In the matter of Springex Pty Limited; Moshirzadeh v Sajadi & anor

Cross Claim 12As its outcome may affect the valuation question, it is convenient to deal first with the cross-claim.

13Springex cross-claimed for $20,000 from Mr Moshirzadeh, being the initial contribution for his 40% shareholding, which it alleges he did not pay. 14Mr Sajadi in his affidavit evidence said that there was a "buy-in price" of $20,000 for Mr Moshirzadeh's initial 40% shareholding, which was to be paid on Mr Moshirzadeh's behalf by Mahmoud, and that it was never paid. 15Mr Moshirzadeh said that it was not a 'buy-in price', but that he and Mr Sajadi agreed that he would advance $20,000 (and Mr Sajadi would advance $30,000) to the company as loan capital (proportionate to their original shareholdings), and that the advance was made on his behalf by Mahmoud. Mr Moshirzadeh's evidence is substantially corroborated by Mahmoud, although the evidence as to how the payment was made was admittedly vague - it seems to have been effected indirectly, by Mahmoud allowing Springex some credit in transactions with Irex. 16More significantly, the loan is recorded in the books and records of Springex as a loan from Mr Moshirzadeh to Springex, as is a corresponding loan of $30,000 from Mr Sajadi. Repayment of both loans in 2007 is also recorded. The paid up capital of Springex is recorded as $100. Mr Sajadi approved financial statements of Springex that reflected these matters. 17Even if the initial subjective intention of Mr Sajadi was ambiguous, objectively these advances were treated as loan capital advanced on loan account, not as subscriptions for equity. Indeed, in cross-examination, Mr Sajadi became more equivocal as to the character of his and Mr Moshirzadeh's advances: he said that he was not aware how they were treated for accounting purposes, and agreed that he and Mr Moshirzadeh had received at least some repayment. 18The cross-claimants have failed to prove that Mr Moshirzadeh did not advance $20,000 in connection with his acquisition of an interest in the company. To the contrary, the evidence establishes that $20,000 was advanced on behalf of Mr Moshirzadeh and $30,000 by Mr Sajadi, by way of loan capital, and later repaid. This aspect of the cross-claim therefore fails.

Secret commissions 19Springex claimed that Mr Moshirzadeh was liable to account to it for commissions received by him from Irex without the knowledge or consent of Mr Sajadi or Springex. The central allegation is that, while Mr Moshirzadeh was a fiduciary of Springex, moneys were secretly paid by Irex into an account in his name with Irex for his benefit, and that in equity Springex was entitled to those moneys. The claim was particularised as one for the amounts that had been credited to two accounts, numbered 86 and 87, with Irex [Cross-claim, paras 13-15, Annexure C]. 20There is no doubt that Mr Moshirzadeh, being a director, owed Springex fiduciary obligations. It is clear enough that if, in fact, Mr Moshirzadeh derived financial benefits from Irex in the manner alleged, while he was a director and fiduciary of Springex, he did so in circumstances that would on basic equitable principles render him liable to account for them to his principal, Springex [Chan v Zacharia (1984) 154 CLR 178, 198-9 (Deane J)]. The essential question is the factual one, whether in fact he received such benefits. 21On 27 June 2007, an account - styled "Mohammed's Account 86" - was opened, in Irex's Booloo Moien accounting system. A translation of that account, which was tendered but not admitted (for reasons previous given [T22-23]), but was the subject of some oral evidence [T165-168], indicates that it had a closing balance as at 19 March 2008 of IRR107,989,300. The Persian New Year was 20 March, and on 24 March 2008 a new account - styled "Mohammed's Account 87" was opened with an opening balance of IRR107,989,300, corresponding with the closing balance of Account 86; this closing of Account 86 and opening of Account 87 was plausibly attributed to the New Year. Between then and 24 December 2008, there were numerous transactions on this account, both credits and debits. So far as can be ascertained from the imperfect English translation of the incomplete Farsi copy of the account in evidence, a total of IRR928,467,793 was credited to the account over the period from 24 March 2008 to 24 December 2008, while a total of IRR798,025,000 was debited, leaving a closing balance of IRR130,442,793 (equivalent to about AUD19,674.63) on 24 December 2008. 22Mr Moshirzadeh now accepts that an internal account ledger was established in his name, but says that this was done by his brother Mahmoud without his knowledge and for the benefit of their brother Mehdi, and that he has himself received no benefit from it. Mahmoud says that he established the account to conceal commissions paid to Medhi, and that it was not for the benefit of Mr Moshirzadeh. The question is whether, in the light of this explanation, on the whole of the evidence, Springex has established to the requisite standard that Mr Moshirzadeh received a benefit from Irex through Accounts 86 and 87. This requires consideration of the evidence of Mr Moshirzadeh and Mahmoud about those accounts, and of matters that bear on the credibility of their evidence. 23Mr Moshirzadeh says that he was unaware of the existence of the account in his name until, in about December 2008, Mr Sajadi accused him of receiving secret payments into a secret account in his name with Irex, following which he contacted Mehdi, who told him of an "account under your name [that] has nothing to do with you". He says that in reply to his request that Mehdi send him something to explain the matter to Mr Sajadi, he received a 2-page document (being the ledger for Account 87), which he then gave to Mr Sajadi. He denies that the balance of account 87, of IRR130,442,793, was paid to him on 21 January 2009, or at all. 24Mahmoud says that an account was established in Mr Moshirzadeh's name but that the money in it belonged to Mehdi, and that he had agreed this arrangement with Mr Khanzadeh to provide additional reward for Mehdi's services, which were valuable to Irex, in order to keep secret from the other Irex staff, including the accountant Mr Nezhad, that Mehdi was receiving commission. Mr Rollinson, for the defendants, submitted that this was improbable, as the computer system entries were all made by Nezhad, according to Mahmoud's oral or written instructions (as Mahmoud could not make them himself); but use of the account in Mr Moshirzadeh's name would have disguised from Nezhad as well as from any other staff member that the true beneficiary was Mehdi. Mahmoud referred to "the internal affairs of the business" as an additional reason for concealing the true owner of the account. Although the evidence was not explicit, I infer that this was a reference to taxation-related purposes, and that this other suggested purpose was to conceal income from taxation authorities in Iran. Mahmoud said that the account was established in the name of Mr Moshirzadeh, but for the benefit of Medhi, and that Mr Moshirzadeh had nothing to do with it; that he explained to Mr Khanzadeh that he wanted to help Mehdi and did not want other staff to know about it - so that they would not have an excuse to ask for commissions as well. He said that it was commonplace in Tehran that people open such accounts for the purpose of not allowing the tax office to know, and other purposes. He said that he never discussed this account with Mr Moshirzadeh, never told him that there was an account with his name on it, was not in Tehran when Mehdi sent a copy of it to Mr Moshirzadeh, and did not tell Mehdi to do so. He said that he did not know what happened to the balance of Account 87 after Medhi left Irex in early 2009. 25Mr Khanzadeh denied any knowledge of, discussion or agreement with Mahmoud about payment of commission to Mehdi, or the establishment or existence of any secret account for that purpose. However, it is to be borne in mind that he was in serious dispute with Mahmoud: he alleges that Mahmoud has "swindled" him of $150,000 - which he described as "treason". This resulted in civil and criminal judicial proceedings against Mahmoud in Iran - in which it appears that Mr Khanzadeh has, at least so far, prevailed. Mr Khanzadeh could not say what had become of the closing balance of Account 87. 26There is no evidence from Mehdi. However, it was agreed that no adverse inference should be drawn from his absence, which was agreed to be sufficiently explained by the admitted difficulty in procuring a visa. 27Generally speaking, the versions of Mr Moshirzadeh and Mahmoud were consistent, internally and with each other, which is an indication of reliability - although, of course, it is possible that it could be the result of collaboration. Both presented as careful and precise witnesses - but this is a frail basis for findings of contested facts. Mr Moshirzadeh in particular, and to a lesser extent Mahmoud, have a strong interest in the outcome, and in avoiding a conclusion that they have acted dishonestly. While there was some evidence of judicial proceedings in Iran against Mahmoud in respect of alleged dishonesty in his dealings with Mr Khanzadeh, there was insufficient detail or proof to enable me to be satisfied that he had in fact acted dishonestly in respect of the subject matter of those proceedings. 28Against that, cross-examination of Mr Sajadi established that following the final breakdown of the relationship in 2010 (which culminated in the commencement of the proceedings), Mr Sajadi not only himself removed $250,000 from the company, but ultimately pleaded guilty to attempting forcibly to enter Mr Moshirzadeh's home with intention to intimidate, admitting (1) going to the home with an iron bar, and (2) saying to Mr Moshirzadeh, "I'm here to kill you and your family". These admissions were made in a statement of facts agreed with the police, believing on advice that this would assist to achieve a better outcome for him; before me however, he was somewhat reticent to confirm that the second admission was true, though he accepted that he had to treat it as true. However, he had previously, in an ERISP, given the police a version which was deliberately false in material respects, in a manner which served to exculpate him and inculpate Mr Moshirzadeh. He was reluctant to embrace "lies" as a description of these falsehoods, which he attributed to the "extreme pressure" of the collapse of the relationship and "being out of his mind". However, they demonstrate that Mr Sajadi may be prepared to tell falsehoods to advance his own interests or to harm Mr Moshirzadeh, even when under an obligation to tell the truth. This means that his evidence must be treated with great care, particularly where it is not corroborated, either directly or indirectly by associated matters. I have therefore founded my conclusions principally on the probabilities based on matters that can be established objectively, matters that are agreed, and matters established or corroborated by the evidence of relatively independent witnesses. 29Mahmoud visited Australia in or about January 2007, for about 40 days. He stayed with Mr Moshirzadeh, visited the Springex office, and discussed the Irex/Springex business. He denies that they discussed the secret account and how much was in it - which is credible as it appears that the account had not then been established. 30Mr Sajadi says that "in about the middle of 2007", when checking on a portable telephone handset from the shop downstairs whether a line was free, he overheard a telephone conversation between Mr Moshirzadeh and Mahmoud in which Mr Moshirzadeh said "Mahmoud make sure you keep filling up my account" and Mahmoud replied "Don't you worry about that, I will keep doing that". He says that he was suspicious but without better evidence could do nothing. In the absence of corroboration I do not act on this, albeit that it was not expressly denied by Mr Moshirzadeh in his affidavit evidence. 31It appears - from the evidence of Mr Khanzadeh and Mr Sajadi - that in the latter part of 2008, Mr Khanzadeh began to suspect that Mahmoud had not been acting honestly, and undertook an investigation of Irex's accounts, as a result of which he became aware of the account in Mr Moshirzadeh's name. In late December 2008 or possibly early January 2009, Mr Khanzadeh informed Mr Sajadi that Mahmoud had been caught red-handed and had been placing funds into Mr Moshirzadeh's account, and that Mahmoud had been locked out of the business and was to be, or had been, dismissed. As he was dismissed with effect from 1 January 2009, this conversation cannot have been long before then at the earliest. 32Mr Moshirzadeh agrees that he had a conversation with Mr Sajadi in late December 2008 in which Mr Sajadi asked "Where is Mahmoud, I hear that he's not at work in Tehran", and Mr Moshirzadeh answered "He is in Tehran". He denies that Mr Sajadi then said "I've heard he's not there anymore", but agrees that a day or two later he told Mr Sajadi "Oh, Mahmoud has gone for a business trip to Dubai". Thus Mr Moshirzadeh knew that Mahmoud was not in the Tehran office, and is likely to have known that he had had a serious falling out with Mr Khanzadeh. 33On a Sunday afternoon in late December 2008 or early January 2009, after Christmas - for reasons to which I shall come it was probably Sunday 4 January 2009 - Mr Sajadi telephoned Mr Moshirzadeh at his home, while Mr Moshirzadeh was having a family gathering, and asserted that there was an account in his name with Irex in Iran, and demanded a copy of it. Mr Moshirzadeh replied that he did not know what Mr Sajadi was talking about and they could discuss it at the office the next day. Mr Sajadi asserts, but Mr Moshirzadeh denies, that he pressed a demand for the account, and that Mr Moshirzadeh said "OK, I will give it to you". This seems unlikely, in the light of the evidence of what was said in later conversations, but is not impossible, as - for reasons that will be explained below - it is likely that Mr Moshirzadeh had had a copy of Account 87 since 16 September 2008. 34The next day - a Monday (for the same reasons, probably Monday 5 January 2009) - at the Springex office, Mr Moshirzadeh and Mr Sajadi had a discussion. Mr Sajadi said "I have been told that you have been directing money in Tehran from the Irex account into an account in your own name in Tehran". Mr Moshirzadeh denies (as Mr Sajadi asserts) that he then replied "My brother created that account, I don't know about it", and says he replied "I don't know what you're talking about". He agrees that Mr Sajadi said "I want you to give me the statements for your account at Irex", but denies replying "There is an account but I don't have the statements"; he says his reply was "I don't know what you're talking about". He denies Mr Sajadi's assertion that he said "Any amounts that are due to the company, Springex, that are not there, I will pay them back". He says that Mr Sajadi was "really angry", and insulted his ancestors, pushed him into a chair, and said that he would kill him and his brother. It is notable that on Mr Sajadi's version Mr Moshirzadeh denied knowledge of the account (though saying that his brother had created it), which does not fit well with him saying the previous day that he would provide the details to Mr Sajadi. It is also inconsistent with such denial that he would say that he would pay back any amounts due to Springex. These matters cast some doubt on the accuracy of Mr Sajadi's version. Ultimately, the detail of this conversation does not contribute significantly to my conclusions. 35Following this, Mr Moshirzadeh says that he contacted his brother Mehdi in Tehran, who informed him that there was an account in his name but that it had nothing to do with him, and was now mixed up with the dispute between Mr Khanzadeh and Mahmoud. He agreed to send Mr Moshirzadeh a copy. Mr Rollinson, for the defendants, submitted that it was implausible that he would make this inquiry, not of Mahmoud who was a principal in Irex, but of Mehdi; but as he was aware that Mahmoud was not in the Tehran office (and was probably aware of the falling out between Mahmoud and Mr Khanzadeh), I do not think it implausible on that account. However, for reasons explained below, it is probable that Mr Moshirzadeh had had a copy of the account since 16 November. I accept that Mr Moshirzadeh had a conversation with Mehdi at or about this time, and asked him to send a (further) copy of the account in his name, as occurred the next day. 36Mr Moshirzadeh then met his friend Thomas Shah at his home. Mr Shah's version (he provided an affidavit for the defendants) is that Mr Moshirzadeh said that he had nothing to do with diversion of business funds, but that there was a matter of kickbacks put aside for him by his brothers that Mr Sajadi did not know about, that Mr Sajadi wanted an explanation and he did not know how to do it; Mr Shah advised him to come clean and tell Mr Sajadi exactly what happened in Iran; Mr Moshirzadeh said that he had a document containing a list of the commission that Mr Sajadi was requiring to see; Mr Shah said to give him what he wanted; and they agreed to set up a meeting with Mr Sajadi. Mr Moshirzadeh denies that he told Mr Shah that he received commissions from his brothers, and says that he believes he said "Russoul (Sajadi) thinks that I have been getting commissions from my brother that he hasn't known about"; he apparently says - though somewhat indistinctly - that he could not have referred to the document, as he had not yet received it. It is possible, but unlikely, that Mr Shah - who was not cross-examined, albeit on the basis that it was not to be taken that his evidence was accepted, but who appears to have been relatively independent and neutral - misunderstood what Mr Moshirzadeh said; and again, it is likely that Mr Moshirzadeh had had a copy of the account since 16 November. Mr Shah's is therefore significant evidence that Mr Moshirzadeh knew of the account in his name and that it was for his benefit. 37Later that same day, Thomas Shah brought Mr Moshirzadeh to a meeting at Springex's office with Mr Sajadi and Kambiz Allaf, who Mr Sajadi had asked to be present. 38According to Mr Sajadi, he said "You have been stealing money from me, from the company, by misdirecting commissions ... to your account ... You have to present the statements of your account or Irex will send them to me... Your brother ... has been kicked out from Irex ... and has been dismissed". Mr Moshirzadeh replied "You are angry that I've been dishonest. I will give you all the evidence. I will pay everything back, Mahmoud has created all of this". Mr Sajadi said that Mr Moshirzadeh must confess to cheating in conjunction with his brother; Mr Moshirzadeh apologised and said that he would provide all of the reports of the accounts and everything Mr Sajadi wanted, "but you need to forgive me"; Mr Sajadi said that he would decide whether to forgive him once Mr Moshirzadeh gave him the evidence. 39According to Kambiz Allaf - who is in Mr Sajadi's camp, and who like Mr Shah was not cross-examined, but on the basis that it was not to be taken that his evidence was accepted - Mr Sajadi asserted that Mr Moshirzadeh and Mahmoud had been stealing money which should have come to Springex; Mr Moshirzadeh denied this. Mr Sajadi said that he had also found out about a private and secret account in the Irex Iran office into which funds were being misdirected, and wanted Mr Moshirzadeh to disclose and return all the funds to the company, and spoke of the need for honesty and integrity. Mr Moshirzadeh was silent. When asked to respond, he raised the insult of his ancestors. Mr Sajadi said that the matter could be resolved - if Mr Moshirzadeh was honest, he could be forgiven. Mr Moshirzadeh said that he was sorry; that he would get the documents requested as soon as possible; that he would repay what was Mr Sajadi's from the account in Iran; that he had done the wrong thing; and "I will repay the money and I will give you all the paperwork that you need". Mr Sajadi eventually agreed to give him another chance, "but only if he brings a full copy of the accounts and pays the funds back". This version involves no attribution of responsibility to Mahmoud, which in the light of the other evidence is surprising. 40Mr Shah (who places the meeting a couple of days later, but this seems against the weight of the evidence) says that Mr Moshirzadeh said "I'm sorry for all that has happened. I had nothing to do with it. My brothers are involved with this problem in Iran with their partner there". Mr Moshirzadeh apologised, and Mr Sajadi apologised for the insult. This confirms that Mr Moshirzadeh offered an apology, although maintaining that he had "nothing to do with it". 41Mr Moshirzadeh says that much of Mr Sajadi's version is incorrect, but that Kambiz Allaf's version is substantially correct, although it omits that he said "I do not know about the account" and "I have not received any money from Irex or my brothers". He agrees that Mr Sajadi said "Mohammed, you have been stealing money from me, stealing money from the company by directing money into your account in Tehran". He does not remember him adding "Your brother (Mahmoud) has been kicked out of Irex, he's been dismissed". He denies that he replied "You're angry that I've been dishonest but I will give you all the evidence and I will pay all the money back", or "It's not my fault, Mahmoud has created all of this", but agrees that he promised to give him documents about the account as soon as he found out. 42On his own version, by this time Mr Moshirzadeh knew - from his conversation with Mehdi - of the existence of the secret account. On the whole of the evidence, and giving greater weight to that of Mr Shah and Mr Allaf and to the surrounding circumstances, I find that Mr Moshirzadeh did not deny Mr Sajadi's allegation that there was a secret account in his name with Irex into which funds were being misdirected, but said that it had been set up by his brothers and that he had had nothing to do with it; said that he would get the documents recording the account and provide them to Mr Sajadi as soon as possible; and said that he was sorry and that he would repay what was Mr Sajadi's from the account in Iran. 43The following day - Tuesday 6 January 2009 - Mr Sajadi and Mr Moshirzadeh had dinner with Mr Shah at his home. Mr Shah says that Mr Moshirzadeh handed a document to Mr Sajadi and said "I was not part of it. This is the document created for me in Iran by my brothers. Even that I had nothing to do with it. I have no idea what it is. Let's get together and work it out and what it is, together". He asked forgiveness and suggested that they continue to work together. 44Mr Sajadi says that Mr Moshirzadeh said that he had learnt a big lesson, regretted what he had been doing, asked forgiveness, and said "Here is a print out of my account with Irex. I will pay back Springex everything that has been taken", and "I have misdirected the funds. It was in conjunction with my brother. I was deceived by him and he encouraged me to do it". He asked to be allowed to go to Iran to resolve things there. Mr Sajadi forgave him, told him to go to Iran and do what he thought right to do, and reminded him that he had to repay the company. 45Mr Moshirzadeh says that he handed to Mr Sajadi the two page document he had received from Mehdi and said "This is the document you are looking for, it has nothing to do with me". 46The document has its own mysteries. The document identified by both Mr Sajadi and Mr Moshirzadeh as having been provided on that occasion (Ex RS1, pp12-13 of Mr Sajadi's affidavit sworn 9 September 2010) is in Farsi, and comprises two pages. However, the first page bears two facsimile transmission imprints: one, in Farsi, on a Persian date that the interpreter somewhat tentatively said corresponded to 7 October 2008, but which on close examination and comparison of the documents, including the Farsi numerals, I am satisfied in fact corresponds with 16 November 2008; and another in English on 16 November 2008 at 20:03, of which it was page 1. The last entry on that page is dated 3 November 2008. The second page also bears two facsimile transmission imprints: in Farsi on the equivalent of 6 January 2009, and in English what appears to be 6 January 2009 at 14:10, of which it was page 3. The last entry on this page was made on the Persian equivalent of 24 (possibly 23) December 2008. The second page repeats the last three entries that appear on the first page. They are therefore not consecutive pages of a running account, but overlap; and they were not transmitted on the same occasion, but months apart. 47What purports to be the English translation (Ex RS1, pp14-15) contains a number of apparent inconsistencies. It was made on 31 August 2010. Instead of the summary at the end showing total credits and debits and balance which appears in the Farsi document, it shows an entry dated 21 January 2009 (after the date of transmission of the second page of the Farsi version) being a debit of IRR130,442,793, reducing the balance to nil. It does not contain the summaries that appear at the foot of both pages of the Farsi document, nor does it contain the last the entries of the first page of the Farsi document (which are duplicated at the top of the second page), but it contains an additional debit entry dated 21 January 2009. It appears not to be a translation directly of the Farsi documents at Ex RS1, pp12-13, but of an excel spread sheet (at Ex RS1, pp16) on which some of the Farsi numerals have been transliterated, the provenance of which is unexplained, but which could not have been in existence before 21 January 2009, the date of the last entry on it. 48Transmission of the second page on 6 January 2009 enables the chronology to be fixed in the period 4 to 6 January as mentioned above, and tends to corroborate receipt of such transmission by Mr Moshirzadeh on the afternoon of 6 January (which would have been the morning of 6 January in Tehran). However, it is clear that page 12 had been in Australia since 16 November 2008, while page 13 was not transmitted until 6 January 2009. When these matters emerged, Mr Moshirzadeh after initially saying "I can't remember receiving that in 2008", denied that he had received page 12 in October or November 2008 and maintained that he received two pages in January 2009. Yet it is clear that the 6 January transmission was of 3 pages, although it is conceivable that one was a coversheet. Mr Sajadi maintained that he was handed one account of two pages in early 2009, though he conceded that documents might have been jumbled in the course of obtaining translations and compiling his affidavit. The question remains, who had received the first page on 16 November 2008 (page 12)? It seems distinctly unlikely that Mr Sajadi would have done so in November, when he was pressing for it in early January; also that it would have been transmitted to him by Mr Khanzadeh in mid-November, as Mahmoud was then still managing the Tehran office, and Mr Khanzadeh could have informed Mr Sajadi that he had been "caught red-handed" only shortly before his dismissal on 1 January 2009. It is far more probable that this page was transmitted by Mahmoud to Mr Moshirzadeh on 16 November 2008, and that Mr Moshirzadeh had had it since then. Moreover, on this point - which arose more or less without notice in the course of cross-examination - I found Mr Moshirzadeh's initial response "I can't remember receiving that in 2008" less than convincing; it was one of only a few instances that his otherwise quite precise evidence descended to "non-recollection", before hardening to a denial. Accordingly, Mr Moshirzadeh was more probably than not in possession of this document - page 12 - at the time of his initial conversation with Mr Shah, on 5 January, although he plainly also received a three page transmission - including page 13 - on 6 January, which he gave to Mr Sajadi that evening. 49Two days after the dinner at Mr Shah's, at a meeting at Springex's office, it was agreed that Mr Moshirzadeh should travel to Iran to sort things out, and would be allowed a year "to prove that he was a good brother" to Mr Sajadi. 50Mr Khanzadeh says that in January 2009, Mr Moshirzadeh telephoned him, sought forgiveness, asked him to take all the moneys in the accounts under his name and other names, and begged him not to send a print out of the accounts to Mr Sajadi. He says he responded that Mr Moshirzadeh should seek forgiveness from Mr Sajadi. Mr Moshirzadeh says he had a conversation with Mr Khanzadeh in which he said "If there is an account in my name it's not mine and as far as I'm concerned the money does not belong to me and you can take and do whatever you like with it". As with Mr Shah, it is possible, but unlikely, that Mr Khanzadeh misunderstood what Mr Moshirzadeh said. While Mr Rollinson submitted that it was unlikely as, on any view, Mr Moshirzadeh obtained and provided a printout of the account to Mr Sajadi, it would be consistent with the chronology of events that such a conversation took place before Mr Moshirzadeh's first (5 January) conversation with Mr Shah - that is to say, while Mr Moshirzadeh remained undecided whether to provide a copy of the account to Mr Sajadi. 51Subsequently, according to Mr Khanzadeh's affidavit evidence, Mr Moshirzadeh informed him that Mr Sajadi had forgiven him on condition that Mahmoud and he pay their debts and damage caused to Springex, and they were continuing to work with Mr Sajadi. Given the hostilities between Mr Khanzadeh and Mahmoud, this seems unlikely, and Mr Khanzadeh rather resiled from it in cross-examination, saying that it was an inference he drew from the fact that they were still working together. 52Still later (it must have been towards the end of January) Mr Moshirzadeh instructed him to transfer any remaining funds into a new account in the name of Sajadi. A few days later, Mr Moshirzadeh changed this instruction, to transfer the remaining funds "to my younger brother's account". In cross-examination, Mr Khanzadeh said that Mr Sajadi also gave him this instruction. 53On 28 January, Irex transferred IRR6,300,000 approximately to an account in the name of Mehdi. This was the balance of the funds standing to the credit of Springex in Irex's accounts. It does not appear to have included the moneys standing to the credit of the account in Mr Moshirzadeh's name. 54Mr Moshirzadeh travelled to Iran on 1 February 2009. Having left Irex, Mahmoud and Mehdi established a new Tehran business styled Mani Exchange. Springex began trading with Mani Exchange in place of Irex. 55From the above summary of the evidence, the following matters are the most significant. First, the probability that Mr Moshirzadeh had received a copy of Account 87 on 16 November 2008. Secondly, Mr Shah's evidence of their first conversation on 5 January, that Mr Moshirzadeh spoke of "kickbacks put aside for him by his brothers that Mr Sajadi did not know about", that Mr Sajadi wanted an explanation, and that he had a document containing a list of the commission that Mr Sajadi wanted to see; and that it was decided to "come clean" with Mr Sajadi. Thirdly, my above findings in respect of the meeting with Mr Shah and Mr Allaf, based chiefly on their evidence (and Mr Moshirzadeh's acceptance of Mr Allaf's version as substantially correct), that Mr Moshirzadeh did not deny Mr Sajadi's allegation that there was a secret account in his name with Irex into which funds were being misdirected, but said that it had been set up by his brothers and he had nothing to do with it; said that he would get the documents recording the account as soon as possible; and said that he was sorry and that he would repay what was Mr Sajadi's from the account in Iran. Fourthly, Mr Shah's evidence of the dinner meeting on Tuesday 6 January 2009, that Mr Moshirzadeh handed a document to Mr Sajadi, said "I was not part of it. This is the document created for me in Iran by my brothers. Even that I had nothing to do with it. I have no idea what it is. Let's get together and work it out and what it is, together", and asked forgiveness. Fifthly, Mr Khanzadeh - who was relatively independent, though plainly antagonistic to Mahmoud - contradicted Mahmoud's evidence that the secret account was established with his knowledge and agreement. Sixthly, Mr Kanzadeh's evidence of Mr Moshirzadeh's call seeking forgiveness, asking him to take all the moneys in the accounts under his name and other names, and begging him not to send a print out of the accounts to Mr Sajadi. 56From these matters, I am comfortably satisfied that Mr Moshirzadeh's knowledge of the secret account was not so limited as he professed, and that he knew of its existence and that it was intended to benefit him. It is notable that at no point in these events during January 2009 was it suggested that the beneficiary of the account was not Mr Moshirzadeh but Mehdi; indeed, the matters emphasised in the preceding paragraph suggest the opposite; the notion that Mehdi was the beneficiary appears to have emerged only later. Accordingly, even though it has not been proved that funds were disbursed from Account 87 to Mr Moshirzadeh, or received by him in Australia, it may be inferred that he had ultimate control and authority over their disposition, to whomever they were disbursed. 57It may be said that it would seem an unlikely outcome of a confession that the Moshirzadeh brothers had been defrauding Mr Sajadi that he would agree that Mr Moshirzadeh should travel to Iran to sort things out, and would be allowed a year "to prove that he was a good brother" to Mr Sajadi; that Mr Sajadi would join in an instruction to transfer the remaining funds "to my younger brother's account"; and that Springex would commence trading with Mani Exchange, under the control of Mahmoud and Mehdi, in place of Irex. But in the light of Mr Sajadi's explanation of the significance of confession and forgiveness in the Persian culture, it is not impossible. In any event, these observations do not outweigh the matters referred to in the two preceding paragraphs. 58Accordingly, I conclude that Springex has established that Mr Moshirzadeh is liable to account to it for the moneys that were credited to Account 86 and 87 with Irex in his name. The only evidence before the court, the translation of account 86 having been rejected, is that of Account 87, to which the total credits were IRR928,467,793 (including the balance transferred from Account 86). Given the way in which the case was conducted, and the reasons given for rejecting the translation of Account 86, it does not seem to me that the cross-claimant should be given a further opportunity to adduce evidence of Account 86. (On what the translation suggests, if admitted, it would increase the total credits by only IRR153,005,824 (approximately AUD22,000), being the difference between the credits of IRR260,995,124 and the closing balance of IRR107,989,300 which was carried forward to Account 87 and is taken into account in the sum of IRR928,467,793). There should be judgment in favour of Springex against Mr Moshirzadeh for the AUD equivalent of IRR928,467,793.

Depletion of Springex accounts by $107,988.82 59Springex complains that Mr Moshirzadeh paid out $107,988.82 from its bank account without authority and thereby depleted its assets by that amount. The only evidence in support of this claim is that between 12 January and 19 January 2010, a period that was selected intentionally by Mr Sajadi to demonstrate a depletion, is a summary apparently prepared by Mr Sajadi of the net credit balance of four Springex bank accounts indicating a reduction by that amount. The key transactions were debits from the CBA Business Account on 13 January of $83,000 and on 14 January of $24,000. But these were transfers to another Springex account, which as at 20 January had a credit total of $302,414, which is not taken into account in the cross-claimant's calculations. I am not satisfied that there has been any such deterioration in the overall status of the accounts as alleged, because there is insufficient evidence of the contemporaneous status of each bank account to sustain the conclusion. 60Moreover, as cross-examination of Mr Sajadi established, the sum of $107,988 was paid out to Australian clients of Springex, whom Springex was liable to pay, and in fact Mr Sajadi authorised the transactions. 61This aspect of the cross-claim fails.

62Springex and Mr Sajadi alleged that in respect of the venture involving Springex and Mani Exchange, between February 2009 and January 2010, Springex had not received the revenue to which it was entitled, being 50% of the profits. The case against Mr Moshirzadeh was apparently that he had somehow guaranteed the fidelity of Mani Exchange. 63It was first necessary for the cross-claimants to establish that Springex had not received the revenue to which it was entitled. To do this it tendered reports of an accountant Mr Mostafavi of 5 April 2011 and 9 January 2012, which expressed a conclusion that Springex should have received more than it did. However, those reports were rejected, for reasons previously given [T202-203]. With that, the substratum of this aspect of the cross-claim failed. 64Moreover, even had that evidence been received, it is not at all clear how Mr Moshirzadeh would have been responsible for any failure of Mani Exchange to account to Springex for its share of the profits of the venture.

Claim for $15,000 65Again because its resolution may affect the valuation question, and also because it is related to the first aspect of the cross-claim, dealt with above, it is convenient next to address to Mr Moshirzadeh's claim for repayment of a loan account debt of $15,000. 66This loan account is recorded in the MYOB books and records of Springex as a loan from Mr Moshirzadeh to Springex. There is also a record of a similar loan account in Mr Sajadi's name. In cross-examination, Mr Sajadi agreed that both had contributed $15,000 to the company by way of loan which had not been repaid. 67In their valuations referred to below, both experts ultimately treated the balances of these loan accounts, totalling $30,000, as liabilities of the company, with the result that the value of Mr Moshirzadeh's shares was proportionately reduced by the existence of those liabilities. It would be inconsistent with that approach to assert that the loan did not exist. 68There should be judgment for Mr Moshirzadeh against Springex for $15,000.

The valuation issue 69On 15 September 2010, the Court by consent ordered, pursuant to Corporations Act s 233(1)(d), that Mr Sajadi purchase Mr Moshirzadeh's 49% shareholding, at a price to be fixed by the Court. 70In a valuation for the purposes of a s 233(1)(d) order, the goal is to place the oppressed party in the same position, as nearly as can be, as would have pertained had there been no oppression [ES Gordon Pty Limited v Idameneo (No. 123) Pty Limited (1994) 15 ACSR 536, 540; Dynasty Pty Limited v Coombs (1995) 13 ACLC 1290, 1307]. At least usually, it is not appropriate to apply any discount for the fact that the oppressor already exercises control over the company [MMAL Rentals Pty Limited v Burning (2004) 63 NSWLR 167; [2004] NSWCA 451, [73]-[78]], and there was no suggestion that any discount should apply here on account of Mr Sajadi's pre-existing majority control. Where, as here, the purchaser under the order is an existing shareholder, the Court needs to assess the value of the shares to that person [Mike Gaffikin Marine Pty Limited v Princes Street Marina Pty Limited (1995) 122 FLR 294; MMAL Rentals, [73]-[78], [103]-[107]]. However, there was no suggestion that there should in this case be a premium for total control. 71Each party proffered an expert valuation of the company, by Mr Wilcock (for Mr Sajadi) and by Mr Cheadle (for Mr Moshirzadeh) respectively. Many aspects of the valuation were agreed, some of them after a joint conference. These agreed matters included the appropriate capitalisation rate for the purpose of working out goodwill (4.25% pre-tax), and (ultimately) the appropriate valuation methodology (net value of the assets). The valuers agreed that, assuming that the company owed each of the directors $15,000, the amount of $30,000 should be included as a liability of the company. They also agreed that trade creditors and debtors should be included. And they also agreed that, should Mr Moshizardeh be ordered to pay moneys to the company as a result of the cross-claim, such amounts (less any applicable tax) would have to be added to the valuation. At the beginning of the trial, there remained differences between them as to provision for taxation liabilities, and the calculation of goodwill (which depended on what assumption was adopted as to the impact on the business of restrictions imposed by the Government of Australia on trade with the Islamic Republic of Iran). There was also an issue as to whether a later version of the financial statements of Springex as at 22 January 2010 should be substituted, but it became apparent in the course of the trial that the second version, printed on 5 April 2011 and supplied in February 2012, which showed "current year earnings" of $508,601 and a net equity of $551,240 (as opposed to $149,967 and $192,606 respectively on previous assumptions) involved double-counting a large transaction; and it became common ground, therefore, that the financial position previously adopted by the valuers should be accepted. 72The valuers agreed that the pre-tax earnings history of Springex was as follows: FY Net income 2003/4 (from 19 Feb) -11374 2004/5 9079 2005/6 -11087 2006/7 45449 2007/8 36924 2008/9 -3107 2009/10 (to 22 Jan) 149967 Total (5.92 years) 215851

73Mr Wilcock then deducted 80% on account of the impact of trade sanctions, producing a result of $43,170, which on an annualised basis over 5.92 years was $7,292. Treating this as the maintainable level of earnings, he capitalised this by the agreed multiplier of 4.25 (corresponding to pre-tax return on investment of 23.5%) to produce $30,992. 74Mr Cheadle made no such deduction. On his approach, annualised earnings were $36,461, which capitalised by the agreed multiplier of 4.25 produces $154,960. However, Mr Cheadle first applied tax of 30% to the annual earnings, reducing them to $22,823, before applying the multiplier, to reach capitalised future maintainable earnings of $96,997. The agreed capitalisation rate of 4.25 was described by both valuers as a "pre-tax" capitalisation rate, yet was applied by Mr Cheadle post tax. In his supplementary report, he agreed that in the circumstances it was not acceptable to disregard taxation at this point. Moreover, in principle a pre-tax multiplier should be applied pre-tax, as Mr Wilcock did. In circumstances where to do so would produce a higher, not a lower, value (against the interests of Mr Wilcock's client and in the interests of Mr Cheadle's client), it is hardly likely that Mr Wilcock's approach, on this issue, was unreasonable. I will apply the multiplier to pre-tax earnings, as Mr Wilcock did. 75The remaining difference on future maintainable earnings is whether they should be reduced on account of the trade sanctions, as Mr Wilcock proposed and Mr Cheadle disputed. While the plaintiff invoked Short v Crawley [2008] NSWSC 917, 67 ACSR 627, [35], for the view that, like the smoking ban, this was at worst a temporary downturn, I accept that if there was, as Mr Sajadi apparently told the valuer, a serious negative impact on the business due to the sanctions, that would have had a radical impact on the price that any potential purchaser would have been prepared to pay at the time. The question is whether their introduction would reasonably cause a potential purchaser to think that the business earnings were no longer maintainable. 76However, there is little if any evidence to establish in fact that the sanctions had, or were likely to have, any relevant impact. Mr Sajadi apparently told Mr Wilcock that he intended to cease trading due to the sanctions, based on advice from the Commonwealth Bank and given Australian Government policy at the time; as recorded in a file note of his conversation with the valuer: "Sajadi doesn't want continue". But the sole evidence of the terms of the sanctions is to be found in Direction relating to foreign currency transaction and to Iran (13/10/2008) as amended, made under the (Cth) Banking (Foreign Exchange) Regulations 1959. This imposed bans on dealings in foreign currency in connection with transactions that related to property of, or for the benefit of, any of 20 persons and entities listed in the Annex to the direction. The direction commenced on 15 October 2008, and the annex was amended on 14 July 2010 with effect from 21 July 2010. It is not apparent that bans on dealings with the twenty listed individuals and entities would have had any, or any material, impact on the business of Springex. This is particularly so given that they had been in force since October 2008, yet during their operation the business had a highly successful year in 2009/10, and the 2010 amendments to the Annex were enacted only well after the valuation date. 77In those circumstances, I cannot accept that Mr Sajadi had formed an intention not to continue the business as at January 2010 - a conclusion which I have reached without reference to events after the valuation date, but which is supported by those events, namely that he continued the business, under a different banner, with considerable success. I conclude that no reasonable basis for an assumption that there would be an 80% downturn in business on account of trade sanctions is established. 78Moreover, the maintainable earnings calculation of $43,170 per annum is a very conservative one, and itself contains a significant allowance for the prospect that the high earnings achieved in 2009/10 would not be sustained. More recent years are usually far more significant than the early years of a business. In my view, a purchaser would not be concerned with the earnings history prior to FY2006/7. Using the last four periods, the annualised earnings would be $64,391. This includes one abnormally bad year (2008/9), and the most recent period (2009/10) which was conspicuously successful but might not be sustainable. Unassisted by the expert evidence, I would have concluded that the maintainable earnings were not less than about $60,000 per annum, which using the uncontroversial 4.25 multiplier would have capitalised at $255,000. But given that neither valuer was challenged on this point, and that it was not argued, I ought not step outside the bounds of the issues as litigated by the parties. However, it leaves me very comfortable in concluding that the maintainable earnings calculation is already a very conservative one containing a very substantial allowance for the possibility that the high earnings in the first seven months of 2009/10 would not be sustained. 79Accordingly I conclude that the capitalised net maintainable earnings are $154,960 (annualised earnings of $36,461 before tax, capitalised by the agreed multiplier of 4.25). 80Mr Cheadle derived a goodwill value of $51,814 - say $52,000 - by deducting from his capitalised earnings of $96,997 the value of net assets as per the last balance sheet of $45,183. He then added the current bank balances ($8,636), and the premature distribution to Mr Sajadi ($250,000), to arrive at a total value of the assets of the company of $310,636. Mr Wilcock assumed that there was no valuable plant equipment of stock and made no deduction from his capitalised maintainable earnings, so that they equated to the goodwill value. In cross-examination, he agreed that this approach remained appropriate even if no discount were made on account of trade sanctions. In my view, it is not appropriate to take into account the net assets position reflected in the last available balance sheet as Mr Cheadle did, because it effectively involves double-counting bank account balances and trade debtors and creditors. 81Finally, Mr Wilcock deducted provision for income tax in respect of the seven months to January 2010, at 30% of the earnings for that period. Mr Wilcock was of opinion that provision should be made for tax as to 30% of any profit, on the basis that such tax would be incurred and reduced the effective profit by that amount. Mr Cheadle disagreed, on the basis that the effective tax rate would ordinarily be reduced by tax-effective payment of salaries to directors, superannuation and other discretionary disbursements, and that in any event the position might be different by the end of the financial year. 82In my judgment, an arms-length purchaser, as at the date of valuation, would necessarily take into account income tax payable in respect of income generated to date. The possibility that the position would be different at the end of financial year (presumably so that tax would not be incurred) implies that the company would not be profitable over the whole year. That undermines the assumption as to its profitability which underpins the notional price. That possibility, if correct, would defeat the whole purpose of valuation as at the valuation date. In any event, it is entirely hypothetical that discretionary tax-effective salary or superannuation payments would be made, having a practical impact on taxable income, as they would increase Mr Sajadi's personal taxation liability. There was no evidence of such payments being made on a historical basis. 83It was also argued that company income tax should be disregarded on the basis that the value of the shareholding to Mr Sajadi included a corresponding franking credit. Mr Wilcock rejected taking into account a franking credit as "it was not done in the commercial world", except perhaps where there was a present intention to pay a dividend (in which case one would value the shares cum dividend). There does not appear to be any history of Springex paying dividends. In any event, Mr Moshirzadeh would also have been entitled, on relevant assumptions, to a franking credit. Any franking credit is an entitlement of the shareholder, in respect of dividend income, and does not affect the value of the shares. 84I therefore agree that provision should be made for income tax as proposed by Mr Wilcock. 85Accordingly, I value the company as follows: Assets Valuation Goodwill 154960 Cash 8636 Add-back premature distribution to Sajadi 250000 Debtors 24695 Total assets 438291

Less, liabilities Creditors 38081 Directors loans 30000 Provision for tax 44058 Total liabilities 112139

Financial summary Total assets 438291 Less liabilities -112139 Net asset value 326152

86In order to determine the final value of the company as at the valuation date, it is necessary to add to that net asset value 70% of the amount for which Mr Moshirzadeh must account to the company pursuant to my above conclusion - the other 30% being provision for income tax, as the amount for which Mr Moshirzadeh is liable to account is in the nature of taxable income in the hands of the company. In the absence of any contention that there should be a discount for minority shareholding or a premium for total control, the value of Mr Moshizadeh's 49% shareholding is 49% of that final value.

Conclusion 87The cross-claimants have failed to prove that Mr Moshirzadeh did not advance $20,000 in connection with his acquisition of an interest in the company. To the contrary, the evidence establishes that $20,000 was advanced on behalf of Mr Moshirzadeh, and $30,000 by Mr Sajadi, by way of loan capital, and later repaid. The first aspect of the cross-claim therefore fails. 88Springex has established that Mr Moshirzadeh is liable to account to it for the moneys that were credited to Account 86 and 87 with Irex in his name. The only evidence before the court, the translation of account 86 having been rejected, is that of Account 87, to which the total credits were IRR928,467,793. Given the way in which the case was conducted, and the reasons given for rejecting the translation of Account 86, the cross-claimants should not have a further opportunity to adduce evidence of Account 86. There should be judgment in favour of Springex against Mr Moshirzadeh for IRR928,467,793 or its AUD equivalent. 89Springex has failed to prove that Mr Moshirzadeh paid out $107,988.82 from its bank account without authority. The third aspect of the cross-claim therefore fails. 90Springex has failed to prove that Mani Exchange has not accounted to it for 50% of the profits of their joint venture between February 2009 and January 2010; or that Mr Moshirzadeh was responsible for any such failure. Accordingly, the fourth aspect of the cross-claim fails. 91There should be judgment for Mr Moshirzadeh on his claim against Springex for $15,000. 92In the valuation of Springex for the purpose of fixing the price under the order made on 15 September 2010, pursuant to Corporations Act s 233(1)(d), that Mr Sajadi purchase Mr Moshirzadeh's 49% shareholding, at a price to be fixed by the Court, no deduction should be made from the level of maintainable profits otherwise agreed by the valuers on account of trade sanctions, but provision should be made for income tax as proposed by Mr Wilcock. 93The value of Springex at the valuation date is $326,152, plus 70% of the judgment referred to in paragraph 88 above (the 30% allowance representing provision for tax on what will be income of the company). The price for Mr Moshirzadeh's share should be fixed at 49% of that amount. 94I direct that the plaintiff bring in short minutes to give effect to this judgment. On that occasion, I will hear the parties on the question of costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 January 2013