Leviston v PQ Management Pty Ltd - [2022] FCA 787 - FCA 2022 case summary — Zoe

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Leviston v PQ Management Pty Ltd

[2022] FCA 787

Federal Court of Australia|2022-07-08|Before: Derrington J

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Source facts

Court

Federal Court of Australia

Decision date

2022-07-08

Before

Derrington J

Source

Original judgment source is linked above.

Judgment (51 paragraphs)

[1]

It is declared that the purported exercise by the first defendant on 9 March 2020 of the call option granted in the written agreement between, inter alia, the first defendant and the plaintiff entered into on 29 July 2017, was ineffective to exercise the option.
It is declared that the purported transfer of the plaintiff's 60,901 fully paid ordinary shares in the company Treated Waste Agencies Pty Ltd to the first defendant on 29 May 2020 was invalid and of no effect.
It is declared that by their conduct in relation to the plaintiff as a shareholder in Treated Waste Agencies Pty Ltd in the period since 29 May 2020, the first, second and third defendants have contravened s 232 of the Corporations Act 2001 (Cth).
The first defendant, PQ Management Pty Ltd, is to purchase the plaintiff's 30% shareholding (being 60,901 fully paid ordinary shares) in Treated Waste Agencies Pty Ltd at a price being the greater of the amount equal to 30% of the market value of all of the shares in Treated Waste Agencies Pty Ltd or 30% of 2.2 times EBITDA (being the earnings of Treated Waste Agencies Pty Ltd before interest, taxes, depreciation and amortization calculated in accordance with the Australian Accounting Standards), such values to be determined as at 30 June 2020.
The amount to be paid by the first defendant to the plaintiff in respect of the purchase of shares referred to in Order 4 hereof is to be less the amount of $169,163.77 and less an amount in respect of interest on that sum calculated from 30 June 2020 on the same basis as interest is payable pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth) on pre-judgment amounts.
The first defendant is to pay to the plaintiff interest on any amount found to be payable by the first defendant in respect of the purchase of the plaintiff's shares in Treated Waste Agencies Pty Ltd pursuant to 51A of the Federal Court of Australia Act 1976 (Cth) from 30 June 2020.
The parties have leave to apply to the Court for further orders in relation to the issues determined in the reasons of the Court and in relation to the question of interest including its quantification.

[2]

Introduction 1 In this matter Mr Andrew Troy Leviston (Mr Leviston) seeks orders for the recovery of certain sums of money as well as relief in relation to alleged oppressive conduct in respect of the management of the company, Treated Waste Agencies Pty Ltd (TWA). The dispute initially arises from disagreement in relation to the sale of 70% of Mr Leviston's shares in TWA to PQ Management Pty Ltd (PQ Management), of which Mr Donald Neal Ison (Mr Ison) and Mr Gregory Shane Eldridge (Mr Eldridge) are directors. Companies owned or controlled by Mr Ison and Mr Eldridge are the shareholders of PQ Management. In this initial aspect of the dispute, Mr Leviston seeks to unravel the completion of the share sale transaction, claiming that he was paid an insufficient amount for his shares. The second aspect of the dispute concerns the exercise by PQ Management of an option to acquire the remaining 30% of Mr Leviston's shares. In essence, Mr Leviston claims that the option was invalidly exercised and that his shares were improperly transferred from him to PQ Management. Despite that, he received a significant sum of money for the shares and has retained it. In relation to his oppression case he claims that the transfer of shares was void such that he is, and has always remained, a shareholder in TWA but that he has been excluded from its management and operation. 2 The issues in this matter were advanced by each of the parties at a high degree of generality and, as is apparent by the written submissions, with no close attention to the confines of the pleadings. That is unfortunate in circumstances where the matters to be decided require a precise analysis of the facts and of the inter-party agreements. An additional difficulty is that the parties had entered into agreements which were not well suited to the purpose for which they were intended. It appears that the agreements have been adapted from other agreements which may have been used for other transactions, and an attempt has been made to apply them for an ill-fitting purpose. Yet a further difficulty is that the parties adopted an entirely relaxed attitude to the manner in which the agreements were performed, including by entering into oral variations without any attempt to record them. To exacerbate matters, the variations entered into were vague and casually arranged. It was only when the disputes arose that the parties returned to consider their contractual rights and entitlements as they existed in the written documents.

[4]

The Memorandum of Understanding 9 The MOU recited that it was "between the Buyer (PQ Management) and Seller (Mr Leviston) listed herein and the Seller confirms the Buyer's offer to enter into a Share Sale Agreement of the below mentioned Company upon the following terms and conditions". It then provided: (a) the "Seller" was Mr Leviston; (b) the "Buyer" was PQ Management; (c) the "Completion Date" was 1 July 2017; (d) the "Purchase Price" was "$910,000 + Stock"; (e) "the Buyer agrees to enter into a Share Sale Agreement to be prepared by the Seller's Solicitor" (paragraph 1); (f) the agreement was "subject to and conditional upon the parties entering into an agreement confirming that the Seller shall remain as the "QBCC License Nominee" for a period of up to three (3) years from the date of Completion on terms and conditions satisfactory to both parties within twenty (20) business days from the date of this Agreement" (paragraph 6); (g) the Purchase Price would be adjusted on completion by reference to the amounts of "Employee Entitlements", "Current Aged Payable (Creditors)", and "Current Aged Receivables (Debtors)" (paragraph 7); (h) "the Seller shall transfer out of the Company the following on or before Completion" (paragraph 8.1(a)): (i) "Personal motor vehicles"; (ii) "Cash at bank"; (iii) "Shareholder loans"; and (iv) "Retained profit"; (i) "the Seller warrants and agrees to execute a Deed of Restraint as prepared by the Buyers' solicitors" for a 5 year period in the plumbing industry (paragraph 8.1(b)); (j) "the Buyer warrants and agrees to enter into a rental agreement as prepared by the Sellers' solicitors for the premises located at 8/12 Norval Court Maroochydore Queensland on terms and conditions satisfactory to both Buyer and Landlord" (paragraph 8.1(c)); (k) the agreement was "subject to and conditional upon the parties entering into a Shareholder Agreement for the Company… on terms and conditions as agreed by the parties" (paragraph 9); (l) "if the Buyer receives advice that would recommend a structure of ownership contrary to that in this Agreement the Buyer may terminate this Agreement immediately and replace this Agreement with the Share Sale Agreement in the ownership structure as advised" (paragraph 10); (m) the agreement was also "subject to and conditional upon the Buyer receiving final finance approval on terms and conditions satisfactory to the Buyer in their sole discretion" within 20 business days (paragraph 10). 10 The parties agreed that it was common ground that at the time of executing the MOU, the parties, by each of Mr Leviston, Mr Ison and Mr Eldridge were aware of the following: (a) no "Share Sale Agreement" had been entered into by any of them or PQ Management for the sale of shares in the Company to PQ Management; (b) no "Shareholder Agreement" had been entered into by any of them or PQ Management in relation to the holding of shares in the Company; (c) no "Deed of Restraint " had been entered into by Mr Leviston and the Company in relation to restraining Leviston from acting in the plumbing industry; (d) no agreement confirming that Mr Leviston was to remain as the QBCC licence nominee had been entered into by Mr Leviston and PQ Management; (e) no rental agreement had been entered into by PQ Management and the landlord of 8/12 Norval Court, Maroochydore, Queensland. 11 As it was, there was no transfer of shares in TWA on 1 July 2017 (being the date for completion as contemplated in the MOU). Further, by that time the parties had not entered into a Share Sale Agreement or Shareholders Agreement as proposed by the MOU.

[6]

The Share Sale Agreement 14 On 3 July 2017, Mr Leviston and PQ Management entered into the Share Sale Agreement. It relevantly provided as follows: (a) Mr Leviston was the "Seller" and PQ Management was the "Buyer; (b) by cl 2.1, Mr Leviston agreed to sell and PQ Management agreed to buy the "Sale Shares" (being 70% of the ordinary shares in the Company) for the "Purchase Price". "Purchase Price" was defined to mean "$910,000 plus Stock". "Stock" was relevantly defined to mean: … all goods owned or agreed to be bought by the Company which are to be sold to third parties (whether by wholesale or by retail) in the course of conducting the Business. … (c) cl 3.2(b) provided that the agreement was: conditional upon the Buyer and the Seller entering into the Company Agreements on terms reasonably satisfactory to the parties including an agreement for the sale of the remaining 30% of the ordinary shares by the Seller to the Buyer on or before 1 July 2020. (d) "Company Agreements" was defined to mean the "Shareholders Agreement, Buy-Sell Agreement, Lease and Deed of Restraint"; (e) "Shareholders Agreement", "Buy-Sell Agreement" and "Lease" were defined to mean the agreements to be negotiated and agreed upon pursuant to cl 3.2; (f) "Deed of Restraint" was defined to mean "the restraint of trade conditions that will be contained within the Shareholders Agreement"; (g) by cl 4.1, Completion was to take place on the Completion Date. "Completion" was defined to mean the "completion of the sale and purchase of the Sale Shares under cl 2" (that is, the actual date on which Completion occurs); (h) the "Completion Date" was 1 August 2017 or "any other date after that date which is agreed in writing by the parties"; (i) at Completion, PQ Management was obliged to pay to Mr Leviston "the respective Purchase Price attributable to the Sale Shares". In relation to this: (i) the Purchase Price was defined to mean $910,000 plus Stock; (ii) cl 3.1 however provided that PQ Management was to pay for "all the goods and saleable stock-in-trade being in and on the Business premises" at the date of Completion in addition to the Purchase Price; (iii) there is no contention by Mr Leviston that the Share Sale Agreement created a right for him to be paid for stock twice (once as part of the definition of the Purchase Price under cl 2.1, and then again in addition to the Purchase Price under cl 3.1). Rather, it was accepted that the effect of the agreement was that Mr Leviston would be paid for the stock once and that its price was to be ascertained by the procedure in cl 3.1, being an amount determined by a stocktake carried out by an independent stocktaker after the close of trade on the day before the date of Completion; (j) by cl 4.5(d), Mr Leviston was entitled to "all monies held in bank accounts up to and including the Completion Date"; (k) cl 4.7(c) provided that, one month after the Completion Date, PQ Management was to pay to the seller the "Debtor Amount" (being the amount of the Company's debtors at Completion less the amount of the Company's creditors at Completion). In the event of a dispute as to the Debtor Amount, cl 4.7(c) provided that "the decision of the Company's accountant prior to Completion will be final and binding on the parties"; (l) cl 4.5(a) provided that Mr Leviston was to be responsible for and promptly pay all taxes, duties, costs, Division 7A loans, liabilities, Claims or Losses incurred by the Company up to the Completion Date; (m) cl 4.5(c) provided that, at Completion, Mr Leviston must allow PQ Management an amount equal to 70% of particular accrued staff entitlements calculated at Completion.

[7]

Events leading up to completion 15 Mr Ison began working in the business of TWA from about 3 July 2017 during which time he had unfettered access to its books and records. 16 On 29 July 2017, TWA, Mr Leviston, PQ Management, Mr Ison and Mr Eldridge entered into an agreement called, "Shareholders Agreement". 17 On 1 August 2017, Mr Leviston (by his solicitors) requested that the Completion Date under the Share Sale Agreement be extended to 3 August 2017. PQ Management agreed to that request. 18 On 2 August 2017, Mr Ison sent an email to PQ Management's solicitor attaching, "draft numbers attached for your perusal". That email was copied to Mr Leviston, Mr Eldridge and Mr Forbes, the latter being Mr Leviston's business broker. The attachment to the email was a spreadsheet containing a calculation of monies to be paid at settlement and some cheque directions. It relevantly indicated that: (a) the total purchase price payable was $890,971.51, calculated as follows: (i) the Purchase Price in the Share Sale Agreement of $910,000; (ii) plus Stock in the sum of $34,369.94 (which was noted "As at Stocktake 30 June"); (iii) less Staff Entitlements in the sum of $25,036.81 (noted as "70% of 70% of 30/6/2017 entitlements"); (iv) less Loans taken over in the sum of $96,483.25 (the calculations for which identified that it was as at 30 June 2017); (v) plus the sum of $52,049.54 for debtors less creditors (the calculations for which identified that it was carried out as at 30 June 2017); (vi) plus cash of $9,673.31; (vii) plus interest of $6,758.78 (calculated at 9% per annum for 31 days on the sum of the figures in (i) to (vi) above); (b) the sum of $50,494.65 would be paid by Mr Leviston to TWA at settlement for "post 30/6/2017 adjustments", the details of which were in "Sheet 2". That latter sheet identified amounts which were assessed as Mr Leviston's expense incurred and owed to TWA for the identified period. 19 PQ Management's solicitors then sent an email to Mr Leviston's solicitors that day attaching a draft settlement statement. The covering email provided: Please find attached our draft settlement statement. We look forward to confirmation of the settlement time and place and finalisation of the figures and cheque directions. 20 The draft settlement statement attached to the email relevantly mirrored the calculations in Mr Ison's spreadsheet. 21 On 3 August 2017, Mr Leviston's solicitors sent an email to PQ Management's solicitors enclosing what they referred to as the "final settlement statement". It identified that PQ Management would provide cheques totalling $840,971.51, including one which was payable at Mr Leviston's direction to TWA for $50,494.65. Mr Leviston was also a recipient of the email. The settlement statement was substantially the same as the draft statement issued by PQ Management's solicitors on the previous day. 22 There is a dispute by Mr Leviston as to whether there was any agreement by him that any amount was payable at his direction.

[9]

The Shareholders Agreement 25 As mentioned, the parties had entered into the Shareholders Agreement on 29 July 2017. As far is relevant to the issues in this case, it provided as follows: (a) by Schedule 3, that: (i) "Shareholder 1" was PQ Management; (ii) "Shareholder 2" was Mr Leviston; (iii) "Director 1" was Mr Ison; (iv) "Director 2" was Mr Eldridge; (v) "Director 3" was Mr Leviston; (b) in relation to the "net profit" of the Company: (i) the "net profit" was to be determined by the Accountants of the Company (or such other firm of accountants as the Shareholders appoint) in accordance with generally accepted accounting principles: cl 11.3; (ii) that "net profit" of the Company is to be dealt with as follows: (A) first, the retention of "such reasonable amount as may be determined by the Directors as being reasonably required for the purpose of working capital": cl 11.2(a); (B) second, the return of moneys advanced to the Company pursuant to cl 6.3 (which relates to loans by only some shareholders): cl 11.2(b); (C) third, the return of moneys advanced to the Company pursuant to cl 6.2 (which relates to loans by all shareholders): cl 11.2(c); (D) fourth, a division of any profit between the Shareholders in proportion to their respective shareholding, as cash flow permits: cl 11.2(d); (iii) the Shareholders Agreement also provided for weekly drawing of an amount (set out in item 10, Schedule 3) on account of annual profit distributions: cl 7.2(f); (c) clause 8.12 of the Shareholders Agreement dealt with the "call option" and provided that: (a) In consideration of the terms of this Agreement the Shareholder 2 (Grantor) grants to Shareholder 1 (Grantee): (i) The option to purchase all the shares owned by the Grantor at an amount that is not less than 2.2 times EBITDA and on the terms and conditions set out in the Share Sale Agreement in Schedule 5 (Call Option). (ii) The right to require the Grantor to enter into the Share Sale Agreement in Schedule 5, mutatis mutandis. (b) The Call Option may be exercised at any time prior to 3 July 2020 by the Grantee delivering to the Grantor an executed written notice of the exercise of the Call Option (Call Option Notice) pursuant to clause 8.12. (c) If the Call Option is exercised pursuant to clause 8.12 (b), the Grantee will deliver a properly executed Share Sale Agreement, to the Grantor or the Grantor's Solicitors on or before two (2) business days after delivering the Call Option Notice. The Grantor shall execute and deliver the Share Sale Agreement to the Grantee on or before two (2) Business Days after receipt of the documents from the Grantee. If the Grantor fails to execute and deliver the Share Sale Agreement then the Grantee has power of attorney to do so. (d) The Share Sale Agreement will not be subject to any conditions precedent and once exercised, the Call Option cannot be withdrawn. (d) clause 8.13 was in similar terms, but in relation to a "put option" granted by PQ Management: (a) In consideration of the terms of this Agreement the Shareholder 1 (Grantor) grants to Shareholder 2 (Grantee): (i) The option to require the Grantor to purchase all the shares owned by the Grantee at an amount that is not less than 2.2 times EBITDA and on the terms and conditions set out in the Share Sale Agreement in Schedule 5 (Put Option) (ii) The right to require the Grantor to enter into the Share Sale Agreement in Schedule 5, mutatis mutandis. (b) The Put Option may be exercised at any time after 3 July 2020 before prior to 17 August 2020 by the Grantee delivering to the Grantor an executed written notice of the exercise of the Put Option (Put Option Notice) pursuant to clause 8.13. (c) If the Put Option is exercised pursuant to clause 8.13(b), the Grantee will deliver a properly executed Share Sale Agreement to the Grantor or the Grantor's Solicitors on or before two (2) business days after delivering the Call Option Notice. The Grantor shall execute and deliver the Share Sale Agreement to the Grantee on or before two (2) Business Days after receipt of the documents from the Grantee. If the Grantor fails to execute and deliver the Share Sale Agreement then the Grantee has power of attorney to do so. (d) The Share Sale Agreement will not be subject to any conditions precedent and once exercised, the Put Option cannot be withdrawn. (e) "EBITDA" was defined to mean "earnings of the Company before interest, taxes, depreciation and amortization calculated in accordance with the Accounting Standards"; (f) Schedule 5 of the Shareholders Agreement did not annex a Share Sale Agreement. Rather, it simply stated "Share Sale Agreement for Shareholder 2's shares". The only Share Sale Agreement for Mr Leviston's shares (being "Shareholder 2's shares") was the Share Sale Agreement of 3 July 2017 by which he sold 70% of his shares to PQ Management.

[12]

The 9 March 2020 Notice 32 On 4 March 2020, TWA's accountants issued Mr Leviston, Mr Eldridge and Mr Ison a letter identifying that the estimated settlement value of Mr Leviston's remaining 30% share in TWA, as of 29 February 2020, was $169,163.77. This was said to be made up as follows: (a) 30% of 2.2 x EBITDA as at 30 June 2019 equalled the amount of $190,832.78, less; (b) 30% of employee entitlements as at 29 February 2020 which was $21,669.01. 33 On 9 March 2020, PQ Management gave notice purporting to exercise the call option under the Shareholders Agreement. It provided: We refer to the shareholders' agreement between us, Gregory Shane Eldridge and the Company dated 29 July 2017 (the Agreement). Under clause 8.12 of the Agreement, we hereby exercise our option to acquire all the shares held by you, being 60,901 fully paid ordinary shares (the Shares), in the Company for the total price of $169,163.77 (the Price). For the avoidance of doubt, this letter is a Call Option Notice in accordance with clause 8.12(b) of the Agreement. The following documents are enclosed with this Call Option Notice: (a) a letter from the Company's accountant confirming that the Price has been calculated on the basis of 2.2 times EBITDA, in accordance with clause 8.12(a)(i) of the Agreement; (b) share sale agreement in respect of the Shares in the form agreed in Schedule 5 to the Agreement duly executed by us (Share Sale Agreement); and (c) completed share transfer form in respect of the Shares. In relation to the provisions of the Share Sale Agreement, we note the following: 1 the Deposit (as defined in the Share Sale Agreement) required to be paid by us pursuant to Clause 3.1 was receipted by Black Bear Legal Practice Trust Account on 9 January 2020. Accordingly, all conditions precedent to the purchase of the Shares in accordance with the Share Sale Agreement have been satisfied. In accordance with clause 8.12(c) of the Agreement, you are required to execute the Share Sale Agreement within 2 days of receipt of this Call Option Notice. If we do not receive the executed Share Sale Agreement within the prescribed time frame, then we intend to execute the Share Sale Agreement and share transfer form pursuant to the power of attorney granted in clause 8.12(c) of the Agreement. 34 The email attached a share transfer form. 35 On 16 March 2020, TWA's accountants sent a letter to Mr Ison, Mr Eldridge and Mr Leviston setting out the calculation of profit distributions to 29 February 2020. It calculated that, to that date, $128,354.13 was owing to PQ Management and $25,683.84 was owing to Mr Leviston. 36 On 1 June 2020, PQ Management's solicitors sent a letter to Mr Leviston's solicitors. It provided, inter alia: 1 We act for PQ Management Pty Ltd in respect of Treated Waste Agencies Pty Ltd (Company) and we understand you act for Mr Andrew Troy Leviston. 2 We refer to the call option notice issued by our client dated 9 March 2020 (Call Option Notice) under which our client exercised its option to purchase the 60,901 fully paid ordinary shares (Shares) held by your client in the Company in accordance with the shareholders' agreement dated 27 July 2017 between our respective clients and the Company (Shareholders' Agreement). Your client has not, as required by the Shareholders' Agreement, signed and returned the sale agreement and transfer form provided with the Call Option Notice. 3 We are instructed that our client has now exercised its right under the Shareholders' Agreement and in this regard we enclose: (a) fully executed Sale Agreement and Transfer Form, signed on your client's behalf in accordance with the power of attorney in clause 8.12(c) of the Shareholders' Agreement; (b) notice to the Company advising that the Shares have been duly transferred to our client and instructing the Company to register the transfer; (c) a cheque from our client for the sum of $164,163.77, being the price to be paid to your client for the Shares as set out in the Call Option Notice, less the deposit of $5,000 paid to your trust account on 8 January 2020; and (d) a cheque from the Company for the sum of $20,016.07, being the aggregate of: (i) $25,683.84, being the amount owed to your client in respect of distributions as at 29 February 2020 (Outstanding Distribution); less (ii) $5,667.77, being the amount owed by your client to the Company in respect of Jett's Apprenticeship; and (e) a letter from the Company's accountant confirming the amount of the Outstanding Distribution. 37 On 1 June 2020, Mr Leviston's solicitors sent a letter in response. It provided as follows: We refer to the abovenamed matter and your correspondence dated 1 June 2020 that was delivered to our offices by your client, Don Ison. We note your clients purported exercise of its rights under the Shareholders Agreement to execute a share sale agreement and register a share transfer to itself. We also note cheques were supplied for amounts of $164,163.77 and $20,016.07. Further, we note the amount of $5,000 of your client's funds held in our trust account is said to be for our clients benefit. We have now supplied all of those monies to our client. However, as you know, our client disputes the validity of the Call Option Notice, the terms of the share sale agreement and the calculation of the purchase price paid. Our client further disputes the proper calculation of the outstanding distribution of income of the Company, has occurred. We place you on notice that our client takes the benefit of those monies as a part-payment towards to due and proper monies payable by your client and the Company and reserves all of his rights and interest in respect of such. Would you please advise if you hold instructions to accept service of the anticipated legal proceedings on behalf of your clients. Should we not hear from you by 4.00pm Wednesday, 3 June 2020, we advise we will arrange personal service on each of your clients. 38 The present proceedings were commenced by Mr Leviston on 3 June 2020.

[17]

The calculation of the sum of $39,353.49. 49 On about 17 October 2017, TWA's then accountants delivered to it the accounts for the period from 1 July 2017 to 31 July 2017. There was obviously some instruction given to them to prepare those accounts but there was no evidence as to who gave them or precisely what they were. 50 In any event, Mr Leviston has purportedly calculated the amount payable under the Share Sale Agreement as at 1 August 2017 using the figures for 31 July 2017. However, his calculations are not strictly in accordance with the Share Sale Agreement which used the date of completion as the date on which the price was to be calculated. As mentioned above, on 1 August 2017 the completion date under the agreement was extended to 3 August 2017, but no accounts to that date or to 2 August were prepared. 51 The defendants submitted that the difficulty here for Mr Leviston is that he has calculated the amount owing under the agreement as at 1 August 2017, and did not call evidence to establish the elements of the adjustments which need to be made to the purchase price so as to calculate the actual amount owing on 3 August 2017. It was submitted that it was a matter of speculation that such amounts will not have altered much between 31 July and 2 or 3 August. Mr Lyons on behalf of the defendants, submitted that in order for Mr Leviston to demonstrate his entitlement to any additional payments he would have to prove: (a) the price of the stock at the close of trade on 2 August 2017 (as ascertained under the procedure in cl 3.1); (b) the Debtor Amount as at 3 August 2017 (cl 4.7(d)) although the contract provided for the adjustment to take place one month after the completion date; (c) the amount held in bank accounts as at 3 August 2017 (cl 4.5(d)); (d) the liabilities for which he was responsible up to 3 August 2017 (cl 4.5(a)); and (e) the relevant accrued staff entitlements as at 3 August 2017 (cl 4.5(c)). 52 Mr Lyons submitted that movement in any one of these variables could have made a significant difference to the amount, if any, which may be payable under the agreement alleged by Mr Leviston. For instance, there may have been a significant withdrawal from TWA's bank account in the days between 31 July and 3 August which might overwhelm the claim for $39,000.00. It was not in doubt that TWA was continuing to trade in this period with the possibility that stock may also have been used up in the period from 31 July. 53 It should be accepted that the figures on which the amount in dispute is calculated would vary from day to day. Whilst it was put to Mr Ison in the course of cross-examination that TWA's financial position as at 31 July 2017 would be substantially the same as that at 3 August 2017, he denied that proposition. For present purposes the only finding which can be made is that it is not possible to ascertain what amount would be payable under the Share Sale Agreement based on the financial position of TWA as at 3 August 2017. 54 Ultimately, however, for the reasons identified below this issue does not have the effect alleged by the defendants.

[18]

What was the agreement reached between Mr Leviston and PQ Management as to completion? 55 Whatever was the agreement reached between the parties, it was not reduced to writing. Neither was it confirmed in the course of any emails or other correspondence. That is, perhaps, emblematic of the casual manner in which the parties conducted their dealings. The result is that the identification of what the agreement was is undertaken by an analysis of the direct evidence of Mr Ison and Mr Leviston and of the surrounding circumstances, in particular, those which might be consistent with either version. 56 In the course of submissions both parties made some reference to the question of the extent to which the post-contractual conduct of the parties might be relied upon by the Court although no clear analysis was ultimately provided. Moreover, each party referred to post-contractual events in an attempt to strengthen their asserted version of the agreement. 57 It must be kept steadily in mind that the agreement in question is the oral variation of a written agreement and, there being no dispute as to the existence of such an agreement, the issue was only as to its terms. For the reasons discussed below it is not technically necessary to determine the extent to which the Court might rely upon post-contractual conduct in the current circumstances. That is because the evidence of Mr Ison as to the entry into of the agreement is preferred to that of Mr Leviston. However, were it necessary to decide, the preferable view would appear to be that expressed by Edelman J in Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295 [98]-[99] where his Honour said: [98] This subsequent conduct is a relevant matter to consider in finding whether, as a fact, the alleged oral promises were made. Mears v Safecar Security Ltd, Stephenson LJ (with whom O'Connor LJ and Sir Stanley Rees agreed) said: I have already expressed my view that this agreement was oral, but even if it was partly in writing, we are concerned with the search for a term that was not written down, and there is nothing in those authorities which prevents the court from looking at the way the parties acted for the purpose of ascertaining what that term was. Common sense suggests that their subsequent conduct is the best evidence of what they had agreed orally but not reduced to writing, though it is not evidence of what any written terms mean. [99] This passage was approved by Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) and the latter half was quoted with approval by Murphy JA (Pullin & Newnes JJA agreeing) in Fazio v Fazio. The statement by Stephenson LJ is consistent with statements in a number of other cases. Spigelman CJ has also described post-contractual conduct as a matter of "significant weight" in identifying the subject matter of an alleged oral contract. This approach also accords with principle. It would be peculiar if courts were to be constrained in the exercise of finding facts from considering any relevant matter subsequent to the alleged occurrence of the fact in issue. 58 In his affidavit of 12 November 2021, Mr Ison gave evidence as to how he alleged the agreement varying the method of calculating the purchase price came about. He claimed that he commenced working in the TWA business from 3 July 2017 as if completion had taken place. He said that his immediate focus was on finalising the figures for the purposes of completion of the sale and, in the course of that, he prepared multiple spreadsheets evidencing the company's finances which he provided to Mr Leviston. He claimed that he had numerous discussions with Mr Leviston about them and their content including the manner in which Mr Leviston's loan account with the company could be dealt with at settlement. In the course of cross-examination Mr Ison denied that he was preparing TWA's financial figures for the purposes of ascertaining its position as at 1 August 2017, and that all he was doing was attempting to understand the position as at 30 June 2017 (ts 55). Mr Ison should be accepted on this issue and there was no evidence to the contrary. 59 Mr Ison further deposed that in early July 2017, being shortly after the third of that month, he said that he and Mr Leviston agreed that as the financial data for TWA for the financial year ending 30 June 2017 had almost been completed, those figures would be used at completion for the purposes of calculating the purchase price and that PQ Management (or Mr Ison and Mr Eldridge) would pay interest on the amount so calculated to the date of settlement. Mr Ison gave further evidence to the effect that a rate of 9% was subsequently agreed and, as calculated, equated to $6,758.78, being for a period of 31 days from 3 July to 3 August 2017. He denied that the agreement to pay that interest arose because the completion date which had originally been mooted under the MOU, being 1 July 2017, had been pushed back to 1 August. Again, his evidence on this topic is supported by the commercial logic of the circumstances. As the Share Sale Agreement specified 1 August 2017 as the date for completion, there no basis on which it might be thought that any legal or moral obligation to pay interest might have arisen. Certainly, none was suggested. 60 For the purposes of settlement Mr Ison prepared draft settlement statements which he provided to Mr Leviston and Mr Leviston's solicitors. Mr Leviston acknowledged that his solicitors received by an email of 2 August 2017, from Mr Ison's solicitors, a working draft of the settlement statement with attached notes (CB 250). The email, which had the heading of, "Plumbers Qld draft settlement numbers", was also sent to Mr Leviston and his business broker, Mr Brendan Forde. The attached document is headed, "Settlement Working", and shows a draft of the figures which would be later incorporated into the settlement statement. It also shows some breakdown of the draft figures. On the second page is the heading "Post 30/6/2017 adjustments". Thereafter, three entries appear as "Bank", "Wages" and "TL Credit Card". The initials "TL" is a reference to Troy Leviston. Amounts appear adjacent to those entries which are shown to total $50,494.65. A further note states "TL expenses from 3/7 to cob 27/7 reimbursement to TWA". In the context of Mr Ison's evidence these are the workings and conclusions as to the amount which, on his version of the settlement agreement, were to be paid by Mr Leviston to TWA. Mr Leviston said very little about this document other than acknowledging that it was received by his solicitors. Its import is that it demonstrates that Mr Ison was acting consistently with what he said was the settlement agreement; namely that the parties would operate as if settlement had occurred on 1 July 2017 by a payment calculated as of that day. On that basis, Mr Leviston's personal expenses which were paid for by TWA in the month of July 2017 would need to be reimbursed on the date of actual completion. If no agreement as Mr Ison alleges was struck, there is no explanation for him calculating Mr Leviston's personal expenses incurred in July 2017 and identifying them as an amount which Mr Leviston was required to pay to TWA on settlement. When that context is understood, it is clear from the email of 2 August 2017 that Mr Ison was asserting that Mr Leviston's expenses incurred by TWA in the month of July were to be reimbursed on settlement. There was no attempt to disguise or conceal this and it is conduct consistent with the settlement agreement which Mr Ison alleges. 61 Later on 2 August 2017, PQ Management's solicitors emailed to Mr Leviston's solicitors a draft of the formal settlement statement for use at completion. It indicated that the time and place of settlement was to be confirmed, but identified that the settlement date and the adjustment date were both 3 August 2017. The figures set out in it were in accordance with the draft statement and workings which had been sent that same day, and they indicated both the interest payment by PQ Management and that a payment of $50,494.65 would be made at Mr Leviston's direction to TWA from the purchase price. Mr Leviston's solicitors utilised this document to prepare a formal settlement statement for the purposes of effecting completion, which they emailed to PQ Management's solicitors on 3 August 2017, describing it as the "Final Settlement Statement". That version identified that both the "settlement date" and the "adjustment date" were 1 August 2017. Otherwise, apart from inserting the time and place for settlement, it reflected the draft sent by PQ Management's solicitors. 62 To a large extent this correspondence supports Mr Ison's version of the settlement agreement. It proceeds upon the working figures sent to Mr Leviston and his solicitors which showed that interest was being paid on the purchase price from 1 July 2017 and that the amount of $50,494.65 was to be paid by Mr Leviston to TWA on completion in respect of the expenses incurred by him in July 2017. It is appropriate to consider the relevance of these two matters in more detail.

[19]

Leviston expenses 63 In his evidence Mr Ison explained that, as the effective date of the sale was 3 July 2017, the personal expenses of Mr Leviston incurred by TWA were to be deducted from the price paid. He claimed that this had been agreed with Mr Leviston on the basis that, for practical purposes, the parties were acting as if the sale had completed on 3 July 2017. The evidence on this point is somewhat sparse, although in his affidavit Mr Ison said that he made these calculations in July 2017 while working in TWA's offices, in the course of which he would discuss the various constituent amounts with Mr Leviston. Mr Leviston deposed that he did not recall any agreement in relation to the amount of $50,494.65. However, there is evidential value in the fact that Mr Ison actually undertook the process of calculating the amount which might be described as having been incurred by TWA for Mr Leviston's personal expenses in July 2017. It is not likely that he would have undertaken that task for no purpose and it is apparent that it would have taken some considerable time for him to identify the expenses and analyse them. Importantly, there was also no attempt to disguise the fact that he considered that the amount of $50,494 would be paid by Mr Leviston to TWA. The final version of the settlement statement which PQ Management's solicitors provided to Mr Leviston's solicitors identified that amount as a payment directed by Mr Leviston to TWA. The statement was adopted by Mr Leviston's solicitors who altered it in some minor respects and then sent it to PQ Management's solicitors as the "final settlement statement". There was no evidence of what steps Mr Leviston's solicitors took to verify the figures in the settlement statement which they accepted. In his affidavit of 30 August 2021, Mr Leviston asserted: 34A. I have no recollection of agreeing to any settlement figure with Don [Mr Ison] personally or giving any instructions to my lawyers to agree to any particular adjustments prepared by Don, at all. 64 In his second affidavit of 26 November 2021, he further stated at paragraphs [29] and [30]: 29. As stated above, there was no agreement with me as to the amount of those settlement figures or any amendment to the date upon which adjustments were to be calculated. 30. I recall discussing the settlement statement with Don on 2 or 3 August 2017. Those discussions were mainly around the $50,494.65 to be put back into TWA and what I understood from those discussions was that was an injection of working capital to be returned later when PQ purchased the remaining 30%. 65 These statements are somewhat difficult to reconcile. It is apparent that Mr Leviston's solicitors agreed on 3 August to the terms of the settlement statement. It is difficult to accept that they would have done so without instructions and it is noted that they were not called to give evidence on that topic: Jones v Dunkel (1959) 101 CLR 298. It must also have been apparent to Mr Leviston that the settlement statement together with the adjustments had been prepared by Mr Ison. There was no other person working on the production of such figures. It was also sufficiently apparent from the information on the document headed, "Settlement Workings", what were the constituent elements of the amount of $50,494.65. This being something to which neither Mr Leviston nor his solicitors objected. To the contrary, they embraced it and adopted it. 66 It should be mentioned here that Mr Ison was cross-examined at length about the manner in which he calculated the amounts which totalled $50,494 as being the sum representing the expenses of Mr Leviston and his family during July 2017. Apart from a minor amount he was able to provide positive verification for the inclusion of each expense. The explanations which he provided were consistent with an understanding that the agreement which he asserts regulated the parties during this period. In the course of cross-examination, Mr Ison regularly stated that the calculations which he was making were in accordance with the agreement which he had reached with Mr Leviston to which there was no demur. 67 The foregoing circumstances are consistent with Mr Ison's evidence as to the nature of the agreement reached as to how completion would occur, and that the date of the financial figures to be used for the calculation of the price was 30 June 2017.

[21]

Mr Leviston's asserted agreement 70 Mr Leviston denied that any settlement agreement as alleged by Mr Ison was entered into. In the course of his evidence he claimed that the substance of the oral agreement in the Share Sale Agreement was to remain intact, in that the purchase price would be calculated and paid on the basis of TWA's accounts as at 1 August 2017. However, as TWA's financials to that date would not be available, completion would take place by the making of a provisional payment on completion based on TWA's financial accounts to 30 June 2017, and that would be subject to adjustment to the end of July 2017, once TWA's accountants had undertaken the task of calculating those figures. Again, this was neither recorded nor confirmed in writing. 71 One of the difficulties with this version of events is its lack of consistency with the events as they occurred. In particular, the payment of $50,494.65 to TWA is not consistent with Mr Leviston's version. He asserted that he had a conversation with Mr Ison around 2 or 3 August 2017 as to the contents of the settlement statement and, in particular, he queried why there was a payment to TWA from the sale proceeds of $50,494. He deposed that Mr Ison told him that it was an injection of capital to be returned to him later and that it would "come out in the wash", that it was necessary to get the completion "over the line", and that as Mr Leviston would remain in the business adjustments could be made later. 72 That version of events should not be accepted. In particular, it is inconsistent with the email sent by Mr Ison's solicitors of 2 August 2017 attaching the workings of the draft settlement statement. As mentioned, the statement in that document, "TL expenses from 3/7 to cob 27/7 reimbursement to TWA", is rather clear as to the purpose of the payment. This inconsistency is further emphasised by the indication in the draft settlement statement that there was to be a payment of the amount at Mr Leviston's direction to TWA. The email was sent to Mr Leviston as well as his solicitor and broker and, if there were any doubt about its veracity, one of them should have noted it. Further, Mr Leviston's solicitors incorporated the payment into the Formal Settlement Statement which they prepared at a time when they were in possession of the document which explained it and how it was calculated. It is apparent that Mr Leviston was mistaken as to his recollection of events surrounding this topic.

[23]

The 5 October 2017 email 74 On 5 October 2017, Mr Ison sent to Mr Leviston an email which Mr Leviston asserts supports his claim that there was to be an adjustment made to the purchase price as at 31 July 2017. In it Mr Ison said: Hi mate, I met with Michael today and he advises that the 2017 draft fins for discussion and adjustment to 3/8 should be ready around the end of next week. I'll follow him up end of next week to make sure it keeps rolling. He appeared to have his head around it. 75 The reference to "Michael" was to Mr Michael Dicello who was a member of the firm Clarke McEwan which, at the time, acted as TWA's accountants. When this email was put to Mr Ison he claimed that the arrangement for Clarke McEwan to undertake the preparation of the updated financials had not been put in place by him. He said that he met with Mr Dicello to ascertain what was happening and was told that there was a necessity to update the financials because they still had to adjust Mr Leviston's loans and retained profits. 76 When that email is considered in the context of the continued dealings between TWA and Clarke McEwan, it is apparent that the accountants were undertaking the task of preparing financial statements for TWA as at 31 July 2017 for the purposes of bringing them up-to-date, given the variation which had occurred in relation to the shareholding. In an email from Mr Dicello to Mr Ison and Mr Leviston of 17 October 2017, he stated that he had completed the company's accounts for, inter alia, 31 July 2017. By the content of that email, it is apparent that Mr Dicello was instructed to prepare the accounts on the basis that the terms of the MOU regulated the rights and interests of the parties, which was not the case. In particular, the email discussed how the retained profit in the company as at 31 July could be accounted for given that, by the MOU, it was to be paid out to Mr Leviston prior to completion and some recommendations were made. The subsequent email correspondence relates to that issue and, in particular, what might occur in relation to the retained profit which had not been taken out of the company by Mr Leviston as at the date of completion. 77 Whilst a degree of concern must be expressed to the manner in which Mr Ison responded to questions in cross-examination as to why he allowed Clarke McEwan to work on TWA's accounts when he did not understand the need for it, that does not alter the objective evidence which indicates that the updating of the accounts to 31 July 2017 was for the purpose of bringing into account certain alterations occasioned by the completion of the sale. Although Mr Ison's email to Mr Leviston refers to "adjustments" to 3 August, it is apparent that this refers to the making of adjustments to TWA's accounts to that date and not to any amount payable under the Share Sale Agreement. 78 It follows that Mr Ison's email of 5 October 2017 does not evidence the existence of some antecedent agreement that the purchase price under the agreement would be adjusted to the date of actual completion or to 1 August 2017.

[24]

Other email correspondence 79 The subsequent email correspondence during the period October 2017 to December 2017 supports the above conclusion and some reference to it is warranted. 80 It is apparent that much of the focus of those emails was related to the income tax consequences of loan balances between Mr Leviston and TWA. For example, Mr Dicello, in an email of 18 October 2017 sent to Mr Ison and Mr Leviston, illustrated how the balance of "Division 7A loans" to Mr Leviston could be offset by a final dividend to clear retained earnings. That email provided, inter alia, that if the adjustments are made on 1 July "taking the contract date as the "completion date" rather than using the settlement date per our initial email", then the following situation will occur. Firstly, the total Division 7A Loans to Troy 1 July (after clearing all motor vehicles, motor vehicle loans and related party loans) would be $538,871.57. Second, this would be reduced by a final dividend to clear retained earnings (this is the full amount of retained earnings at 1 July, the company cannot declare a higher dividend than this) in the amount of $423,417.07. Third, a balance of Division 7A loans to Troy would remain in the amount of $115,454.50. However, it was also stressed that there were insufficient retained earnings in TWA to clear the total amount of Mr Leviston's personal loans to nil using a dividend at 1 July 2017. That email also referred to Mr Leviston paying an amount of $237,192.32 relating to company matters which would have the impact of creating a loan outstanding to Mr Leviston of $121,737.82 (i.e. $115,454.50 less $237,192.32). 81 Mr Ison replied to Mr Dicello in an email of 18 October 2017 which copied Mr Leviston, stating that "agreement was reached to use the 3/7 date for practical purposes prior to settlement so that's the date we need to use". He noted that the terms of the Sale Agreement were that all Division 7A and related party arrangements "needed to be cleaned out at this date including ATO (the $208k paid on settlement date)". He also stated that it was his understanding that "payment" transactions from TWA to Mr Leviston personally needed to be done as at 30 June 2017 to effect this, but that he needed to clarify that no cash payment was needed to be made. 82 Mr Dicello sent a further email to Mr Ison and Mr Leviston on 27 October 2017, outlining at a summary level, what income tax implications would arise under the commercial debt forgiveness rules from TWA's perspective, if the loan owing to Mr Leviston was forgiven. That email also confirmed that the credit loan which remained unpaid to Mr Leviston was in the amount of $121,737.82. Several other email exchanges took place seeking to ascertain the written down value of various assets that were to be transferred from TWA's balance sheet. From this it would appear that, based on an email from Mr Dicello dated 9 November 2017, an additional amount of $8,285 would be allocated against the loan payable to Mr Leviston. This would in turn reduce the balance owing to $113,452.82. Mr Ison then confirmed in an email of 15 December 2017 sent to Mr Dicello which was copied to Mr Leviston that, "we have decided to proceed on this basis" which was for the loan to Mr Leviston to be written off and for the resultant tax implications to be offset in terms of the purchase agreement. 83 Clearly, none of this correspondence in the period from October 2017 to December 2017 supports any finding that there was an antecedent agreement that the purchase price under the agreement would be adjusted to the date of actual completion or to 1 August 2017. Rather, it supports the opposite conclusion.

[25]

References to the "adjustment date" in the settlement statement 84 In the course of the hearing the parties regularly referenced the expression, "adjustment date", without making any attempt to define it. In the documentary evidence it only appears on the draft settlement statement prepared by Mr Ison and the formal settlement statement prepared by Mr Leviston's solicitors. It is not a term used in the Share Sale Agreement and it does not have any established legal meaning. It would appear, however, that Mr Ison understood it as being a date on which some adjustment might be made to the purchase price. He was cross-examined on this point and he claimed that the reference in his draft settlement statement to 1 August 2017 as being the adjustment date was an error. 85 Mr Ison's draft had identified that the settlement date was to be 1 August 2017 and that the adjustment date was also 1 August 2017. The formal settlement statement prepared by Mr Leviston's solicitors identified both as being 3 August 2017. The manner in which the term was used by the parties tended to suggest that it was intended that when the figures were obtained, they would be used to adjust the price as at that date. In earlier spreadsheets which Mr Ison had prepared and given to Mr Leviston, he had adopted an adjustment date of 3 July 2017 (ts 72), and, it would seem to follow, that he had deliberately adopted an adjustment date of 1 August 2017 in the settlement statement indicating an intention that adjustments would be made to that date. 86 Although, prima facie, the identification of 1 August 2017 as the "adjustment date" might tend to support Mr Leviston's version of the settlement agreement, given that it was not an established or settled term it carries somewhat less weight. Further, the concept of the purchase price being adjusted to 1 August was equally capable of referring to the date to which the purchase price, which was calculated using the 1 July financial information, would be adjusted by the payment of interest of $6,758.78 for the 31 days from 1 July. 87 In any event, given the general laxity and casualness of the manner in which the parties conducted their legal affairs, it is difficult to attribute to this reference too much emphasis. It is not surprising that Mr White did not attempt to do so. If the settlement statement was given a literal reading, the entries in relation to interest and the payment of $50,494.65 to TWA tell strongly against Mr Leviston's version.

[29]

Whether the claim could be established by the July 2017 financials? 91 It was submitted on behalf of the defendants that, even if the agreement as alleged by Mr Leviston had been entered into, he was unable to demonstrate that the accountants' figures were "an accurate representation of the financial position of the Company as at 31 July 2017", such that the claim could not succeed. It was submitted that the accountants were not called to verify the work they had done and prove the amounts represented in the financial statements. It was also said that they had not been adopted by the company and in any event were only in draft. 92 Given the foregoing conclusion as to the settlement agreement it is strictly not necessary to deal with this question. However, out of deference to the substantial submissions made with respect to it, it is not inappropriate to consider it. That said, it must be addressed on the basis that Mr Leviston's version of the settlement agreement had been agreed between the parties; namely that the amount payable under the Share Sale Agreement on the day of completion would be calculated using the accounts as at 31 July 2017, and that an adjustment would be made using the updated accounts as at 31 July 2017, prepared by TWA's accountants. In this respect the accounts prepared by Clarke McEwan for the period from 1 July 2017 to 31 July 2017 were produced in Mr Leviston's affidavit (pp 286ff) and are, on their face, a complete set of figures. There is no reason to believe that they do not meet the description of accounts prepared by TWA's accountants for the relevant period. If Mr Leviston's version of the settlement arrangements were accepted, the effect of the agreement would have been that the parties were bound by whatever amounts Clarke McEwan produced. That, however, is somewhat uncommercial, at least from the perspective of PQ Management which had not previously had dealings with that firm. This is possibly another reason to reject Mr Leviston's version of the agreement. 93 The defendants further submitted that the accounts prepared by Clarke McEwan do not necessarily coincide with the concepts used in the Share Sale Agreement. As an example, reference was made to the value of the stock which, under the agreement was to be calculated in a particular manner and at a particular time: see cl 3.1. It was submitted that there was no evidence that TWA's accountants undertook an appropriate stocktake in the course of preparing the accounts to 31 July 2017. There was some difficulty in relation to that submission given that the amount contained in the accounts of 31 July 2017 for stock was $49,099.91 which was the same amount as appeared in the accounts to the end of June 2017 (CB 288) and it is not clear that the two amounts were not calculated in the same manner. In any event, the greater difficulty with this submission is that the settlement agreement was that the purchase price would be calculated using the accounts prepared by TWA's accountants and there was no specification as to how that was to occur. There was no agreement that a further stocktake in accordance with some methodology calculated by reference to the Share Sale Agreement would be undertaken. It was simply that an adjustment would be made using the figures generated by TWA's accountants. 94 It was further submitted that Mr Leviston was unable to prove the amount of the adjustment because it was not possible to identify from the accounts to 31 July what was the adjusted amount relating to Staff Entitlements. As mentioned, under cl 4.5(c) of the Share Sale Agreement, Mr Leviston was to allow PQ Management an amount equal to 70% of the aggregate value of the accrued employee entitlements. It was submitted that the accountants made no reference to TWA's obligations in relation to employee entitlements such that it was not possible to use the 31 July accounts to make a proper adjustment. 95 Before turning to that issue of proof, something needs to be said about the figures relating to the employee's entitlements as they appeared in this matter. It would seem that the deduction in the purchase price with respect to the employee entitlements was to reflect the fact that the purchaser was assuming the obligation to pay them in due course. However, as is the case in many similar clauses, the deduction to the price is only of 70% of the amount owing and it is well understood that this reflects the fact that, although the amounts will eventually be paid by the purchaser, it will accrue a tax deduction in respect of them. In the present case it appears that Mr Ison understood the 70% reduction to be the standard which should be applied. In the Settlement Statement which he prepared he identified that, as at 30 June 2017, the amount of Staff Entitlements was $51,095.53. However, in the calculation of the deduction to be made in the purchase price he calculated the sum of $25,036.81, being 70% of 70% of $51,095.53. It would appear that Mr Ison had considered that the usual rule applied to reducing the purchase price by 70% of the outstanding employee entitlements, and that it was then appropriate to apply a further 70% reduction to that figure in accordance with cl 4.5(c). Alternatively, it may have been thought that the full deduction from the purchase price should not be allowed as PQ was only acquiring 70% of the shareholding in TWA. It is unfortunate that this was not the subject of cross-examination or explanation in the course of evidence. However, if it was an error as it appears to have been, it was one in favour of Mr Leviston in an amount of approximately $10,000. Again, it reflects the general laxity and casualness of the manner in which the parties undertook their business. 96 At paragraph 63 of his first affidavit Mr Leviston sought to provide a calculation of the adjusted purchase price using the figures provided by TWA's accountants as at 31 July 2017. It is apparent that the accountants' figures did not disclose the company's liability for employee entitlements. On that basis Mr Leviston adopted the amount of employee entitlements identified by Mr Ison in his draft Settlement Statement of $51,095.53. He discounted it by 70% to reach the figure of $35,766.87 as the amount by which the purchase price should be reduced for the purposes of cl 4.5(c). 97 Returning to whether there was evidence of the amount payable by PQ Management in accordance with the settlement agreement as alleged by Mr Leviston, the defendants' submission that there was no such proof should be rejected. Mr Leviston set out the calculations based on the updated financial statements in his affidavit and was not challenged in relation to them. In relation to the reduction to be made in accordance with cl 4.5(c), there was nothing in the updated figures which suggested that any alteration should be made in that respect. On the basis of the agreement as advanced by Mr Leviston, adjustments would be made to the calculated purchase price in accordance with updated figures provided by TWA's accountants. If the accounts so provided were insufficient to identify that any amount should change there would be no basis on which to make a relevant adjustment. That would apply in relation to any reduction in respect of employee entitlements. 98 However, here, in the recalculation of the reduction for employee entitlements it is apparent that Mr Leviston, perhaps inadvertently, rectified an error in the previous calculation which weighed in his favour. In the process of calculating the purchase price using the accounts from June 30, as updated to the extent that they were by the 31 July accounts, the amount actually payable under the Share Sale Agreement was exposed as being $930,325. That included a reduction of $35,766.87 in respect of employee entitlements which was the correctly calculated figure using the original financial statement information which was unaffected by the updated figures. When the comparison is made to the figure used on completion of $890,325 the amount which remained owing as the purchase price was $39,353.49. 99 Therefore, had the settlement agreement as alleged by Mr Leviston been established, the amount of $39,353.49 would have been demonstrated as being owing as a result of the adjustment of the purchase price based upon the updated figures. However, as indicated above, Mr Leviston's version of the settlement agreement has not been accepted and his claim in relation to this amount necessarily fails.

