, in March 2002 (during which the value of Musashi increased substantially by reason of Horewood's efforts, including his investment in the company).[19] The learned judge also took into account that the respondents confirmed their "conceded oppression" at the outset of the trial and that, notwithstanding this, the appellant pursued at trial a considerable number of claims that were plainly unmeritorious and that this conduct was productive of the matter not being disposed of in 2002. That his Honour treated the respondents' admissions as being important to the issue can be deduced from his observation that he considered that, arguably, the date of valuation should be the date on which the admission was confirmed, namely, 5 March 2002. It is true that the price at which the respondents offered to purchase the appellant's shares on 5 March 2002 was, as was later determined, inadequate but that does not detract from the fact that the two critical planks of the appellant's claim, namely, oppression and entitlement to have the shares purchased at fair value, were plainly admitted by the respondents at that time. In the circumstances, it is not surprising that, as I have said, his Honour considered that 5 March 2002 might have been an appropriate date of valuation but in the end, he decided to select 30 June 2002 because that was the more "sensible and convenient" date.
42 It seems to me that if the liability decision had been given in 2002 it would have been understandable, at least on the face of things, if 30 June 2002 was then chosen as the date of valuation, that being the accounting date closest to the date of such determination. Be that as it may, I consider that the trial judge sufficiently explained the path of the reasoning that led him to the impugned conclusion. Moreover, I think that the above matters were properly taken into account by him in exercising his discretion on the question of the date of valuation. Hence, the claim that the decision is vitiated due to lack of reasons should fail.
Appellant's conduct of trial not irrelevant
43 I now turn to consider the appellant's claim that his Honour's decision as to the appropriate date of valuation is vitiated because he took into account, as a material factor, an irrelevant consideration, namely, the appellant's pursuit of a large number of claims that the judge considered to be plainly unmeritorious and, consequently, it was said, the decision must be set aside. In my view, however, his Honour did not err as claimed. The appellant's argument is flawed because it disregards the context, which I have already described, in which the judge took that matter into consideration in arriving at the impugned decision. It was not so much the fact that the appellant pursued unmeritorious claims at trial that was, of itself, of significance so far as his Honour was concerned. More relevantly, it was that the conduct was pursued notwithstanding the respondents' admissions and that it had the effect of materially delaying the resolution of the liability claim. These factors, I would have thought, taken in conjunction with the fact that Musashi's significant development occurred after 1995 and that the appellant played no role in that, having left the company in late 1990, were all relevant to the determination of the date of valuation. I mention for completeness that, as a matter of practicality and fairness, the discretionary choice of possible valuation dates in this case was relatively limited. One date might have been the date of the issue of the proceeding. Another might have been the date of his Honour's decision on the liability issue. Yet another might have been March 2002 when the respondents confirmed their admission of oppression. The choice of the ultimate date, as I have said, was to be determined by reference to the fairness and justice of the situation. In my view his Honour's choice of 30 June 2002 is sufficiently understandable as not to constitute error in the exercise of his Honour's discretion in that regard.
44 I also think that there is no merit in the appellant's claim that he was "doubly punished" for the manner in which he conducted his case at trial. As a matter of proper characterisation, I think, the judge's discretion on the question of costs was exercised by him by reference to the extent to which the parties succeeded, or failed, in their respective claims and not just because of the appellant's pursuit of plainly unmeritorious claims in the face of admission of wrongful behaviour by the respondents.
Alleged interest error
45 The appellant next claimed that his Honour erred in not ordering that he be paid interest on his holding in Musashi at the penalty interest rate to which, he said, he was entitled, given his success in his claims. But in ordering that the appellant be paid interest on the value of his shareholding at the rate of 6 per cent per annum his Honour made it plain that the interest was awarded by way of compensation for the respondents' use of his shares. The learned judge also made it clear that in selecting the interest rate he sought to ensure that the compensation was "fair and equitable in the circumstances". His Honour said that he was satisfied on the material before him that the rate of interest was one that represented a good commercial return on investment in the market, and this aspect of his decision is not challenged. His Honour explained that he did not apply the penalty rate because that contains elements that were inapplicable here, namely, a penalty component aimed at inducing defendants to settle cases and providing compensation for loss of use of money.[20] In my view, his Honour made no error of principle in determining to award the interest at the above rate. Plainly, s 101 of the Supreme Court Act 1958 had no application to the claim, and even if s 58(1) of the Supreme Court Act applied, which I doubt, as their Honours in Clarke v Foodland Stores Pty Ltd[21] pointed out the provision purports to prescribe only a maximum rate and the rate to be applied is at the discretion of the court. Importantly, as I have said, the judge in this case did not award the appellant interest qua interest; rather, he used interest as a proxy to measure the compensation to which the appellant was entitled by reason of the first and second respondents having use of his shareholding between the relevant dates.[22] Beyond the date of judgment, s 101 of the Supreme Court Act would give the appellant entitlement to relevant interest.
46 I mention for completeness that, in light of his Honour's explanation for ordering that the appellant be paid interest at 6 per cent per annum, I would reject counsel's claim that his Honour failed to provide sufficient reasons for the decision to order the above interest rather than interest at the penalty rate.
Loss of dividends, earnings
47 The appellant also contended that his Honour erred in rejecting his claim that he was entitled to compensation under s 233(1) of the Act arising from the oppressive conduct by the respondents, more particularly, in respect of the monetary loss that he claimed to have suffered in the form of non-receipt of dividends and loss of earnings as an employee and/or director of Musashi. It was argued that the appellant was entitled to such a compensation order so as to overcome the effects of the oppressive conduct as a matter of justice and equity. More specifically, it was claimed, the compensation should have been based on the benefits the appellant would have received by way of earnings and dividends if "the parties had continued to cooperate".
48 In my view, however, this complaint is without foundation. First, his Honour did not find that no dividends were paid to the appellant because the first and second respondents wished to disadvantage him; it was part of their business policy not to pay dividends. The oppression, in that regard, said his Honour, was constituted by their failure to consider whether that payment should be made. Secondly, and in any event, as the respondents pointed out, the amounts that would have been paid as dividends were retained by the company and were ultimately reflected in its rise in value, so that the appellant is not entitled to claim it again, so to speak, as compensation. Hence, as I have said, there was no error in principle in the judge not awarding compensation in respect of the non-payment of dividends.
49 As to loss of earnings, the appellant claimed below, as I have noted, that he was entitled to compensation for the earnings he would have gained at Musashi but for his dismissal which, he said, was part of the oppressive conduct of the respondents. His Honour, however, said that this claim was essentially one for damages for wrongful dismissal that was not brought within the limitation period. As the judge noted, such a claim should have been brought by the appellant in his capacity as an employee of Musashi and could not be properly made in the context of relief sought as a member of the company. In the end, his Honour did not regard it as appropriate or just to award compensation, as the appellant claimed, to cover his earnings for some indefinite time after his employment was terminated.
50 The appellant argued before us that his Honour erred in a number of respects in rejecting the claim that was based on loss of earnings. First, it was said, his Honour mischaracterised the claim for compensation as one for wrongful dismissal. Such a wrongful characterisation, it was said, led his Honour into error in refusing to order the compensation sought. Secondly, the appellant contended, his Honour's rejection of the claim was inconsistent with the evidence that the judge had himself accepted, namely, that Horewood had offered the appellant employment, unlimited as to time, promised him that he would be appointed a director of Musashi, which he did on 7 September 1990, and spoke in July 1990 in terms of the appellant being an excellent employee and instrumental in the company's sales doubling whilst he was there. Counsel argued that, notwithstanding this, the respondents wrongfully pursued, in the latter part of 1990, a policy of getting rid of the appellant from Musashi in order to avoid having to pay all or some of the money to which he would have been otherwise entitled. In so doing, it was said, they pursued oppressive conduct against him which entitled him to compensation for lost wages. Yet, it was claimed, his Honour made no reference to these matters when dealing with the appellant's claim for loss of earnings.
51 But it is plain enough that merely because his Honour did not refer to those matters in his reasons does not mean that he did not have due regard to such of them as were relevant to the consideration of the claim now under discussion.[23] Moreover, I consider that his Honour made no error of principle in characterising the appellant's claim as described. In any event, it was open to his Honour, in the exercise of his discretion under s 233(1) of the Act, not to award the appellant compensation in relation to the termination of his employment at Musashi, particularly given that there were circumstances, as accepted by his Honour, that would have justified his dismissal on an objective basis. I have earlier referred to some of these circumstances, such as the appellant's lie to Horewood about the true reason why he was detained at the airport in early 1990, the making of a fraudulent customs declaration, his falsification of documentation as to his appointment as director, his procurement of Hore's signature on Musashi's letter of support for the renewal of his visa, his dealings with the company's agents in a manner which Horewood regarded as contrary to the company's interests and his personality clashes with Horewood.
52 In the circumstances, I consider that there is no merit in the appellant's claim that his Honour erred in not awarding him compensation in respect of the non-payment of dividends to him and for the termination of his employment at Musashi.
53 I mention for completeness two matters. The first is that I think that there is no merit in the appellant's contention that his Honour failed to give sufficient reasons for his decision on these matters. The second is that the appellant's ground alleging failure by the judge to award exemplary damages was abandoned on the appeal.
