MATTER : Sections 175, 232, 461 and 1324 of the Corporations Act 2001

Corporations - Members rights and remedies - Relief against oppression - Issue and allotment of new class of preference shares without a shareholder meeting being called and resolution obtained - Whether issue and allotment of shares constituted improper dilution of other shareholding - Whether a variation in the rights of shareholders - Whether breach of director's duties - Whether issue and allotment of shares invalid - Loans made by companies to a director without shareholder approval - Refusal by companies to register a trustee as holder of shares - Power of trustee to bring proceedings for winding up of a company - Whether grounds for winding up of companies

Corporations Act 2001 (Cth), s 53, s 231, s 232, s 233, s 246C, s 254A, s 461, s 467(4), s 467A

Supreme Court (Corporations) (WA) Rules 2004

First Defendant : Mr P I Jooste QC & Mr T J Kavenagh

Second Defendant : Mr P I Jooste QC & Mr T J Kavenagh

Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd [2000] WASCA 170; (1999) 34 ACSR 469

Hespe & Ors v Surfers Paradise Forests Ltd (1985) 10 ACLR 182

Lorenzi v Lorenzi Holdings Pty Ltd (1993) 12 ACSR 398

Netbush Pty Ltd as Trustee of the Russell Roberts Family Trust v RW Roberts Pty Ltd [2004] WASC 247

O'Neill v Phillips [1999] UKHL 24; [1999] 1 WLR 1092

Re Cumberland Holdings Ltd (1976) 1 ACLR 361

Re National Discounts Ltd (1951) 52 SR (NSW) 244

Re Weedmans Ltd [1974] Qd R 377

Reid v Bagot Well Pastoral Co Pty Ltd [1993] SASC 4323; (1993) 12 ACSR 197

Residues Treatment & Trading Co Ltd v Southern Resources Ltd (No 2) (1988) 51 SASR 177

Ruut v Head (1996) 20 ACSR 160

Shears v Phosphate Co-operative Co of Aust Ltd (1988) 14 ACLR 747

Thomas v HW Thomas Ltd [1984] 1 NZLR 686

Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459

Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285

Zephyr Holdings Pty Ltd v Jack Chia (Australia) Ltd (1988) 14 ACLR 30

Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534

Greenhalgh v Arderne Cinemas Ltd [1946] 1 All ER 512

Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692

Re Bellador Silk Ltd [1965] 1 All ER 667

Re CMPS & F Pty Ltd (1997) 24 ACSR 728

Re Dalkeith Investments Pty Ltd (1984) 9 ACLR 247

Re Langham Skating Rink Co (1877) 5 Ch D 669

Re Norvabron Pty Ltd (No 2) (1986) 11 ACLR 279

Thomas v Mackay Investments Pty Ltd (1996) 22 ACSR 294

White v Bristol Aeroplane Co Ltd [1953] 1 All ER 40

1 This is an application arising out of disputes within a group of companies in which the Roberts family have directly or indirectly substantial interests. As a result of matrimonial proceedings arising out of the end of the third marriage of the person who appears to be the senior member of the family, two of the companies made substantial loans to him. He had sought these to enable him to meet obligations arising out of those proceedings. Further, those companies each issued and allotted to the same entity a new class of shares, to respond to his concern about the administration of the trust set up for the children of his first and third marriages. Before the issues and allotments in question that trust held a predominant proportion of the ordinary shares of one of the companies and through it, and with the trust's own holding, a substantial proportion of the ordinary shares of the other company. The issues and allotments came after the companies were ordered in other proceedings to register the trust's holding in the name of the new trustee for the trust.

2 The present proceedings by the trustee are to wind up the two companies, as well as to have the issues and allotments set aside, the companies' share registers rectified accordingly and an injunction issued to prevent the allottee's exercise of any of the rights arising in respect of the shares issued and allotted. The bases for the application lie principally in the provisions in the Corporations Act 2001 (Cth) granting the Court discretionary powers to provide relief against oppression in Pt 2F.1, and to wind up a company under Pt 5.4A.

3 These reasons begin with an account of the factual background in greater detail, so that, after considering some preliminary matters raised against these proceedings, it is possible to better appreciate the arguments of the parties for and against the relief sought, or any other relief.

4 The facts in this matter emerge from the contents of affidavit material filed for the purposes of these proceedings, as well as affidavit material which was filed for the purposes of other proceedings, and to which I gave leave to refer, there being no objection to this. I will return to those other proceedings.

5 The affidavits to which leave was granted to refer were a number from COR 98 of 2004. Those affidavits are of Helen Mary Goldfinch, one sworn 16 April 2004 (in two volumes) and the other 29 April 2004; of Russell Walter Roberts (the fourth defendant, for whom there was no appearance before me), one sworn 25 June 2004 and the other 13 August 2004; of Graeme Leslie Sampson, one sworn 27 July 2004 and the other 18 August 2004; and of Timothy Joseph Kavenagh, one sworn 28 September 2004 and the other 14 December 2004.

6 The affidavits in these proceedings were that of Mark Russell Roberts sworn 17 December 2004; and those of Russell Roberts, one sworn 20 December 2004 and the other 18 January 2005.

7 I also gave leave to refer to an affidavit in proceedings CIV 2217 of 2004, that of Sally Marie Roberts, sworn 14 January 2005.

8 By deed of settlement dated 8 February 1979, the Russell Roberts Family Trust (I will come below to another, similarly named family trust in this case) was established. Under the Russell Roberts Family Trust deed Russell Walter Roberts was trustee, appointor and guardian. The primary beneficiaries under the deed were the children of Russell Roberts. Subsequently, there were some variations of the deed, to one of which, in 1993, I will briefly return towards the end of these reasons.

9 Then, in 2000, Russell Roberts retired as trustee and appointor, appointing in his place BCH Custodians Pty Ltd as trustee, and his two adult children, those of his first marriage, Mark Roberts and Sandra Roberts (as she then was), as appointors. However, Russell Roberts remained as guardian.

10 By deed of variation dated 3 September 2001, the Russell Roberts Family Trust deed was amended to provide that, if the appointors appointed a new trustee without the prior written consent of the guardian, the deed's provisions as to distributions of income and capital were to be replaced by other provisions. The replacements provided for the whole of the income to be applied to or for the benefit of the children of Russell Roberts in equal shares, with certain provisos, one allowing for the trustee with the consent of the guardian to apply any child's or children's equal share to any company in which the "beneficial interest of all of the issued capital is held beneficially" either solely by a child of the first marriage or in equal shares by the children of that first marriage, and the other an equivalent proviso for any child or the children of the third marriage. The replacements also required that the capital be held in trust for the children of Russell Roberts and be distributed among them in equal shares absolutely when the youngest had reached the age of 25, or "such earlier time with the consent of the guardian".

11 By deed of appointment of new trustee dated 25 July 2003, the appointors replaced BCH Custodians with Devin Park Pty Ltd. Upon the appointors becoming aware of a concern with such appointment under the terms in the Russell Roberts Family Trust deed, a further deed of appointment of new trustee was entered into, dated 31 July 2003, replacing Devin Park with Netbush Pty Ltd, the plaintiff. There was no consent of the guardian, Russell Roberts, to either appointment.

12 The assets of the Russell Roberts Family Trust until very recently included A Class and B Class ordinary shares in R W Roberts Pty Ltd, representing 99 per cent of the issued share capital of that company. Russell Roberts holds one first governing director's share and one ordinary share of the company. The first governing director's share entitles Russell Roberts to 76 per cent of the votes of shareholders of the company. It also confers further rights on him, to which I will return.

13 The Russell Roberts Family Trust also owns management shares in Walter Developments Pty Ltd, the second defendant, representing 6.445 per cent of the issued shares of that company. Holders of management shares have the exclusive power to elect the directors of the company, but management shares are otherwise equivalent to ordinary shares. Walter Developments is a company in which the R W Roberts company also holds management shares, representing 66.065 per cent of the issued shares, sufficient to control the composition of the board.

14 The Russell Roberts Family Trust also owns ordinary and management shares in Fascine Developments Pty Ltd, the first defendant: the ordinary shares represent 91 per cent of that class, while the management shares are a minority of that class of shares, the rights attached to which make them equivalent to the management shares in Walter Developments.

15 The R W Roberts company also holds management shares in Fascine Developments, sufficient to control the composition of that company's board. Fascine Developments in its turn holds management shares in Walter Developments, representing 19.336 per cent of the issued shares of that company.

16 As a result of an order, dated 27 January 2004 of the Family Court of Western Australia, in proceedings arising out of the end of Russell Robert's third marriage, the shareholdings in the R W Roberts company were restructured. Russell Roberts was required to exercise one of the rights his first governing director's share conferred on him, so as to issue a special share to his third wife through the holding of an extraordinary meeting of the company at which he would exercise his voting rights to approve the issue. One of the entitlements of this special share arose in the event Russell Roberts did not exercise as stipulated another of the rights conferred on him by his first governing director's share, to require any holder of shares in the company to sell their shares to him or to his nominee for the amount paid up on those shares. The stipulation was that Russell Roberts require the Russell Roberts Family Trust to sell its shares. If that right were so exercised, then the special share should immediately be redeemed for $1. If that right had not by Russell Roberts' death been so exercised, then the wife might at any time following that death, with the leave of the Family Court, require the company to redeem the share for an amount equal to the amount due to the wife by Russell Roberts in satisfaction of all orders of the Court unsatisfied at the date of that death. The right to require that sale was in fact exercised.

17 The effect by the time of the hearing before me was that the Russell Roberts Family Trust's shares in the R W Roberts company were held by another company. This company, Truesteel Pty Ltd, is the trustee for another trust, the R W Roberts Family Trust. The terms of the R W Roberts Family Trust were not the subject of evidence before me, except that uncontested submissions by counsel for Fascine Developments and Walter Developments included that the effect of Truesteel's holding was to put a proportion of the distribution of the assets of Walter Developments at Russell Roberts' disposal from which he could satisfy loans made to him by Fascine Developments and Walter Developments.

18 The assets of Walter Developments until recently were real property in Broome, shares in public companies and shares in a wholly owned subsidiary company, as well as liabilities to Walter Developments under loans to Fascine Developments (of $332,500), to Russell Roberts (totalling approximately $620,000: there is some difference between those affidavits that address the matter on the amount, but both set it no lower than this amount and no higher than $631,000), and to the subsidiary. Recently, the real property and, it would appear, the public company shares, were sold, leaving Walter Developments a "cash box company", as it was described to me.

19 The assets of Fascine Developments so far as appear to me are freehold and a business in Carnarvon, and a 75 per cent interest in a partnership business also in Carnarvon, as well as real property in Broome. Fascine Developments had also made a loan of $405,954 to Russell Roberts, in part from the proceeds of a loan of $332,500 made to it by Walter Developments.

20 A further aspect of the factual background to which I need to refer now concerns the entry of Netbush in the registers of shareholders of the R W Roberts company, Walter Developments and Fascine Developments. Following its appointment as trustee, Netbush sought to be substituted for the original corporate trustee, BCH Custodians. The boards of all three companies refused these requests. The constitutions of the R W Roberts company and Walter Developments provided for pre-emption rights on a transfer of shares, rights which their boards could waive. Those constitutions also provided that the directors could in their discretion without assigning any reason refuse to register a transfer of any share to anyone whom it would be in the opinion of the directors undesirable in the interest of the company to admit to membership. Fascine Developments' constitution did not contain either sort of provision, but simply said that, upon presentation of an instrument of transfer of fully paid shares in any usual or common form, accompanied by the share certificate and such other information as the directors might properly require, the company must, subject to the powers vested in the directors by the constitution, register the transferee as a shareholder. In COR 98 of 2004 Netbush successfully sought orders to have the companies register the share transfers evidencing the transmission to it of the Russell Roberts Family Trust's shares in the companies.

21 Reasons for judgment in COR 98 of 2004 were delivered on 23 November 2004: Netbush Pty Ltd as Trustee of the Russell Roberts Family Trust v RW Roberts Pty Ltd [2004] WASC 247, Sanderson M. I return below to the reasons for this judgment. This judgment was entered on 25 November 2004. Subsequently, on 1 December 2004, the boards of Walter Developments and Fascine Developments met and resolved (two directors in favour, with the remaining director opposed) to issue and allot one share of a new class of shares in each company. These were called "M" class shares. The directors of the two companies who voted in these matters were the same three individuals, including the two who voted for the issues and allotments, Russell Roberts and Wendy Joan Benzie, who was the third defendant in these proceedings (and for whom there was no appearance before me). The "M" class shares were allotted to Rusmon Pty Ltd, the fifth defendant in these proceedings (and for which there was no appearance before me), of which Russell Roberts is sole director and shareholder, as well as company secretary. No shareholders' meeting was held in respect of these issues and allotments by either Fascine Developments or Walter Developments. In the hearing before me, the principal emphasis in the argument for Netbush was on the nature and effect of the shares.

22 An "M" class share in each case carries certain voting rights, and no participation entitlement to any profits of the issuing company, or to surplus assets or any residue on a winding up of the company, other than a right to a "preferential distribution", but in both cases only in certain circumstances.

23 The voting rights are to attend, speak and vote at any general meeting or any class meeting of any of the company's shareholders at which any resolution, including a special resolution, is to be proposed. On a poll, the holder of the "M" class share has the same number of votes as the total number conferred on a poll and capable of being cast by or on behalf of the trustee of any trust for the minor children of the third marriage of Russell Roberts and the major children of his first marriage.

24 The participation entitlement is to receive a "preferential distribution" equal to such proportion of any proposed distribution as those minor children would have been entitled to if the minor children had benefited pari passu and rateably with those major children in such proposed distribution, provided that the minor children are not entitled to benefit otherwise in that distribution, including through any trust whose beneficiaries include those major children.

25 However, the voting rights do not arise if the holder of the "M" class share after consultation with all other shareholders in the company has then lodged a declaration of no objection to any proposed votes on the proposal in question. The participation entitlement will arise only if the holder of the "M" class share, after consultation with the holders of all other shares in the company then issued for the purpose of determining whether the minor children will benefit, whether directly or indirectly, rateably and pari passu with the major children has not then lodged a declaration of no objection to any proposed corporate action involving a participation entitlement.

26 The "M" shares are recorded in the registers of the two companies as allotted on a fully paid basis for a consideration of $1. The terms of the "M" class shares include that they can be forfeited by the holder for nil consideration at any time, and have to be so forfeited if the holder is a nominee for or the trustee of a trust the sole beneficiaries of which are the minor children of Russell Roberts' third marriage and the youngest or survivor of them reached the age of 25.

27 It would appear that the "M" class shares were issued in this form and allotted as they were because of a concern Russell Roberts had that the trustee planned to exercise its voting rights so as to procure a distribution of the assets of the two companies to their shareholders. The trustee would then distribute to the four beneficiary children as income amounts, from the proceeds of such distribution to the trustee as shareholder, which were in fact capital for the purposes of the deed of Russell Roberts Family Trust as amended in 2001. As capital, those amounts could not be distributed until the youngest child became 25, as I have indicated. These amounts were apparently calculated on the basis of the capital gain in the assets of the trust as at the date of the 2003 appointment of the first trustee without the consent of the guardian. This had the effect, it was concluded, of making the trust a fixed one. Russell Roberts has the two adult children I have referred to, Mark Roberts and Sandra Cambridge, both of whom are over 25, and two infant children, Russell Roberts and Montana Roberts, both less than 10 years old, who are the children of his third marriage. Russell Roberts has no other children.

28 The effect of the "M" class shares would be to ensure that the allottee Rusmon, had equivalent voting rights to those of the trustee on any shareholder approval of a distribution. Somewhat less clearly, the effect of those shares would be to ensure that there would be no distribution by Walter Developments or Fascine Developments to or for the benefit of the major children in which the minor children did not share pari passu and rateably with them.

29 The factual bases of the claims for relief in these proceedings are the loans by Walter Developments and Fascine Developments to Russell Roberts, the refusal by those companies to register Netbush as the holder of the Russell Roberts Family Trust's shares, and the issues and allotments of the "M" class shares. These are said severally and in combination to represent conduct that falls within Corporations Act s 232, the "oppression remedy", so as to justify the orders sought. They are also said, in the same way, to represent conduct for the purposes of s 461 that would justify winding up orders under that provision. Further, it was said that the issues and allotments of the "M" class shares constituted a variation in the rights of the shareholders of Walter Developments and Fascine Developments without a shareholders meeting being called and resolution obtained as required by s 246C. The issues and allotments of the "M" class shares could thus be set aside under s 246D. In argument before me, there was also consideration of the possibility that the issue of the "M" class shares was a contravention of the duties of the directors of the companies at common law and under Corporations Act s 180, as well as of s 254A(2), which says that preference shares with preferential rights in respect of participation in surplus assets and profits or voting can only be issued if the rights are set out in the company's constitution or are otherwise approved by special resolution of the company.

30 I will consider each of the factual bases to which I have referred accordingly, but beginning with the issues and allotments of the "M" class shares, followed by the refusal to register Netbush as the holder of the Russell Roberts Family Trust's shares, and the loans to Russell Roberts. However, I will do so after dealing with some preliminary objections to these proceedings. They are of two sorts. One sort is procedural, and the other goes to the power of the trustee to bring proceedings like these, and in particular to seek orders for windings up of companies in which the trust has shares.

31 These objections went to the applications for orders for winding up only. They were that a number of the requirements for these applications under the Supreme Court (Corporations) (WA) Rules 2004, and one of the requirements under Corporations Act s 470(1), were not complied with. The Rules requirements were for publication of a notice of the application before the originating process is served on the company as r 5.6 provides, unless the Court otherwise orders; filing and serving on the company before the hearing of an official liquidator's consent as r 5.3 provides; and including with the application the consent of the official liquidator to act as a provisional liquidator as r 6.1(1) provides. The Corporations Act, s 470(1)(a) requires the lodgement of the applications with the Australian Securities and Investments Commission within the time period there referred to. The Rules requirements apply to both the applications under the oppression remedy provisions in Corporations Act Pt 2F.1 and the applications under the winding up provisions in Pt 5.4A: r 5.1. The Act requirement applies only to the latter applications.

32 However, here it was conceded that the filings and service had in fact occurred, albeit late. While no notice had been published, all of the shareholders and directors of both Walter Developments and Fascine Developments were aware of the proceedings, and the companies were both solvent. Fascine Developments and Walter Developments accepted that no injustice had been done to them, and I cannot identify an injustice to third parties which should cause me to require the proceedings to be recommenced. ASIC had been written to four days after the applications were made informing them of the conduct complained of in a fashion that would also have made them aware of the commencement of these proceedings, and notice of the proceedings on what appears to have been the relevant form had been lodged with ASIC approximately one month later. The letter was not the document or the form of its submission ("lodged") called for by the section, nor was it within the time the section called for. The document the section called for was properly submitted ("lodged") but well outside the time provided for, albeit two days before the hearing before me. However, reference was made to Corporations Act s 467A which requires an application under Pt 5.4A not be dismissed because of "a defect or irregularity in connection with the application" unless the Court is satisfied that "substantial injustice has been caused that cannot otherwise be remedied (for example, by an adjournment or an order for costs)". In these circumstances I am not satisfied that a substantial injustice has been caused, and thus no consideration of a remedy such as an adjournment is called for.

33 Accordingly, I would not uphold these procedural objections to proceeding with the applications.

The power of the trustee to bring these proceedings

34 The objection here was that neither the Russell Roberts Family Trust deed nor other law for trustees conferred on the trustees the power to bring a winding up application for a company in which the trust had shares. Further, it was said in any event to be "inequitable" to allow an application to be made that itself was in breach of trust.

35 In the event it is not necessary for me to consider whether indeed other law than the Russell Roberts Family Trust deed is not sufficient to confer the relevant power. That is because it seems to me that the deed confers it.

36 It was put to me for the Fascine Developments and Walter Developments that the Russell Roberts Family Trust deed was in fact a bare trust, by which I understood it to be meant that the trustee was simply a repository of legal title with no or minimal management discretions in respect of the corpus or distributions. Heavy reliance was placed on the provision with respect to the distributions of capital in the trust deed the result of the 2001 variation previously referred to, that the capital be held in trust for the children and distributed among them in equal shares absolutely when the youngest had reached the age of 25, or "such earlier time, with the consent of the guardian" (cl 8.4). This, however, does not spell out the form in which the capital is held. Indeed, another provision of the Russell Roberts Family Trust deed says, "with respect to any company in which the Trustee holds shares", the trustee's powers include the power to sell the shares (cl 9.1(g)(v)) or to agree to assent to or join in any arrangement relating to the sale of such shares (cl 9.1(g)(vi)). Further, still another provision gives the trustee the power to "vary or transpose any investments into or for any other or others of any nature whatsoever" (cl 9.1(d)). Those provisions are in my view telling against the Fascine Developments' and Walter Developments' argument.

37 For Fascine Developments and Walter Developments, it was also put that there was no express provision in the Russell Roberts Family Trust deed permitting the trustee to seek the remedies under the Corporations Act being sought here. It is true there is no such express provision. However, the provision just referred to, "with respect to any company in which the Trustee holds shares", sets out its list of specific powers as "in addition to the powers conferred by the Proper Law" (cl 9.1(g), opening words). The "Proper Law" would be sufficient to include the Corporations Act (see deed, cl 1.2(n)), which would it seems to me be adequate for the purpose of these proceedings. This makes it unnecessary for me to consider whether or not the further express power, "to take such action as [the trustee] thinks fit for the adequate protection of any part or parts of the Trust Fund" (cl 9.1(n)), would be sufficient.

38 This leaves the matter of the objection based on the exercise of any such power, in the form of these applications, being in breach of trust. There is indeed authority that the Court should not grant relief such as a winding up order under Corporations Act s 461, in the exercise of its discretion under that provision, if the winding up is being sought in breach of trust: Re Fernlake Pty Ltd [1995] 1 Qd 597, at 604. However, in that case, one of a special resolution for a winding up where the purchaser of one-half of the shares received no notice of the meeting and was not consulted on the matters to be discussed on which he could have given voting directions, the Court was dealing with the rights arising out of the contract of sale and the trust to which that contract gave rise (at 601). Here, one must consider the discretions of the trustee I have referred to as arising under the terms of the Russell Roberts Family Trust deed which had no counterpart in that case.

39 Further, here there were several beneficiaries, who were not all sui juris; in Fernlake there was only one, who was sui juris. The authorities seem to indicate that, at least absent such a trust as in that case, there is no duty to consult the beneficiaries (or in the case of the minor children, their legal representative) or to accept directions from them, although, of course, the trustee must exercise its powers in the interests of all of the beneficiaries, and there is support for the view, at least in relation to voting rights, that the trustee would usually accept the instructions of beneficiaries if they were all sui juris, absolutely entitled and agreed: Hespe & Ors v Surfers Paradise Forests Ltd (1985) 10 ACLR 182, at 191 - 192. It follows that a failure to act in the beneficiaries' interests is not made out simply by reference to a failure to consult the beneficiaries on action the trustee proposes to take, or to take such directions from them. In any event there is no suggestion that there would be any unanimity among the major children and the representative of the minor ones.

40 Fascine Developments and Walter Developments do argue, in effect in the alternative, that the proceedings here form part of a larger project by the trustee, to which I have already referred, the ultimate object of which is to distribute as income what is capital for the purposes of the Russell Roberts Family Trust deed, in breach of its terms. If that argument were made good, it would seem to me, on Fernlake (supra), to be a matter which would have a strong bearing on the exercise of my discretion to grant relief under Corporations Act s 461 and also, it seems to me, under the oppression remedy, s 232. Whether it has been made good, and whether, even if it has not, it raises issues that bear on whether to grant relief under those provisions, are matters to which I return below, under the heading "The appropriate form of relief".

41 To this point then, there is no barrier to my consideration of the merits of the trustee's applications. I turn to them, by reference to the factual bases on which they rest.

The issues and allotments of the "M" class shares

42 For Netbush reliance was placed on the power of the Court (Corporations Act s 233(1)(a)), under the oppression remedy in Ch 2F, "Members' Rights and Remedies", to order a company be wound up if the conduct of its affairs was "oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member" (s 232(e)). As well, reliance was placed on provisions, in s 461, any of which if engaged enlivened a discretionary power to wind up a company, located in Corporations Act Ch 5.4 on external administration of companies. I return to the s 461 provisions below. I begin with the oppression remedy.

43 The principal authority on the oppression remedy is Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459, and for Netbush reference was made to the dicta in that case which indicate that unfairness or oppression can arise even when directors exercise a general management power in good faith for a purpose within power. In testing that matter, members of the High Court used two sorts of expression. One was that the Court should consider "ordinary standards of reasonableness and fair dealing" having "regard to the view which the directors themselves have formed", and "allowing for any special skill, knowledge and acumen possessed by the directors" (at 472, per Brennan J). The other was that the Court might be "required to undertake a balancing exercise between the competing considerations disclosed by the evidence" (at 466, per Mason ACJ, Wilson, Dean and Dawson JJ), but one informed, it would seem, by the "caution" a court must exercise "to avoid an unwarranted assumption of the responsibility for management" (at 467). The authorities further show that in determining fairness, the court will often be "weighing conflicting interests of different groups within the company": Thomas v HW Thomas Ltd [1984] 1 NZLR 686, at 694, per Richardson J, quoted with approval in Reid v Bagot Well Pastoral Co Pty Ltd [1993] SASC 4323; (1993) 12 ACSR 197, at 205, per Debelle J, King CJ and Millhouse J agreeing.

44 As put for Fascine Developments and Walter Developments, there are indeed different interests represented by the beneficial interests held by the children of Russell Roberts. The issues and allotments of the "M" class shares, it was said, were concerned with providing the allottee the means to protect the minor children against unfair and unconscientious conduct in the administration of the Russell Roberts Family Trust in relation to its holdings in Walter Developments and Fascine Developments, although it was conceded the terms of the shares did not expressly confine the power of the holder not to object to proposed corporate action in such a way.

45 However, adjustments between different interests within a trust would seem to me to be matters for the parties to the Russell Roberts Family Trust - here, the trustee, the appointors and the guardian - exercising their powers and discharging their obligations under the Russell Roberts Family Trust deed. It is not clear why Fascine Developments or Walter Developments should be seen to have been assigned a role in that process. Indeed the provisions of the deed themselves were amended in significant ways in 2001 to make adjustments between different beneficiary interests, as I have indicated. There is no reference to a shareholding in Walter Developments or Fascine Developments in the deed so far as its (amended) provisions were made available to me, nor to the deed or the relations it created in the constitutions of the companies, except as a result of the terms of the "M" shares themselves.

46 On that view, there would appear to be no basis for qualification of the normal approach to the review of the exercise of the directors' power to issue and allot shares as it was exercised here. The directors "cannot ordinarily exercise a fiduciary power to allot shares for the purpose of defeating the voting power of existing shareholders by creating a new majority", which has been explained in terms that it is "simply no part of the function of the directors as such to favour one shareholder or group of shareholders by exercising a fiduciary power to allot shares for the purpose of diluting the voting power attaching to the issued shares held by some other shareholder or group of shareholders": Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, at 289, 290, per Mason, Deane and Dawson JJ. This is in the absence of provisions in the corporate constitution which indicate that such dilution might take place: see Reid (supra) (where the articles of the company gave the life governor the right to take up unissued shares).

47 For Fascine Developments and Walter Developments, it was put to me that these dicta had no application to a case, such as this one, where a new majority was not being created by the issue, but rather an existing shareholding matched, and then only when there had been no declaration of non-objection to the proposed corporate action. However, it seems to me that it is sufficient an existing majority is to be subject to a realignment of voting power such as this one provides for, as in the case of Fascine Developments. Further, it seems to me that the principle is similarly engaged in cases where the voting power of an existing shareholding is targeted so as to realign forces within the company, even if the targeted shareholding is far from a majority one, as in the case of the Russell Roberts Family Trust's shareholding in Walter Developments. In that case, it should be noted, the other shareholdings in Walter Developments, apart from Fascine Developments itself, Netbush, at 6.445 per cent, a Mr Richard Rowick (to whom I return below), at 3.319 per cent, and a Mr John O'Halloran, at 4.834 per cent, were the 66.065 per cent holding of the R W Roberts company. The controlling interest in the RW Roberts company, formerly held by the Russell Roberts Family Trust, had been transferred to another company nominated by Russell Roberts, who controlled the allottee of the "M" class shares, Rusmon, and who thereby would gain control of a substantial indirect interest in the assets of Walter Developments as I have indicated. The vice is the directors making the issues and allotments with a view to "manipulating voting power by favouring one shareholder or group of shareholders at the expense of another non-consenting shareholder or group": Whitehouse (supra), at 292, per Mason, Deane and Dawson, JJ; and see Lorenzi v Lorenzi Holdings Pty Ltd (1993) 12 ACSR 398 (NSW SC, Santow J), where the effect of the change in shareholdings reduced the interest of one member of the family from just under 50 per cent to just over 25 per cent.

48 The effect of contravention of the principle from Whitehouse is that the directors have exercised their power for an improper purpose. It is not to the point that the "motives" of the directors are "substantially altruistic" (at 293, per Mason, Deane and Dawson JJ). The exercise would make the issue invalid: Lorenzi (supra), at 404. It would also be "unfair" within the approach to the s 232(e) ground for an oppression remedy from the judgment of Brennan J in Wayde (supra): Shears v Phosphate Co-operative Co of Aust Ltd (1988) 14 ACLR 747 (FCt SCt of Vic), at 754 - 755, per O'Bryan J, with whom Nathan and King JJ agreed on this point.

49 The remedy of declaring the issues and allotments invalid may be available to Netbush even apart from the oppression remedy: see Residues Treatment & Trading Co Ltd v Southern Resources Ltd (No 2) (1988) 51 SASR 177. In any event, it is available under the oppression remedy: see Shears (supra), at 755, per O'Bryan J. Orders consequential on that such relief, such as rectification of share registers, and injunctions to prevent the exercise of any rights under the shares, would also be available.

50 For Fascine Developments and Walter Developments, however, it was put that the family character of the companies and of the Russell Roberts Family Trust gave rise to equitable considerations which it seems to have been said enlarged the purposes for which the power could be exercised. This enlargement was at least to enable the power to issue and allot shares to be used when a "stratagem" involving the exercise of the voting power of the Russell Roberts Family Trust was to be employed by the Trustee to violate its terms. I was referred to Shears (supra), for the dicta of Nathan J at 763. There his Honour acknowledged that a co-operative company, as he and the other members of the Court in that case said the company was, could amend its articles to give better effect to their limitation on the voting powers of members of the company, where "circumstances reveal its essential characteristics are about to be subverted by a stratagem".

51 However, it seems to me that there is an insuperable difficulty with this argument. It was clear from the objects in the memorandum of the company in Shears, as well as other terms of its constitution, that the company's "essential characteristics" included those of a co-operative. There were no equivalent indications here in respect of the Russell Roberts Family Trust. Nor was I pointed to indications from the history of the operation of Walter Developments and Fascine Developments (other than the issues and allotments of the "M" shares themselves, and the refusals to register Netbush as holders of the trust shares, to which I return) which would show the terms of the Russell Roberts Family Trust were part of those companies' "essential characteristics".

52 There is a further difficulty, even if those terms were part of those "essential characteristics". It is not evident from the terms of the "M" class shares that the role of the allottee was to address the terms of the Russell Roberts Family Trust, as I have said. Its power to lodge a declaration of no objection to proposed corporate action does not on its face appear to be constrained in any way other than to consult with other shareholders beforehand. Nor was it evident to me what form a suitable implied constraint would take. In Shears the vagueness and uncertainty of the article in question in that case were in Nathan J's view fatal to its validity (at 763 - 764).

53 For Fascine Developments and Walter Developments a larger proposition was put, at least to counter the case for any relief, assuming s 232(e) were engaged by the issues and allotments of the "M" class shares. This proposition rested on the authorities on the language of Corporations Act s 461(1)(f) and (g), to which I return below. Those provisions ground the discretion to wind up a company in conduct, actual or proposed, corresponding to that described in s 232(e). Those authorities are also relevant to the different language in s 461(1)(k), returned to below. The proposition put to me was to the effect that an unfairness was involved in the scheme of Netbush to arrive at a position where there would be a distribution to the beneficiaries of assets of the trust in breach of its terms. That unfairness prevented the issues and allotments of the "M" class shares being "unfair" in the terms of that language in s 232(e). Considerable weight was rested on Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd [2000] WASCA 170; (1999) 34 ACSR 469 (FCt SCt of WA), and particularly the reference in that case to the line of authority on "fairness" as "the criterion by which the court must decide whether it has jurisdiction to grant relief" under provisions like s 461(1)(f), (g) and (k) (at 478, per Kennedy J, Malcolm CJ and Pidgeon J agreeing, quoting from O'Neill v Phillips [1999] UKHL 24; [1999] 1 WLR 1092, at 1098 - 1099, per Lord Hoffman).

54 However, it seems to me that Shears (supra) is the answer to this proposition. Whether or not Netbush's scheme was properly characterised as involving a breach of trust, or unfair if it was to be so characterised, the response to it in the form of the issues and allotments of the "M" class shares with the features and effect I have described was unfair when viewed in the light of that case. This case is unlike Guerinoni (supra) where there was "no suggestion" that the affairs of the companies whose winding up was being sought under s 461(1)(k) were being conducted in a way that might engage s 461(1)(f) as "oppressive or unfairly prejudicial to, or unfairly discriminatory against" the applicant for relief (at 473). There was also a finding in Guerinoni, undisturbed on appeal, that the others involved in the running of the family business in that case had not done anything "unreasonable" (at 477). Finally, I note that "the concept of fairness must be applied judicially and the content which it is given by the courts must be based upon rational principles" (at 478, quoting from O'Neill (supra), at 1098-1099, per Lord Hoffman). Whitehouse and Shears for me point to the "rational principles" that need to be applied to the issues and allotments of the "M" class shares.

55 It seems that Russell Roberts' minor children through Russell Roberts as their next friend, as Plaintiffs, and his major children, the appointors under the Russell Roberts Family Trust, as First Defendants are parties to proceedings, CIV 2217 of 2004, in which the propriety of the appointment, without the consent of the guardian Russell Roberts, of Netbush and its predecessor Devin Park as trustee is an issue. That propriety is, as I understand it, challenged as forming part of the same scheme of which the distribution of assets of the Russell Roberts Family Trust, contrary to the terms of the trust added by the 2001 variation, is said to be the ultimate object. In those proceedings it is said that at least the earlier appointment itself, if effectual, would, because the effect under the 2001 variation of the appointment was to make the Russell Roberts Family Trust a fixed trust, have triggered capital gains tax liability for the trust. The two appointments, I understand, are said to be breaches of the duties of the appointors who would also of course as beneficiaries receive shares of the ultimate distribution. I understand from one of the affidavits which I gave leave to refer to, that of Sally Marie Roberts sworn 14 January 2005 in CIV 2217 of 2004, read with the affidavit of Russell Roberts sworn 20 December 2004 in these proceedings, that the relief claimed includes or will include that the appointments as trustee of Devin Park and then of Netbush should be invalidated. However, it seems to me that in this context these matters, like the others I have referred to, at most bear on the exercise of the discretions to grant relief in this case, not on whether or not those discretions are enlivened, and I return to it in that context, below.

56 Thus, I conclude that the issue and allotment of the "M" class shares in the cases of both Walter Developments and Fascine Developments enliven the discretion of the Court to grant relief under the oppression remedy. Further, I conclude that the "M" class shares were invalidly issued and allotted, and Netbush is entitled to have the registers of members of the two companies rectified accordingly and to have the exercise of rights under the shares enjoined. Whether this means the companies or either of them should be wound up, or other relief granted, under the oppression remedy, raises further considerations, to which I return below.

57 This conclusion means I do not need to enter into the question of whether or not the issues and allotments of the "M" class shares could be challenged under Corporations Act s 246D, as variations of the rights of other shares in the companies. Nor do I need to enter into the question of whether or not those issues and allotments could be challenged as contraventions of s 254A, as issues of preference shares bearing one or more of the rights enumerated in that provision made without compliance with it.

58 As I have indicated, for Netbush it was put that the issues and allotments of the "M" class shares also engaged provisions (in s 461) that enlivened the discretionary power to order a winding up of Walter Developments and Fascine Developments under Pt 5.4A of the Corporations Act. Those provisions were s 461(1)(e), (f), (g) and (k). I have previously described s 461(1)(f) and (g), in terms of their correspondence to s 232(e), and the analysis I employed there applies in this context also. This leaves s 461(1)(e) and (k).

59 The discretionary power of the Court under s 461(1)(e) to order a company be wound up is enlivened if the directors "have acted in affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever that appears to be unfair or unjust to other members". A leading authority on s 461(1)(e) is Re Cumberland Holdings Ltd (1976) 1 ACLR 361 (SCt NSW, Bowen J in Eq). It establishes that under the first limb of the paragraph, having to do with directors acting in their own interests, "directors" does not require the board to act unanimously, it being sufficient "the effective majority has acted in its own interests or in the interests of one or more of those board members, or even where one director, by some means or another, has caused his will be to carried into effect" (at 374). The "affairs of the company" include matters of "dividend policy, voting rights" (at 374); and see also Corporations Act s 53(c). The directors may be seen to have so acted when "they have acted in the interests of another company of which they are also directors and shareholders", preferring those interests to those of some one or more members of the company (at 375). On the face of it, given the voting on the issues and allotments of the boards of Fascine Developments and Walter Developments, and Russell Roberts' position as sole shareholder and director of the allottee Rusmon, these dicta would be applicable in this case.

60 For Fascine Developments and Walter Developments, it was put (in effect) that s 461(1)(e)'s "interests of the members as a whole" included compliance with the terms of the Russell Roberts Family Trust. For the reasons I gave in relation to the corresponding argument on Shears (supra), I do not agree. Nor is the matter advanced by referring those interests instead to the position of the minor children under the Russell Roberts Family Trust. As I have indicated, it has not been shown that the purposes of the powers entrusted to the boards of Fascine Developments and Walter Developments included a role for the companies in the administration of the Russell Roberts Family Trust. That would leave the interests of the shareholders as being those of the members including the trustee: the beneficiaries under the Russell Roberts Family Trust were not of course "members" of the companies (see Corporations Act s 231).

61 This conclusion, that the discretionary power to wind up a company under the first limb s 461(1)(e) is enlivened by the issues and allotments of the "M" class shares, strictly makes it unnecessary for me to decide whether or not the same should be said in respect of the second limb of s 461(1)(e), directors acting "in any other manner whatsoever that appears to be unfair or unjust to other members". However, I note that the authorities establish that the conduct does not have to be shown to be unfair or unjust to members as a whole, it being sufficient the conduct is unfair or unjust "at least to any significant body of other members, and perhaps to any other member": Re Cumberland Holdings (supra) at 375 - 376. The holdings of Netbush in both Fascine Developments and Walter Developments appear to me to be "significant": see also Re Weedmans Ltd [1974] Qd R 377. On the analysis of the application of the oppression remedy to this case above, if the first limb had not been engaged, I would have found it hard to resist the conclusion that the second one had been.

62 This conclusion also makes it unnecessary for me to consider whether or not the discretionary power to wind up a company under s 461(1)(k) is enlivened. Winding up may be ordered under that paragraph if "the Court is of opinion that that it is just and equitable" to do so, language which has been approached in ways that are similar to the approach to the language in s 232(e) and s 461(1)(f) and (g), as I have indicated.

63 As with the corresponding issue for the oppression remedy, there is a separate question whether or not to exercise any s 461 discretion to wind up Fascine Developments and Walter Developments: see also Fernlake (supra). I return to that question below.

The refusal to register Netbush as the holder of the Russell Roberts Family Trust's shares

64 As a result of the orders made by Master Sanderson in COR 98 of 2004, the shares of the Russell Roberts Family Trust in Fascine Developments and Walter Developments were vested in Netbush, and those shares were registered in Netbush's name. In his reasons, Netbush Pty Ltd v RW Roberts Pty Ltd (supra), the learned Master appears to have founded his orders on his analysis of the position of Netbush, as one of a person seeking to accede to such a position on the basis of a transmission, not a transfer, of shares. This in his view meant that the pre-emption rights, and it would seem the other share transfer provisions in the constitution of Walter Developments, to which I referred previously, were not engaged, and the position was "even more stark" in respect of Fascine Developments, which as I have indicated above had neither sort of provision in its constitution (at [15]). He noted, in language heavily emphasised by counsel for Netbush, that the refusal of the companies to register the shares in Netbush's name when matters were "put in those stark terms" was "clearly untenable, bordering on bizarre" (at [11]). Counsel said this pointed to conduct that was, like the issues and allotments of the "M" class shares - themselves a response to the orders made by the learned Master - conduct that enlivened the discretionary powers under s 232(e) and s 461(1)(e), (f), (g) and (k).

65 However, it seems to me that the two contexts, involving as they do different powers of the directors, are relevantly distinguishable. The vice of the issues and allotments of the "M" class shares I located in the purpose for the issues and allotments of the targeting of the voting power of the Russell Roberts Family Trust, at least while it was exercisable by Netbush, and the device, the "M" class shares, chosen for the purpose. Here, there was a refusal to register which was not upheld as within the power of the directors. However, the learned Master in his reasons indicated that there was "no question that [Netbush] is the proper trustee of the Trust" and it held "a valid appointment - there is no suggestion to the contrary" (at [11]). Before me, it was clear, from the proceedings in CIV 2217 of 2004, on the grounds for relief in which it seems, from those indications, no reliance was made in the proceedings before the learned Master, that the matter of the validity of the appointment of Netbush as trustee is or will be in issue. It would seem to me that a concern about such validity might have permitted the directors to exercise their power to refuse to register Netbush until the question of that validity had been properly addressed. Nor was it suggested in the proceedings before me that the directors did not at that time entertain such a concern, although of course there had been no reliance upon it in those proceedings. The justifiability of any such concern, as I will indicate below, is a different matter

66 In those circumstances, it seems to me that it is not established that the refusal to register Netbush was conduct that engaged s 232(e), or s 461(1)(e), (f), (g) and (k).

67 For Netbush, there was heavy reliance on concern about loans to Russell Roberts expressed in a letter to him dated 19 February 2002 by a director of Fascine Developments and Walter Developments, Richard Rowick, to whom I have earlier referred, and who was also a shareholder of both companies. In this letter, he indicated he did not agree with their making loans to Russell Roberts because of the poor financial condition of the companies, Russell Roberts' age, his sources of income as limited to his salary from the two companies, and his lack of control of the family trust which had majority control of the two companies, apparently a reference to the Russell Roberts Family Trust. The loans in question, totalling as I have indicated about $1 million, were all extended by the two companies after the date of that letter. There was also reference to the lack of security for these loans or at least for all of them at least until recently, and to the inadequacy of the security. There is also evidence that no repayments of principal or interest had been made on these loans, which are all interest bearing, notwithstanding their due dates.

68 There was also reference in an affidavit of Helen Goldfinch in COR 98 of 2004 sworn 29 April 2004 to conversations she had in March 2004 with Richard Rowick in which he was reported as having said that, despite what appeared in the relevant minutes of a board meeting of September 2003 of Walter Developments, at which a loan of $200,000 of the total had been made to Russell Roberts, he had not approved the loan.

69 For Fascine Developments and Walter Developments, there was reliance on the fact Russell Roberts had not voted on any of the directors' resolutions approving the loans, and on a letter from Richard Rowick, dated 9 April 2003, indicating the preparedness of Fascine Developments and Walter Developments to make loans of $250,000 each to Russell Roberts on security with the priority positions indicated in the letter. This it was said showed a change in Mr Rowick's view of the propriety of lending to Russell Roberts. However, there was no affidavit of Richard Rowick himself indicating his view of the propriety of the loans made after those two, of the adequacy of the current security position in respect of the total loans, or of the failure to make repayments of the loans. There is, however, evidence from Russell Roberts in his affidavit of 18 January 2005 that repayments had not been made because of these proceedings and orders made in COR 98 of 2004. Counsel for Fascine Developments and Walter Developments also referred me to the change in the Russell Roberts Family Trust's shareholding of the RW Roberts' company I have already described. This it was said meant Russell Roberts' proportionate interest in the cash assets of Walter Developments were more than sufficient to cover the indebtedness on the total of the loans from that company and Fascine Developments.

70 In this state of the evidence it is not possible for me to conclude that the loans to Russell Roberts and the circumstances of their administration were such as to show conduct that engaged s 232(e) or s 461(1)(e), (f), (g) or (k). In particular, in a family company context, loans may not necessarily be made on a commercial basis: Ford, H A J, Austin, R P and Ramsay, I M, "Ford's Principles of Corporations Law", at [11.450].

71 If there is conduct within Corporations Act s 232(e), the court under s 233(1) "can make any order under this section that it considers appropriate in relation to the company" with a range of possibilities specified. It would appear that there is a discretion to make no order even if the power to make an order is engaged: Zephyr Holdings Pty Ltd v Jack Chia (Australia) Ltd (1988) 14 ACLR 30. And the "remedy that is the least intrusive that will eliminate the oppression should be considered first by the court": Ford, H A J et al (supra), at [11.490].

72 If there is conduct within s 461(1), there is a discretion to order the company be wound up: see Fernlake (supra); and compare the position under an earlier form of the legislation, where it had been held, in Re National Discounts Ltd (1951) 52 SR (NSW) 244, winding up was mandatory. There is provision (in s 467(4)) that where the application is made on the "just and equitable" ground (s 461(1)(k)), or on the ground that the directors have "acted in a manner that appears to be unfair or unjust to other members" (which in my view takes in s 461(1)(e), (f) and (g)), the Court "must make" a winding up order. This is unless it is of the opinion that some other remedy is available to the applicants and that they are "acting unreasonably" in seeking a winding up "instead of pursuing that other remedy". This confirms that winding up is a remedy of "last resort" that ought not to be granted if "other less drastic relief is available and appropriate": Ford H A J et al (supra), at [27.094].

73 I have determined my discretions to award relief by virtue of s 232(e) and s 461(1)(e), (f) and (g) have been enlivened by the issues and allotments of the "M" class shares, but not on the evidence before me by the refusal to register Netbush as holder of the Russell Roberts Family Trust's shares in Fascine Developments and Walter Developments, or by the loans by those companies to Russell Roberts.

74 Under s 233, the remedy sought by Netbush, of a declaration of the invalidity of the issues and allotments of those shares, and rectification of the registers of Fascine Developments and Walter Developments, with an injunction to prevent the allottee exercising or purporting to exercise any rights under the shares, may be ordered. This leaves the question of Netbush's application for winding up orders and consequential relief.

75 For Netbush it was conceded that if the only form of conduct that was found to engage the powers to grant relief I have referred to was the issues and allotments of the "M" class shares, then it would be difficult to argue for a winding up as well as a setting aside of those issues and allotments. I agree. The invalidation of the issues and allotments of the "M" class shares and consequential relief would eliminate the oppression.

76 In all of the circumstances, then, I do not consider that it would be appropriate for me to order a winding up of either Fascine Developments or Walter Developments, under s 233 or under s 461.

77 I also considered whether it would at least be appropriate for me to order that each of Fascine Developments and Walter Developments buy out the respective holdings of the Russell Roberts Family Trust in them, together with relief in respect of the issues and allotments of the "M" class shares. However, given my findings as to the only form of conduct which would ground relief under s 233, I am not convinced that this additional form of relief is called for. I recognise that when conduct which would ground relief under s 233 is established, and a member wishes to leave the company, the "most usual order" is one for the purchase of that member's shares: Ford, H A J, et al (supra), at [11.490]. However, here there is other relief that will eliminate the oppression I have found, which is a declaration of the invalidity of the issues and allotments of the "M" class shares and consequential relief.

78 I have considered whether nor not this a case where I should conclude that no relief should be ordered on the basis of the residual discretion in s 233, and the discretion to withhold relief under s 461. Counsel for Fascine Developments and Walter Developments would apparently have had me withhold relief under these provisions by reference to the "stratagem" represented by the ultimate object of the trustee to distribute proceeds of the realisation of Russell Roberts Family Trust assets as income, where those proceeds are said to be capital. This would at the very least give the Court a reason not to intervene at this stage, given Netbush's contribution to the circumstances in which it found itself: see Ruut v Head (1996) 20 ACSR 160.

79 However, I have noted there is a dispute as to the propriety of the ultimate object of the plan of action for the distribution of the net proceeds of any distribution to Netbush of the proceeds of the winding up of Fascine Developments and Walter Developments. Both counsel referred me to a file note of a meeting at the offices of the solicitors for Russell Roberts' major children, Mark and Sandra, in May 2003, prior to their replacement of BCH Nominees with Devin Park. This note was of an accountant associated with Russell Roberts' third wife, a Mr Harvey Pickup, and copies were annexed to two of the affidavits before me, one that of Russell Roberts sworn 20 December 2004 for these proceedings, and the other that of Sally Marie Roberts sworn 14 January 2005 for CIV 2217 of 2004.

80 The note indicates that present at the May 2003 meeting was, among others, Helen Goldfinch, who at that point was the proposed new trustee of the Russell Roberts Family Trust. A fairly wide-ranging discussion appears to have occurred at this meeting, of matters to do with the trust's relation to the matrimonial proceedings, and the trust's administration. The matters referred to included the plan, consequent on the appointment of Ms Goldfinch, to distribute as income, for the purposes of cl 8.3 of the trust deed to which I have referred, of $2.4 million. This amount was the net from the realisation of the excess of the then current worth of the assets of the trust over net assets in the balance sheet, after writing down the value of its shares in the RW Roberts company (to allow for the exercise of the first governing director's right to purchase, above) and after taxation.

81 The note indicates what appear to be reflections of Mr Pickup on what he observed. In particular, the note indicates that Mr Pickup was "not sure that I could say with the same degree of confidence as Helen Goldfinch that her interpretation of 'income' is the correct one". The note goes on to indicate his "impression" that "perhaps" Ms Goldfinch and her legal advisor had been "somewhat superficial in their research of the issues".

82 However, the Russell Roberts and Sally Roberts affidavits also annex a further file note of Mr Pickup's, dated 16 May 2003, two days later, indicating he had followed up on two "tax issues" that were "concerning me". One was whether or not the proposed new trustee could distribute the $2.4 million as income. The other was whether there was a potential for the appointment of the new trustee to engage "the resettlement provisions of the Income Tax Assessment Act and the consequences that flow therefrom".

83 On the first issue, the note indicates that, while the original Russell Roberts Family Trust deed did not define income or capital, a deed of variation "in April 1993" defined income in the terms, "unless a contrary intention appears", used in the income tax legislation, which he says defined "trust net income to include capital gains". The note indicates Mr Pickup's conclusion that

"Helen Goldfinch may be correct in her view that the 'capital profit' on sale of the trust's assets would be income and thus able to be distributed immediately to the children, rather than having to wait until the trust vests when Montana [the youngest of the minor children] reaches the age of 25".

84 There was no emphasis in argument before me placed on the note's discussion of the second tax issue, except to remind me that, as I have already indicated, the matter of the taxation consequences of the appointment of the new trustee of the Russell Roberts Family Trust was an issue in separate proceedings, CIV 2217 of 2004. However, it is perhaps worth mentioning that the note indicates by way of a "PS" that there was an exchange between Mr Pickup and Ms Goldfinch after the note's date. In that exchange, Ms Goldfinch referred to tax advice she had received, the note adding that it "seems therefore there are differing views on the issue - even from tax specialists of high calibre".

85 What all of this material indicates to me is that there is at the least what appears to be a difference of opinion among professionals as to the view of what counts as income which underlies what I have called the ultimate object of the actions of the trustee, as well as the related view of the taxation consequences of its immediate predecessor's appointment. I cannot conclude from this (and there is no other basis for dealing with the matter before me) that such ultimate object would be a sufficient reason to exercise any discretion not to award relief in this case, under s 233 or under s 461.

86 Nor do I consider that the pendency of those proceedings would be a sufficient reason to exercise any discretion not to award relief under s 233, at least. The effect of such relief would not be to effectuate the scheme whose ultimate object is in issue in those proceedings. The relief of and consequent on invalidation of the issues and allotments of the "M" class shares might advance the scheme, but well short of its achievement.

87 I have concluded then that conduct has been made out which would warrant the making of an order for relief under Corporations Act s 233, by virtue of s 232(e), as well as under s 461, by virtue at least of s 461(1)(e), (f) and (g). However, that conduct is only the issues and allotments of the "M" class shares, in the case of each of Fascine Developments and Walter Developments. Such issue and allotment should be declared to be invalid in each case, and the registers of the two companies should be rectified accordingly. There should also be an injunction to prevent the allottee exercising or purporting to exercise any rights under those shares. This is not a suitable case to order relief by way of winding up of the companies under s 461.

88 I will hear from the parties as to the terms of the orders that should be made to give effect to these reasons.