[30]

The claim for payment of $50,494.65 for "unjust enrichment" 100 In the prayer for relief in the Amended Statement of Claim filed 25 January 2021, Mr Leviston claims: $50,494.65 as against TWA, for monies paid to TWA by Leviston upon settlement of the Share Sale Agreement but to which TWA holds no lawful entitlement and has been unjustly enriched by; 101 The pleading in support of this relief is contained in paragraphs 38 to 42 and is, in summary: (a) at completion, the sum of $50,494.65 was directed to be paid purportedly by Mr Leviston to TWA; (b) no such moneys were payable to TWA under the Share Sale Agreement; (c) TWA has received the benefit of the payment and has been unjustly enriched at Mr Leviston's expense by it; (d) it is also said that it would be unjust, unfair, unconscionable and inequitable for TWA to retain the benefit of the $50,494.65 sum in the circumstances. 102 In the course of written submissions this claim was put on the basis that it was a mistaken payment within the meaning of the principles referred to in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 (David Securities). It was also advanced on the basis that the money was received by TWA from Mr Leviston in circumstances where TWA had no entitlement to it. 103 As the defendants correctly submitted, there is a degree of difficulty in the manner in which this claim is made. In particular, there is no cause of action for "unjust enrichment" in Australia. Even if there were, no vitiating element to the transaction has been pleaded and, in particular, there is no allegation that Mr Leviston made the payment by mistake. 104 Mr White did not cavil with the proposition that, in Australia, there exists no stand-alone cause of action for restitution or unjust enrichment. He accepted that the current authority holds that unjust enrichment is not a definitive legal principle of general application, so much as an organising concept which provides a taxonomy for identified causes of action on the basis that they share a set of common features. Importantly, what is required by each of those diverse causes of action is some recognised vitiating factor affecting the transaction in question. As was said in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 156 [150]: …whether enrichment is unjust is not determined by reference to a subjective evaluation of what is unfair or unconscionable: recovery rather depends on the existence of a qualifying or vitiating factor falling into some particular category. 105 Those vitiating factors were identified by French CJ, Crennan and Kiefel JJ in Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498, 516 [30]: In David Securities Pty Ltd v Commonwealth Bank of Australia, this Court explained the part played by unjust enrichment in a claim for money had and received (in that case for recovery of a payment made under mistake of law). That explanation may be expressed, at a fairly high level of abstraction, as an approach to determining such claims. In summary: • recovery depends upon enrichment of the defendant by reason of one or more recognised classes of "qualifying or vitiating" factors; • the category of case must involve a qualifying or vitiating factor such as mistake, duress, illegality or failure of consideration, by reason of which the enrichment of the defendant is treated by the law as unjust; • unjust enrichment so identified gives rise to a prima facie obligation to make restitution; • the prima facie liability can be displaced by circumstances which the law recognises would make an order for restitution unjust. Unjust enrichment therefore has a taxonomical function referring to categories of cases in which the law allows recovery by one person of a benefit retained by another. In that aspect, it does not found or reflect any "all-embracing theory of restitutionary rights and remedies". (Citations omitted).

[32]

Was the amount of $50,494.65 owing by Mr Leviston to TWA? 108 Even if Mr Leviston were permitted to advance a claim of mistaken payment, it would be defeated on the merits in this case if consideration was given for the payment. As was said by the High Court in Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, 673 when speaking of the occasions when a liability to refund money paid under a mistake can be defeated: Before that prima facie liability will be displaced, there must be circumstances (e.g., that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust. 109 In this case Mr Lyons submitted that the consideration for the payment was the discharge of Mr Leviston's obligation under cl 4.5(a) the Share Sale Agreement. By that clause he agreed to be responsible for all taxes, duties, costs, Division 7A loans, liabilities, and Claims or Losses incurred by the Company up to the Completion Date. Unfortunately, the parties made very few submissions on this question and, in particular, whether the amounts claimed fell within the scope of this clause although, prima facie, they may well have done so. 110 However, the obligation of Mr Leviston to pay these amounts to TWA might more readily be accommodated in the agreement in relation to settlement which he reached with Mr Ison. By that, the parties would treat the transfer of the business as occurring as at 1 or 3 July 2017 and the price was to be calculated on the basis of the figures as of that date. In accordance with that arrangement, the costs incurred by the business from then until completion by Mr Leviston were to be paid by him. As has been identified above, the agreement that Mr Leviston would be responsible for these amounts was supported by the evidence of the surrounding circumstances. They included that the workings for the settlement statement which clearly showed the $50,494.65 to be a liability of Mr Leviston were sent to him and those advising him, and that they were adopted by them. 111 In the course of the hearing there was some disputation as to the existence of this debt and its quantum. The amount of $50,494.65 was identified by Mr Ison as being the total of the amounts which had been paid to or for the benefit of Mr Leviston and his family in the period from 3 July 2017 to 1 August 2017. In his affidavit Mr Ison set out at length his calculations in respect of the amount. He said (CB 1148) that he became aware that Mr Leviston had used TWA to pay money to his family, purportedly as wages. He claimed that, prior to settlement, he developed a spreadsheet of the amounts which were to form the settlement statement and it contained the amounts which were payable by Mr Leviston. He said that Mr Leviston was given copies of this document. He also explained in his affidavit (CB 1148) how the amounts which he used in his calculation of Mr Leviston's obligation to TWA were identified and why they were his liabilities. He deposed that he had discussed these matters with Mr Leviston who accepted the majority of the amount calculated. 112 Mr Ison was cross-examined in relation to the items which made up the amount of $50,494.65, and his justification for why he included them in his calculation was not shaken. It is relevant that in his written closing submissions Mr White did not suggest that Mr Ison had not been able to provide a justification for the amounts, save in a very minor respect which has been remedied, and nor did he suggest that it had been demonstrated that any individual amounts were to be excluded from the total. It is relevant that Mr Leviston's wages for the month of July were included in the figure although he remained working in the business. I accept Mr Ison's evidence that in the discussions between him and Mr Leviston it was agreed that such amounts would not be payable by TWA. That is consistent with the apparent arrangement between the parties that they would act as if the settlement had taken place from 1 July 2017, on the basis of which interest was payable by PQ Management for that month. 113 Mr White submitted that under cross-examination Mr Ison accepted that the amount of $50,494.65 would not be relevant if the adjustment date for the agreement was 1 or 3 August 2017 rather than 3 July 2017. By that it is understood that if the settlement agreement was as Mr Leviston alleged, and an adjustment had to be made as at 31 July 2017 using the updated financials to that date, this amount was not claimable. Mr Lyons for the defendants accepted that proposition and it is the logical conclusion which flows from the parties' competing claims. However, as Mr Ison's version of the settlement agreement has been accepted, it follows that the amount of $50,494.65 was, in fact, payable to TWA on settlement.

[37]

The validity of the share transfer 124 The facts in relation to this part of the claim have been set out above. In brief they are that following completion on 3 August 2017, the relationship between the parties broke down. From about mid-2018 Mr Leviston requested that his remaining shares be acquired but the parties could not agree on the price. The situation between the parties worsened. 125 On 6 January 2020, PQ Management purported to exercise an option to purchase Mr Leviston's shares but it was obviously invalid and not further relied upon. 126 Subsequently, on 11 March 2020, PQ Management gave a notice to Mr Leviston by which it purported to exercise the option under the Shareholders Agreement. Although the terms of that notice are set out above, it is appropriate to repeat here its operative paragraph: Under clause 8.12 of the Agreement, we hereby exercise our option to acquire all the shares held by you, being 60,901 fully paid ordinary shares (the Shares), in the Company for the total price of $169,163.77 (the Price). For the avoidance of doubt, this letter is a Call Option Notice in accordance with clause 8.12(b) of the Agreement. 127 The notice purporting to exercise the option enclosed a number of documents including a letter from TWA's then accountants identifying the price stated was calculated on the basis of 2.2 times EBITDA, a share sale agreement, and a completed share transfer form. Mr Leviston did not sign the enclosed documents and PQ Management thereafter purported to utilise the power of attorney given to it under the Shareholders Agreement and executed them on Mr Leviston's behalf. It further caused the sum of approximately $190,000 to be paid into Mr Leviston's solicitors' trust account in respect of the purported transfer. 128 Although Mr Leviston disputed that any proper exercise of the call option had occurred, he nevertheless purported to keep the money paid by PQ Management and, indeed, he directed his solicitors to transfer it to him. Despite that, no claim was made by PQ Management that, even if the call option had not been validly exercised, Mr Leviston had made an election such that he was bound by the agreement pursuant to which the money was tendered.

[39]

Whether a valuation was required prior to the option's exercise? 130 It was first submitted that it was a condition precedent to the exercise of the option that a valuation of TWA's shares be undertaken by an independent valuer and that the value be not less than 2.2 times EBITDA. This requirement existed, so it was submitted, on the basis that the price for which the shares were to be acquired under the call option was the greater of 2.2 times EBITDA or the market value of the shares as valued in accordance with cl 15.1 of the Shareholders Agreement. That clause provided: 15.1 Valuer The value of a Shareholder's Shares for the purposes of Clauses 8 and 14 shall be deemed to be the relevant proportion of the market value of all the Shares in the Company as determined by an independent party agreed upon by the Shareholders, or failing such agreement determined by an appropriately qualified professional nominated by the President for the time being of the Queensland Law Society Inc. at the request of the Company or any Shareholder (Valuer) using proper Accounting Standards. The parties agree that such valuation must not be less than 2.2 times the operating net profit of the Company before tax (including management remuneration and superannuation) and that this is the minimum potential value for the purposes of Clauses 8 and 14. 131 It can be accepted that cl 15.1 operates such that the price to be paid for the shares on the exercise of the call option is their relevant proportion of the market value of all of TWA's shares as that value is determined by an independent person (whether agreed or appointed by the identified mechanism) using proper accounting standards, but that the value shall not be less than 2.2 times EBITDA. It follows that their value at 2.2 times EBITDA is the least amount which will be paid by the grantee who exercises the option. 132 There is, however, nothing in the terms of the Shareholders Agreement which has the effect that the valuation of the shares pursuant to cl 15 be a condition precedent to the exercise of the option. It was submitted on behalf of Mr Leviston that such was required because "the call option notice, or at the very least, the accompanying share sale agreement, needed to state a sale price for the shares." However, the clause is clear. The exercise of the option is uncomplicated and occurs by the giving of a written notice of its exercise within the time provided. 133 It is to be observed that cl 8.12(c) provides, "If the Call Option is exercised … the Grantee will deliver a properly executed Share Sale Agreement" and this suggests that the provision of a contract is to follow upon the option's exercise rather than being delivered simultaneously. However, it was submitted that the requirement that the grantee deliver such a contract on or before two business days after delivering the notice exercising the option indicated that a valuation in accordance with cl 15.1 had to occur prior to the exercise. Whilst it can be accepted that the time between the exercise of the option and the delivery of the contract of purchase is limited, it is far from impossible that a relevant valuation could be undertaken in that time. Indeed, by cl 15.2 the shareholders are to co-operate in ensuring that the valuer has the ability to value the company and the degree of co-operation required will be affected by the limited time available under cl 8.12. 134 Mr White also relied on the terms of the MOU and the instructions given by Mr Ison during the drafting of the Shareholders Agreement as to the terms of the call option as supporting his preferred construction. However, even if those matters were admissible as aids to construction, which is doubtful, they do not support the suggestion that the obtaining of a valuation was a condition precedent to the exercise of the option and they do not displace the clear words used by the parties in the Shareholders Agreement.

[40]

Was the notice of exercise otherwise invalid? 135 Mr White further submitted that the notice of the option's exercise was invalid because it attached an inappropriate share sale agreement which did not meet the description of cl 8(b). In this respect it was complained that the share sale agreement was not mutatis mutandis to that identified in schedule 5 of the Shareholders Agreement. 136 Whilst it was not a requirement for the valid exercise of the option that the notice include with it an executed share sale agreement in the correct form, the attachment of the agreement along with the statements in the notice had the result that the notice was invalid. It is undoubted that the notice purported to exercise the option, but it was expressed to be on PQ Management's terms, namely that the price to be paid for the shares was that which had been calculated by TWA's accountants as being 2.2 times EBITDA. The notice did not say that the option was exercised and that the parties should then agree a valuer to undertake a valuation to market price but not less than 2.2 times EBITDA. Rather, the notice claimed to exercise the option only on the basis that the price stated was the actual price payable. 137 The exercise of an option must be "absolute and unqualified and must bind the grantor to perform the very terms set out in the option": Quadling v Robinson (1976) 137 CLR 192, 200 - 201 per Gibbs J, who went on to add: Authority is hardly necessary to support this statement, but some of the cases are collected in the judgment of Smith J in Ballas v Theophilos [1958] VR 576, at p 581 (which was affirmed on somewhat different grounds (1957) 98 CLR 193). However, it is not always easy to determine whether the purported exercise of an option should be understood as attempting to vary the terms of the option or as intending to accept its terms without modification, notwithstanding that they may have been misdescribed, or notwithstanding that the grantee of the option may have indicated that he intends to perform the contract in a manner for which the terms of the option do not provide. Thus although a notice misstates the terms of the option which it purports to exercise, it may nevertheless amount to an unqualified and unconditional exercise of the option: see Carter v Hyde (1923) 33 CLR 115, at pp 121-122, 126, 133. On the other hand, if the grantee of an option sets out his own erroneous understanding of the option, and then purports to exercise the option as so understood, there will (speaking generally) be no effective exercise of the option: see Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20, at pp 26 - 27." 138 In determining whether there has been an absolute and unqualified acceptance of the terms of the option it is necessary to consider the meaning of the notice of exercise by ascertaining what anybody who received it would understand it to mean: Carter v Hyde (1923) 33 CLR 115, 126; Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229 [33]; Hagerty v Hills Central Pty Ltd [2018] NSWCA 200 (Hagerty v Hills Central Pty Ltd) [38]. In this respect, whether an option has been validly exercised is one of fact. 139 Here, the offer in respect of which the option was granted to PQ Management was for it to acquire Mr Leviston's shares at a price calculated by reference to cl 15.1 of the Shareholders Agreement. By that clause the parties were first to attempt to agree on an independent valuer. If no agreement could be reached, a mechanism was provided for the appointment of the valuer. When appointed, the valuer was to ascertain the value of the relevant proportion of the market value of all shares. The concept of "market value" is well understood, but if that value was less than the value for those shares reached by applying a formula of 2.2 times EBITDA, the value given to the shares will be the latter. 140 In this case the purported exercise of the option was not that PQ Management would acquire the shares valued in accordance with cl 15.1. Instead, it purported to accept an offer for the shares that had not been made, namely that the shares would be acquired for $169,163.77 which was not a price calculated in accordance with the clause. By the notice of exercise, PQ Management sought to impose on Mr Leviston its own valuation of the shares which was not by a person agreed between the shareholders, not by a person appointed by the machinery identified in cl 15.1, not for a proportion of the market value of all of the shares, and not, as a minimum, 2.2 times EBITDA as assessed by a properly appointed valuer. 141 This is not a case where the purported exercise of the option can be construed as PQ Management indicating that it was ready and willing to pay whatever was found to be the price calculated in accordance with the Shareholders Agreement, which it believed to be $169,163.77. The notice could only be fairly construed by anybody receiving it as a willingness to exercise the option at the price which it considered was appropriate. That is made clear by the statement in the notice that Mr Leviston was required to execute the share sale agreement enclosed with the notice within two business days and return it and, if that did not occur, PQ Management would utilise the power of attorney in the Shareholders Agreement to exercise it on his behalf. The only construction which could be put on this was an intention to acquire the shares at the price asserted. 142 This situation is far from that which arose in Ballas v Theophilos (No 2) (1957) 98 CLR 193 (Ballas v Theophilos (No 2)). That case concerned a partnership deed pursuant to which the surviving partner was granted an option to acquire the deceased partner's interest on the giving of notice. No time was specified for the giving of notice and the High Court determined that notice within a reasonable time was required, but that the purported exercise of the option some 16 months after the partner's death was ineffective. The partnership deed specified that, if the option had been exercised the price was to be worked out in accordance with a formula provided and, in the case of a dispute, a mechanism was provided for an independent valuation. In obiter Williams J opined that the only question was whether the grantee had complied with the conditions of the option. He held that all that was required in that case was to give notice to the executor of the deceased partner's estate. If that had occurred the relationship of vendor and purchaser would have arisen with the price to be ascertained in accordance with the provisions of the partnership deed. If the grantee purported to exercise the option and tendered payment, the question of what the true price was would only arise if the grantor did not accept the amount tendered. His Honour said (at 209): Even if the purchaser had tendered the wrong amount, he could still in a suit for specific performance obtain a decree if he was ready and willing to pay what was found to be the true purchase price by the court: Berners v. Fleming. If the intention to exercise an option is sufficiently clear, it matters not that the optionee at the same time wrongly asserts that the purchase price is £x whereas the true purchase price is £x + £y. By exercising the option he contracts to pay this price whatever it may be. 143 These obiter observations of Williams J were doubted by Leeming JA in Hagerty v Hills Central Pty Ltd [53]ff who indicated that they were peculiar to the circumstances of that particular case where the price of the partner's interest could not be determined at the time of the option's exercise. The price was to be agreed between the parties or, in the absence of such an agreement, was to be determined by a contractual mechanism. 144 Whilst the circumstances in Ballas v Theophilos (No 2) have some similarity with the present case, here the terms of the notice of exercise of option could not be said to reveal that PQ Management "was ready and willing to pay what was found to be the true purchase price by the court". On the contrary, the notice stated that Mr Leviston was "required" to execute the share sale agreement containing PQ Management's price within two days. It then stated that if Mr Leviston did not act as demanded, it would execute it on his behalf utilising the power of attorney contained in the Shareholders Agreement. In other words, PQ Management purported to accept an offer which had not been made by Mr Leviston. It did so by requiring the execution of an agreement which did not accord with the option's terms. By it, PQ Management did not express clearly and unequivocally that it then and there elected to acquire Mr Leviston's interest on the terms of the option: cf Ballas v Theophilos (No 2) at 196 per Dixon CJ. 145 It follows that PQ Management's purported exercise of the option was not in accordance with cl 8.12 and was wholly ineffective. 146 In the circumstances there is no need to consider the further submission that the attached share sale contract did not satisfy the requirements of cl 8.12. For the reasons referred to above, it was not necessary for the contract to be sent with the notice of exercise of option. However, even on a cursory analysis, it is apparent that the contract proffered by PQ Management did not meet the contractual description, not least because it included the incorrect price.

[43]

The principles relating to oppression 151 Mr Leviston relied upon ss 232 and 233 of the Corporations Act 2001 (Cth) (Corporations Act) in seeking relief on the ground of oppression. Relevantly, they provide: 232 Grounds for Court order The Court may make an order under section 233 if: (a) the conduct of a company's affairs; or … is either: (d) contrary to the interests of the members as a whole; or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. 233 Orders the Court can make (1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order: (a) that the company be wound up; (b) that the company's existing constitution be modified or repealed; (c) regulating the conduct of the company's affairs in the future; (d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law; (e) for the purchase of shares with an appropriate reduction of the company's share capital; … (j) requiring a person to do a specified act … 152 In his written submissions, Mr White relied upon the observations in BAM Property Group Pty Ltd as trustee for BAM Property Trust v Imoda Group Holdings Pty Ltd [2019] FCA 1192 [46] - [50] (BAM v Imoda Group Holdings) as to the applicable principles for determining whether oppressive conduct within the meaning of s 232 has occurred. There is no need to repeat them here. That is particularly so because Mr Lyons very correctly acknowledged that, if it was concluded that the option had not been validly exercised, there was little he could say in relation to the allegations of oppression. As Messrs Ison and Eldridge believed that Mr Leviston was no longer a member of the company they necessarily did not act in his interests as a shareholder at all, and the company was conducted in disregard of any interest he had in its operation. He was denied the financial benefits of being a shareholder and of his rights under the Shareholders Agreement. Even if the oppression suffered by Mr Leviston was not intentional, it was nevertheless real. 153 In the circumstances, the conduct of TWA in disregard of Mr Leviston's interests as a shareholder and only in the interests of PQ Management, was oppressive to, unfairly prejudicial to, or unfairly discriminatory against, Mr Leviston within the meaning of s 232 of the Corporations Act. 154 It was faintly argued on behalf of Mr Leviston that he was deprived of his entitlement to exercise the put option in the Shareholders Agreement although how that would be so was not clearly explained. At all times Mr Leviston asserted that he remained a shareholder of TWA and, had he so chosen, he could have exercised the put option according to its terms. In this respect it might be assumed that he had sought legal advice about that matter and that his assertions were influenced by it. Nevertheless, he did not attempt to exercise the option. In these circumstances, it should not be thought that he did not do so because he was prevented by the defendants from following that course.

[44]

Relief for oppression 155 Consequent upon a finding of oppression, Mr Leviston seeks an order that his 30% interest in TWA be acquired by PQ Management. PQ Management did not dispute that this was an appropriate order in the circumstances. However, two issues were contested. The first was as to the date on which the shares should be valued for the purposes of the purchase (the "notional acquisition date"), and the second was as to the basis on which the shares should be valued. 156 In relation to the principles on which a Court grants relief under s 233, Mr White again referred to the decision in BAM v Imoda Group Holdings and especially paragraph [89] - [90] wherein it was said: 89 The purpose of granting a remedy between parties in an oppression case is to "to compensate the oppressed shareholder for the oppression which has taken place": Smith Martis Cork & Rajan Pty Ltd v Benjamin Corp Pty Ltd (2004) 207 ALR 136, 146 [72] (Smith Martis Cork). In cases where the relief to be granted is the compulsory purchase of shares, that object is achieved by the Court having a wide discretion to fix a price that "represents a fair value in all the circumstances": Smith Martis Cork (145-146 [70]-[72]). That does not necessitate fixing a price only by reference to ordinary valuation principles: Smith Martis Cork (146 [73]-[78]) and Re Bird Precision Bellows Ltd [1986] 1 Ch 658, 669. The question is to identify the price which should be paid in the circumstances. Methodology of valuation for compensation purposes 90 It can be accepted that, where shares are to be valued as a starting point for determining the price which should be paid, the usual date for valuation is the date of the filing of the proceedings, but that is by no means a universal approach. The valuation does not value the shares at that date as if nothing but the ordinary course of business had preceded it. That would effectively allow the oppressing party the benefit of the wrongful conduct as, inevitably, that conduct has diminished the value of the oppressed party's interest in the company before the proceedings are commenced. In Scottish Co-operative Wholesale Society v Meyer [1959] AC 324, Lord Keith identified (at 364) that the valuation process must negate the effects of the oppressive conduct. His Lordship said the amount to be determined was: …what would have been the value of the shares at the commencement of the proceedings had it not been for the effect of the oppressive conduct of which complaint was made. This is clearly not a matter on which a calculation can be made with mathematical accuracy or by the application of strict accounting principles… 157 It was not submitted that those principles should not be applied in the circumstances of this case.

[45]

The notional acquisition date 158 Mr Leviston submitted that the appropriate date for the assessment of the value of his shares should be 1 August 2020, being the last date on which he might have exercised his put option. Conversely, Mr Lyons submitted that the date of valuation should be either the date on which PQ Management first attempted to exercise the call option, being 6 January 2020, or, at the latest, the date of the second attempt, being 11 March 2020. 159 Neither party attempted to support any of the proposed dates with any buttressing logic. It is not clear why the dates proposed by PQ Management should be accepted. There is no reason why the date of the commencement of any operative oppression should be determinative, unless its adoption has the consequence of avoiding additional loss to the oppressed party which followed the acts of oppression. There was no evidence of that in the present case. In that respect, a peculiar aspect of this matter is that there was no significant or independent evidence of the financial fortunes of TWA at the time of the acts of oppression or at any time thereafter. Nevertheless, it does not appear that there was any conduct by PQ Management amounting to oppression which caused any diminution in the value of TWA or Mr Leviston's interests in it. 160 There was similarly no logic attached to the date proposed on behalf of Mr Leviston. He was at liberty to exercise the put option on 1 August 2020, if that had been his desire. He continued to maintain that PQ Management's attempts to exercise the call options were invalid and the necessary corollary of that is that his right to exercise the put option remained unaffected. His omission to take that course was not explained. 161 It is not uncommon for Courts to use the date on which the proceedings are commenced as an appropriate one for the date of valuation or notional acquisition date, but that is not to deny that other dates, including the date of the order, are also appropriate. As there was little useful evidence in this case which might assist in identifying any appropriate date, the date of the commencement of the proceedings, being 3 June 2020, has some validity. There is no suggestion that any conduct by PQ Management reduced the value of Mr Leviston's interest in TWA, either at that time or thereafter. It has the advantage of being close to the dates of the alleged oppression and it is apparent that, by that time, the falling out between TWA's shareholders was irreconcilable. 162 Consideration should also be given to the costs of the valuation task which is necessarily rendered more difficult when undertaken retrospectively. For this reason, it is likely that if the date adopted was 30 June 2020, the availability of the existing company accounts should reduce the difficulty of ascertaining TWA's value and the time required to do it. However, it must be accepted that annual financial accounts cannot always be relied upon as an accurate identification of a company's financial position, but they are likely to be an adequate starting point. 163 In the absence of any substantive information suggesting that 30 June 2020, being a convenient date close to the commencement of the proceedings, is inappropriate, it ought to be adopted as the date for the valuation of Mr Leviston's shareholding in TWA for the purposes of the orders in this case.

[46]

Method of valuation 164 The submissions as to the appropriate method of valuation were equally sparse. For PQ Management it was submitted that Mr Leviston's shareholding be valued at the "fair market value" and that the Court should not adopt the valuation methods identified in cl 15 of the Shareholders Agreement. In this respect Mr Lyons relied upon the observations of White J in Page v Good Impressions Offset Printing Pty Limited [2011] NSWSC 1398, where at issue was the method of valuation of shares for the purposes of an order under s 233(1)(d) or (e) of the Corporations Act. His Honour held that the methodology provided for in the shareholders agreement which regulated the voluntary transfer of shares was inapposite to circumstances where the oppressive conduct had required the involuntary disposition of shares. White J said (at [16] - [17]): 16 A sale pursuant to a Transfer Notice given under clause 12.2 is to be at a price equal to the value of shares determined by the company's accountant on instructions received from the board. It is in the last degree unlikely that the parties would have intended that clause to apply if the shareholder sought and was successful in obtaining an order for purchase of his shares as a result of oppressive conduct of the company's affairs. Nor could the parties by their agreement confine the power of the court as to how shares to be compulsorily purchased should be valued. Typically on such an application the court will have to determine questions such as the date at which shares are to be valued, whether there is to be a discount for the shares being purchased being a minority holding, and how the valuation should be made so as to remove the depressive effect on the value of the shares of the oppressive conduct that would have been found. 17 None of these matters is addressed in the procedures for valuation in clause 12.3. But fundamentally, given that the parties could not, by their agreement, regulate how the court might exercise its powers under s 233 for the valuation of the shares ordered to be purchased, it is not to be assumed that they intended to do so by that clause. 165 Whilst it can be accepted that the Court is not in any way bound in the exercise of power under s 233 by the share valuation method agreed between the parties in a shareholders agreement, that is not to say that it is irrelevant. On the contrary, it may provide an indication of what the parties, when entering into the agreement, had considered was a fair method of valuing a departing member's interest in the company. 166 In this case PQ Management must be taken to have been prepared to acquire Mr Leviston's shares at a value determined in accordance with the Shareholders Agreement on the occasions on which it purported to exercise its option. Although Mr Leviston was not technically prevented from exercising the put option, given PQ Management's conduct, that may have been problematic. That is especially so in the circumstances involving the oppressive conduct which had occurred and that the current proceedings, through which that had sought to be remedied, had been commenced by that time. On the other hand, had Mr Leviston exercised the put option he would have been able to take advantage of the valuation method which had been agreed in the Shareholder Agreement. 167 It is also relevant that by the put and call options the parties intended that the remaining rights and obligations between them would be regulated by the parties entering into an agreement which was mutatis mutandis to that upon which PQ Management acquired the initial 70% shareholding. It was submitted by Mr White that the same condition ought to attach to the Court's order for PQ Management to acquire Mr Leviston's shares. Whilst there is some superficial force in that submission, a brief perusal of the agreement permits one to reach the conclusion that it would be folly to fashion any order around it. In the course of the hearing it became apparent that the agreement was poorly drafted and it would only be productive of additional disputation were it to become the foundation of any court ordered share purchase. It would also be difficult to ascertain what clauses would remain or how they were to be modified if that agreement was the substratum for a further disposition of shares. Mr White submitted that the court-ordered transfer should take place on the basis of that agreement and, as such it should include an adjustment in his favour to take into account 30% of the value of stock at the date of transfer. That, however, would result in Mr Leviston being twice compensated for the value of stock as its value would otherwise be taken into account in ascertaining the market value of the shares. The same can be said in relation to the proposed adjustment in relation to the cash held by TWA at the bank. The original share sale agreement is entirely inappropriate as a vehicle for transferring Mr Leviston's shares to PQ Management at market value. 168 In these circumstances the valuation of Mr Leviston's shareholding in TWA should roughly follow the price for which would have been transferred if they had been sold under the Shareholders Agreement with the valuation occurring on 30 June 2020. In that respect Mr Leviston's 30% shareholding (being 60,901 fully paid ordinary shares) is to be valued at the greater of the amount equal to 30% of the market value of all of the shares in TWA or 30% of 2.2 times EBITDA.

Leviston v PQ Management Pty Ltd

At a glance

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Before

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Judgment (51 paragraphs)

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Legislation Cited (3)

Cases Cited (16)

Cited By (3)