Fresh evidence
54 I now turn to consider the appellant's claim that the documents that were obtained by him from the respondents pursuant to the above subpoenas should be admitted on the appeal pursuant to r 64.22(3) of the Rules of Court. It was said that the material, on its face, demonstrates that there was manifest error in the court's valuation of Musashi or, at the very least, that the valuation was carried out on a false premise. In either case, it was said, the impugned valuation should be set aside and referred back to the trial judge for reconsideration in the context of the new evidence. Before analysing this claim it should be mentioned that, notwithstanding the Court's order as to the confidentiality in respect of these documents, it will be necessary to refer briefly to some of them in order to explain the decision as to their relevance and admissibility. I doubt, however, that such documents are now commercially sensitive so that I think that their limited disclosure here is unlikely to cause justified concern to the respondents or to Nestlé.
55 I turn first to describe briefly the relevant documents and their content. They confirm the appellant's claim that negotiations for the purchase by Nestlé of the Musashi assets began in about late 2004 and that the discussions reached fruition in or about mid 2005, as is apparent from a letter of 28 July 2005 from Nestlé to Musashi offering to acquire its assets for an aggregate price of $28 million on terms of the attached Purchase Documentation Outline ("PDO"). The formal documentation that contains the terms and conditions of sale appears to have been executed by the parties on or about 27 October 2005. Although the matter is far from clear, it seems that, relevantly for present purposes, there were two sets of documents that related to the sale. Chronologically, the first was an agreement pursuant to which Musashi acquired at least some of the intellectual property that it sold to Nestlé from one Jonathon Lambie Davie ("Davie") who, it would seem, assigned to the company, by deed dated 25 October 2005, all his intellectual property rights in a number of (protein based) recipes as well as specified confidential information.[24] The other set of agreements was constituted by the Business Purchase Agreement and the Intellectual Property Purchase Agreement that appear to have been executed on 27 October 2005.[25]
56 I will describe the relevant parts of these agreements shortly, but it is convenient to mention at this point that it was not until the 2004 financial year that there was any reference in the company's financial statements that it was using intellectual property in relation to the conduct of its business (although I would have thought that it would have been obvious to anyone who knew the Musashi business that at least some intellectual property was used in the conduct of it). The 2004 accounts, that were finalised after negotiations with Nestlé commenced, show for the first time, as an item of expense, "royalties [paid] to shareholders". The reference to "shareholders" seems to be a reference to Horewood and Hore so that, curiously, on the face of those documents, no royalties were paid to Davie in that year. And in a Musashi document headed "Special Purpose Financial Statements for the year ended 30 June 2005" that formed part of the confidential material, the Profit and Loss Statement discloses that the amount spent by the company in that year on royalties amounted to $260,000 (although there is no disclosure to whom the money was paid). Returning to the two agreements, their terms make it apparent that they are to be read together. It was pursuant to those agreements that Nestlé acquired the tangible business of Musashi (for approximately $13 million) and its intellectual property (for approximately $12.7 million).[26]
57 The appellant's counsel also referred to a file note, made by the solicitors for the vendors, that dealt with the question whether the anticipated appeal might inhibit the proposed sale. The note contained the entry: "IP in case". It was put for the appellant that this notation indicated that the respondents were positioning themselves so that, if the valuation were to be attacked on the basis of the 2005 purchase price, the seemingly high price could be explained by reference to the sale of the intellectual property to Nestlé. In other words, it was said, the transaction was devised so as to split the purchase price between the intellectual property and the tangible assets of Musashi in order to give the appearance that the tangible assets had a value that was closer to that attributed to them by the court. The subpoenaed documents also disclose that, although the net profit of Musashi in the 2004 year was $800,000, it rose to almost $2.5 million in the 2005 year and that the operating profit before tax rose to $3.4 million in 2005 compares with the figure of $1.1 million in 2004. The material also confirms that Nestlé was a very keen purchaser.
58 The appellant submitted that the Court should exercise its power to admit the further material because it demonstrates that the valuation of the company by his Honour (and the valuers) was plainly wrong and/or proceeded on a false basis. The sale price of $28 million, it was said, is more than twice the highest value that was attributed to it by any of the valuers so that, on its face, there is manifest error in the court's valuation of the appellant's shares. Furthermore, it was put, the fresh evidence shows that, at the time of the valuation, the company had assets which the valuers and the court did not realise existed, namely, the intellectual property, and, therefore, the valuation proceeded on a false premise. The reason the existence of intellectual property was not known, so it was alleged, was that the respondents failed to comply with the discovery process with the result that material information was effectively hidden from the court. It was said that the circumstances here were similar to those in Commonwealth Bank of Australia v Quade ("Quade")[27] where the evidence in question was not made available at the hearing because of the failure by the successful party to disclose it by way of discovery. In the circumstances, it was said, the justice of the situation requires the admission of these documents into evidence.
59 Thus, the documents that are said to constitute the "new evidence" can be conveniently divided into two groups: those that relate to circumstances that existed prior to trial - such as those relating to intellectual property - and those that pertain to matters that plainly occurred after judgment. Rule 64.22(3), which recognises this Court's power to receive further evidence, provides: