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John Patrick O'Brien was a former executive director of O'Brien & Nicholls Pty Ltd. He and the other former executive directors, Douglas Nicholls and Gregory Kilner, owned or controlled more than 90 per cent of the company's shares. O'Brien's 30.28 per cent interest was held through Fourth Taljan Pty Ltd. The company operated LJ Hooker real estate businesses in several Victorian locations. ([6])

The plaintiffs alleged that, after O'Brien's departure, Nicholls and Kilner changed company policies in a way that reduced reported profits and the value of O'Brien's shares. They referred to a directors' meeting on 16 February 2000 and alleged that the company's profit for the year ending 30 June 1999 was reduced from $329,748 to $137,168. They also alleged that no dividend was paid for the relevant financial year and that the defendants had breached arrangements relating to O'Brien's exit, legal costs and share sale. These were allegations in the plaintiffs' case, not findings made by Warren J in this judgment. ([13], [16])

The plaintiffs sought orders regulating the company's affairs, including restoration of profits and dividends and a valuation of the shares under the 1996 shareholders' agreement. They also sought an order requiring a defendant, or alternatively the company, to purchase the shares at the determined price. ([19], [25])

After mediation, the parties entered settlement terms dated 24 November 2000. The proceeding was struck out by consent with a right of reinstatement. The terms were later re-engrossed in an executed deed exchanged around 19 March 2001. ([28]) The deed referred financial issues to an accountant and included a process for the parties to make written submissions. Clause 2.4 stated that the parties agreed to be bound by the accountant's determination. ([32], [71])

The accountant issued a determination on 31 May 2001. Its effect was that the plaintiffs' interests owed the defendants $9,806.10: the calculation found a loss rather than an unpaid profit. ([79]) The plaintiffs disputed the way the accountant had treated amounts previously received and argued that the settlement did not require Fourth Taljan to bear losses. They applied to reinstate the proceeding. The defendants maintained that the deed was binding and that the plaintiffs could not use reinstatement to challenge the determination. ([86], [96], [102])

Warren J dismissed the summons. The decision therefore resolved the reinstatement application, not the underlying oppression proceeding on its merits. ([126])

Why the court decided this way

Warren J's central starting point was the deed's language and purpose. The deed was described as the entire agreement resolving the dispute after mediation. Its stated process was to refer issues to the accountant, receive the parties' submissions and obtain a determination that the parties had agreed to accept. ([71]) The judge noted that each side had an opportunity to submit its position, and that the submissions had been exchanged. The parties could have responded to issues raised by the other side; apparently, no further submissions were made. ([75])

The accountant then performed the task and reached a result adverse to the plaintiffs. The plaintiffs argued that the wording about “unpaid profit” covered profits only, and that the accountant had made an error by attributing a payment to the wrong financial period. They also argued that the determination effectively added an obligation to share losses that was absent from the deed. ([79], [86], [89], [92])

The judge rejected the implied-term argument. First, Warren J considered it illogical to require an accountant calculating the company's financial position to be prevented from finding that the result was a loss rather than a profit. Secondly, if there had been a mistake, the reinstatement proceeding was not the appropriate route for the court to recalculate the amount. ([119])

The judgment states the general proposition that courts will not interfere where parties expressly agree to be bound by an expert's assessment. Warren J cited Arenson v Arenson and Campbell v Edwards for that proposition, including the qualification that parties cannot go behind the assessment absent fraud or special circumstances. The judgment also says that even a mistake in the assessment would not, of itself, allow the parties to go behind it. ([113]) The court did not make a finding that there was fraud or identify special circumstances in this case.

The judge emphasised the limited role available on the summons: the court could not review the accountant's determination, make fresh factual findings about the calculation, decide whether it was correct, or substitute a different determination. Warren J said that any remedy for the plaintiffs lay elsewhere. ([116], [119])

A separate question was whether the proceeding could be reinstated at all. The consent order had reserved a right of reinstatement, which distinguished it from a more absolute order striking out or dismissing proceedings without qualification. Even so, the judge held that reinstatement remained discretionary and required circumstances that warranted its exercise. ([123]) Because the plaintiffs were bound by the settlement and the court should not revisit the accountant's decision through this application, the judge found no basis to reinstate the proceeding. ([126])

Before and after state of the law

This judgment does not set out a comprehensive account of the law before the dispute, nor does it identify a change in the law. It applies propositions drawn from the authorities it cites to the settlement and reinstatement circumstances before it.

On expert determinations, Warren J states that where parties expressly agree to be bound by an expert assessment, courts will not ordinarily interfere. The judgment recognises an exception where there is fraud or special circumstances, and states that an alleged mistake in the assessment does not itself permit the parties to go behind it. ([113]) In this case, that proposition meant the court would not use the reinstatement summons to reassess the accountant's calculation or replace it with its own.

On reinstatement, the judgment recognises that the court has a discretion where a proceeding was struck out with a right of reinstatement. It does not treat the reserved right as automatic reinstatement. The discretion must be exercised judicially, and only where circumstances warrant it. ([123]) The deed's binding effect and the nature of the relief sought led the judge to decline reinstatement. ([126])

The outcome should be read in that setting. Warren J was not deciding whether an accountant's determination can never be challenged, or whether every settlement using an expert process excludes all later court proceedings. The judgment discusses the general rule and its stated qualification, then concludes that the application before it did not justify reopening the proceeding.

Key passages with plain-English translation

At [32], clause 2.4 of the terms says: “The parties agree to be bound by the determination.” In ordinary language, the parties agreed in advance to accept the accountant's decision about the referred calculation. The judge treated this as a central contractual feature, not as incidental wording.

At [71], Warren J describes the deed as the parties' “entire agreement” and says its purpose was to submit issues to the accountant for a determination the parties would be bound by. This explains why the judge focused on the settlement text and the process it established.

At [113], the judgment says parties “cannot go behind the assessment in the absence of fraud or special circumstances.” Plainly, a party who has agreed to accept an expert's decision cannot ordinarily ask a court to redo it merely because the result is disputed. The passage also records the judge's statement that a mistake in the assessment does not itself permit a challenge to the result.

At [116], Warren J says the court cannot review the accountant's determination, make findings about the calculation, or substitute another determination. In practical terms, the reinstatement application was not treated as a second accounting hearing.

At [123], the judgment explains that a reserved right of reinstatement does not compel the court to restore the proceeding. The discretion must be exercised judicially and only if the circumstances warrant reinstatement.

At [126], the judge concludes that there was no basis to exercise that discretion because the plaintiffs were bound by the terms. The result was dismissal of the summons, not a determination of the original oppression allegations.

What fact patterns trigger this precedent

The judgment is particularly relevant to a fact pattern where parties settle a dispute by sending financial or valuation questions to an accountant or another expert, expressly agree to be bound by the determination, and later seek court intervention because the result is said to be wrong. The feature that mattered here was the express binding language in clause 2.4, alongside a defined process for submissions and a deed described as the entire agreement. ([32], [71], [75])

It is also relevant where a proceeding has been struck out by consent but the order reserves a right to reinstate it. The judgment indicates that the reservation gives the court a discretion, rather than an automatic route to have the original dispute heard. The circumstances must warrant reinstatement. ([123])

The decision does not establish that every challenge to an expert process fails. Warren J referred to fraud or special circumstances as exceptions to the general approach. ([113]) The judgment does not define those categories or decide their boundaries. Nor does it decide whether a different contractual wording, a different process, or an application seeking relief distinct from a judicial reassessment would produce the same result.

How later courts have treated it

The supplied judgment contains no discussion of later cases applying, distinguishing or criticising O'Brien v O'Brien & Nicholls Pty Ltd and Ors. It was decided on 25 October 2001, and the text provided gives no later citation history. A claim about how later courts treated it cannot therefore be grounded in this judgment alone.

Within the judgment itself, Warren J relied on earlier authorities for the propositions about binding expert assessments and reinstatement. For expert determinations, the court cited Arenson v Arenson and Campbell v Edwards. ([113]) For the jurisdiction and discretion to reinstate, it referred to Roberts v Gippsland Agricultural, Green v Rozen, Law v Law, Bailey v Marinoff and Palmdale Insurance Limited (in liq) v L. Grollo and Co Pty Ltd. It cited In Re Swire and Ainsworth v Wilding in support of the requirement that the discretion be exercised judicially and only when circumstances warrant it. ([106], [123])

Those citations show the legal sources Warren J used in reaching the decision. They do not establish how later courts have treated this judgment itself.

Still-open questions

The judgment leaves several matters unresolved. First, it does not define what would amount to “fraud or special circumstances” sufficient to permit a party to go behind a binding expert determination. It states the qualification but does not apply it because no such basis is identified in the reasons. ([113])

Secondly, the decision does not decide what remedy might be available “elsewhere” if an expert determination is alleged to contain an error. Warren J expressly said that the plaintiffs' remedy lay elsewhere, but did not specify the form of any such remedy or determine whether one was available on the facts. ([116], [119])

Thirdly, the court does not provide a detailed test for deciding when reinstatement is warranted beyond saying that the discretion must be exercised judicially and only when the circumstances justify it. ([123]) The judgment applies that standard to the settlement and the accountant's determination, but does not catalogue the factors that would warrant reinstatement in other cases.

Fourthly, the judgment does not resolve the plaintiffs' underlying oppression allegations. It does not decide whether the defendants changed accounting policies improperly, whether those changes reduced the share value, or whether the company breached the exit or share arrangements. Those were allegations in the original proceeding, which Warren J did not determine on the merits. ([13], [16], [19], [126])

Finally, the judgment does not address how the result might differ if the agreement had not expressly said that the parties were bound, if the parties had not had an opportunity to make submissions, or if the settlement had described the accountant's task differently. Its reasoning is anchored in the deed and procedural history before the court. ([32], [71], [75])

This is general legal information, not legal advice. Zoe can make mistakes. Before acting on this, relying on it, or using any draft, have a qualified Australian lawyer check it.