Alleged continuation of oppression
71 In light of the above, it is not strictly necessary for me to address the second basis on which the evidence is said to be relevant, namely that it manifested a continuation of the oppressive conduct of the affairs of the company or further breaches of directors' duties.
72 This was put in a number of ways. It was said that an extrapolation of the figures disclosed in the document which is Annexure A to Mr Porman's 29 January 2010 affidavit reveals that the net debts of members of the defendant other than the McLaughlins were allowed by the board to accumulate (both in respect of unpaid levies and in sums expended for their personal benefit) to at least $4.58 million. In that regard, the evidence before the court already indicates that not all of the project levies had been required to be paid by other shareholders and that there were arrangements with some shareholders in relation to variations to their units which were to be paid for in due course. I doubt that the further information adds greatly to the factual position already established in this regard.
73 It is further said that at the time of the hearing, undisclosed by the defendant, its financial position had been allowed to deteriorate to the position that it was the subject of a winding up proceeding by the builder for a debt of some $300,000 and that, subsequent to the hearing, its financial position remains so precarious that it is the subject of winding up proceedings by a substituted creditor. Mr Burchett stressed that the debts claimed by Southern Cross and the ATO (and conceded by the company) were in each case substantially less than the amount he says was incurred for the personal benefit of members other than the plaintiffs. Again, I doubt that this adds greatly to the factual position in relation either to oppression or to the basis on which leave is sought to commence a derivative suit for breach of directors' duties. If the relevance sought to be placed on this is that the directors have allowed substantial debts to be incurred and to remain outstanding while some members have benefited from the project to a greater extent than others evidence of that kind is already before the court.
74 It is submitted that the proposed course of conduct (ie the release of strata titles in return for a surrender of shares) is to the detriment of the defendant and its members generally, and oppressive of the McLaughlins in particular, in that the amount of the levy (for payment of which it is proposed to distribute titles to and release the members) is substantially less than the likely value of the members' units under the "Landsbury" Valuation which was in evidence at the hearing (TB 773) and thereby the proposal to release strata units (referred to in the correspondence now sought to be tendered) would substantially reduce the capital of the defendant; and that the proposed reduction of capital endangers the defendant's ability to pay any amount to the McLaughlins or to pay any liabilities of the defendant not included in the board's calculation of the levy, such that the McLaughlins may be left to satisfy any other liabilities including to themselves and bear the costs of any proceedings for which leave is granted.
75 The difficulty I have with this argument is that it seems to be predicated on fresh acts of oppression, not the subject of the claim in the hearing before me. The proposal for strata title subdivision has been well known since the inception of the project, as was the proposal that members bear a portion of the overall costs of the project (offset by any profits) but end up with a separate title to their unit. If the manner in which this is now proposed to be achieved constitutes a fresh act of oppression, it does not seem to me that that is something in issue before me on the pleadings as they currently stand. If it is said (as I apprehend it was) that this is simply a further manifestation of the oppressive conduct on which the McLaughlins relied in the hearing before me, then the relevance of it seems to me to be marginal at best.
76 Mr Burchett points to the fact that it is proposed that the defendant will retain either the two penthouse units or their proceeds of sale, upon a mortgage of $3.5 million, leaving a net asset value of $2.5 million and that the schedule prepared by one of the directors (which appears at annexure F to Ms Probert's affidavit) shows an "intended balance" refundable to members of somewhere between $10,449 to $12,449 but no allowance for legal fees of the defendant or the McLaughlins or any payment to them or to Mr Garratt. I doubt that this can be described as an "intended" balance. It seems no more than Mr Cannen's estimate as to the likely balance it is based may well prove to be incomplete. Again, this seems to be a complaint as to the manner in which the strata title process is now being completed, not something going to the oppressive conduct, if any, which has already occurred and which is the subject of the claim before me. The evidence before me already establishes that there is little likelihood of a substantial profit to shareholders.
77 It is said that the schedule prepared by one of the board members, Mr Cannen, is inconsistent with Mr Garratt's letter of January 2010 as to the extent of members' liabilities by disclosing the expense of selling the units as $720,000 to $768,000 and including further previously undisclosed debts of $1.8 million. As indicated above, the inconsistency between the various directors' or consultants' past estimates is already in evidence and I am not convinced that further inconsistencies in the calculation of profits/losses take the matter much further.
78 Emphasis was placed by Mr Burchett on the fact that the material shows that the board has once again asserted to the members that the position in which it had put the defendant left the board no alternative (this time put on the basis that it is necessary if the company is to avoid liquidation) than to approve the proposed course of conduct. Again, this seems to be pointing to fresh complaints, not evidence going to the conduct of which complaint was made in the proceedings.
79 It is said that this evidence goes to show that the board is treating the McLaughlins in a discriminatory fashion, by insisting on obtaining security for any actual or contingent liability of the McLaughlins over their unit (by requiring the whole of the proceeds of any sale of the unit, despite the satisfaction of the new levy, to be held in trust by the St George Bank and not be released without the defendant's consent pending the completion of the litigation). Even if that be the case, and I do not accept that on the evidence there is necessarily a serious question to be tried as to the unfairness of any discrimination in this regard, it does not go to what has already occurred and was the subject of the hearing before me. However oppressive the manner in which the affairs of the company may now be being conducted, if complaint is to be made of those after the hearing, then as a matter of procedural fairness it would be necessary for the pleadings to be amended to plead that conduct and for the defendant to have an opportunity to respond thereto, to adduce evidence and to make submissions in that regard.
80 Finally, it is said that the defendant has (again) failed to provide the members or the McLaughlins with proper information upon which to assess the proposed course of action put to them, and has relevantly failed to provide accounts for the 2008-2009 year. (The 2008/9 accounts were the subject of the notice to produce served on the defendant, to which objection was taken but in any event the answer was there were no accounts to produce.) It is said that no statement has been provided of what debts the defendant has, other than those targeted by the new levy, or as to which members owe the substantial amount disclosed (by extrapolation from the figures) to the company and whether and how it can be paid. It is submitted that the bare assertion that the company cannot obtain alternative finance cannot be accepted without explanation in light of the very substantial value of the building currently available as security. A complaint was also made as to the priority said to have been given by the board to the marketing of one of the shareholders' units over the defendant's own unit. These matters all go to conduct after the conclusion of the hearing, as to which I make the same comment as noted above. Further, as I apprehend it, the defendant contends that these matters all go to an impermissible attempt for the court to second-guess the business decisions of the directions.
81 Mr Burchett's argument on this second basis of relevance seems to be that evidence of allegedly oppressive conduct after the hearing is relevant to the matters before me in the hearing because it shows in hindsight that the signs or indications of oppression which were before the court at the hearing have since become manifest. This seems to be a submission that, insofar as complaint was made as to the likely effect of what was occurring, regard should now be had to evidence to show that this was in fact what had occurred.
82 In relation to the asserted relevance of this material to the oppression/breach of directors' duties allegations, Mr Priestley pointed to the fact that the facts sought to be established by tender of this evidence (apart from the final accounting for the project, which he says cannot be relevant in the absence of the other half of the financial loss equation - as noted above) relate to matters post the date of the hearing and cannot be relevant to whether there was oppression/breach of duty by the directors prior to the hearing. Other than in relation to the assessment of damages issue, I agree with Mr Priestley's submission.
83 There were other assertions made by Mr Burchett in relation to the relevance of the evidence in similar vein - he submitted that the evidence showed that the benefit that at least one member had arranged to take out of the company (Mr Brown) is greater than had previously been thought; that the (so-called) "reticence" of Mr Garratt as to whether or not he would have any obligation to make contribution of further levies for his converted ground floor unit had now been confirmed by the fact the levies now issued did not include the former units holders (and hence it is said that Mr Garratt has 'avoided' some $240,000 in levies and therefore the cost to the company of his unit being converted for the purposes of the development is closer to $1.2 million than the $950,000 to be paid for his unit); and it is said that as the new levy reduces the value of the McLaughlins' unit to $400,000 Mr Garratt is in a position three times better than that of the plaintiffs. The thrust of these complaints (in essence that the McLaughlins have received or will receive a lesser benefit out of the redevelopment than others or that Mr Garratt has obtained a greater benefit by being excluded from levies in respect of the unit he gave up for the sake of the project) goes to matters which were already the subject of submissions in the hearing before me. The actual quantum now placed on the differential between the benefit to the McLaughlins and to the other members does not seem to me to add much to this.
84 In any event, having determined that the evidence should be admitted as being potentially relevant to the damages assessment, it can be relied upon for any matter in the proceeding to which it is relevant. Accordingly, whether or not Mr Burchett's submissions as to relevance on the oppression/breach of directors' duty aspect of the matter should be given weight are matters to be addressed in my final judgment in these proceedings. For present purposes, I simply note that the evidence will be admitted for whatever relevance and weight it may ultimately bear.
(ii) Interlocutory injunction
85 The second aspect of the motion is the application for interlocutory relief. The relief sought is as set out in order 3 of the notice of motion as follows:
3. Until further order of the Court or until any judgment against the defendant is satisfied in full, or, if there is an award in favour of the defendant, for at least 28 days after such judgment is handed down, the defendant by itself and its directors be restrained from: