Plaintiff v Defendants

2 Under the terms of his employment agreement, Mr Maclean was entitled to shares in RCMF once certain financial thresholds were met. In about late August 2008, Mr Maclean was issued with 107,500 B Class shares in RCMF.

3 In January 2009, RCMF summarily terminated the employment of Mr Maclean. It did so on the basis that Mr Maclean had breached the terms of his employment agreement by, among other things, attempting to misappropriate moneys.

4 In September 2009, Mr Maclean was informed that the shares issued to him were cancelled. He has received no payment for them. RCMF claims that Mr Maclean had no entitlement to the shares because the qualifying thresholds were not achieved.

5 In the first proceeding ("the Employment proceeding"), Mr Maclean claims damages and other related relief against RCMF for alleged wrongful termination of his employment agreement. In the second proceeding ("the Oppression proceeding"), Mr Maclean seeks relief under s 233 of the Corporations Act 2001 (Cth) on the basis that RCMF has conducted its affairs unfairly or oppressively against him. He seeks orders against RCMF and its director, Richard Francis Celarc (who are the defendants in that proceeding) for the purchase of his shares and a declaration that the cancellation of his shares is of no force or effect. Alternatively, Mr Maclean seeks an order that RCMF be wound up under s 461 or s 233 of the Corporations Act.

6 The first issue is whether RCMF was entitled to terminate Mr Maclean's employment summarily. I have concluded that it was because Mr Maclean breached the terms of his employment agreement by rendering false invoices to RCMF and using a significant portion (if not all) of the money paid by RCMF in respect of those invoices for his personal benefit rather than the benefit of RCMF.

7 The second issue is whether RCMF has acted oppressively in its treatment of Mr Maclean as a shareholder. The shares were issued on the basis that the relevant financial thresholds had been satisfied and consequently Mr Maclean was entitled to the shares under the terms of his employment agreement. However, as Mr Maclean accepted in cross examination, the financial thresholds were not met and he was not entitled to the shares. In those circumstances, I am of the view that RCMF did not act in an oppressive manner when it cancelled the shares. Mr Maclean's claims in each proceeding will be dismissed.

8 My reasons for the conclusions which I have reached are below. I first set out some of the facts that provide the context for the dispute. I next deal with why RCMF was entitled to terminate Mr Maclean's employment summarily and then with why it was not oppressive for RCMF to cancel the shares that were issued to Mr Maclean.

Mr Maclean and events during his time with RCMF

9 Mr Maclean worked for a number of multi national companies in a variety of roles between 1979 and 2005 (apart from a three year period during which he operated his own consulting business). During the course of his employment with these companies, he developed some expertise in re-engineering underperforming businesses so that they became profitable. In February 2005, he restarted his consultancy business and continued to operate it until about late 2007 when he met Moustafa Fahour.

10 Mr Fahour informed him that he was the co-head of the key client department at Macquarie Bank and part of his role was to give financial advice to high nett worth individuals. Mr Celarc was one of his clients. Mr Fahour told Mr Maclean that he had persuaded Mr Celarc to invest $1 million in a start up business called Smart Cup which had been trading for six months and was running at a significant loss with minimal sales revenue. Mr Fahour sought Mr Maclean's assistance to make the business profitable. While continuing his consultancy work, Mr Maclean undertook an evaluation of the Smart Cup business on a monthly retainer plus incentives. As a result of his review, Mr Maclean recommended that no further funds should be invested in the Smart Cup business and it was subsequently wound up.

11 In early February 2008, RCMF was incorporated. The name of the company reflected the initials of Mr Celarc and Mr Fahour who respectively held 60% and 40% of the share capital. The objective of RCMF was to invest in businesses, grow the businesses and then sell them off and realise a profit. Mr Celarc was to contribute the investment funds to purchase the businesses.

12 Around the same time as RCMF came into existence, Mr Fahour told Mr Maclean that he was making other investments on behalf of Mr Celarc and asked if Mr Maclean would be interested in managing some of these other investments and re-engineering or developing the businesses purchased to make them profitable for re-sale. Part of the proposal was that Mr Maclean would be entitled to equity in RCMF if certain financial thresholds were satisfied. Mr Maclean says that Mr Fahour told him that he would be entitled to the shares automatically once the appropriate threshold was triggered and that he would not have to wait until the end of the financial year in which the threshold was reached to obtain his shares.

13 Mr Maclean agreed to take on the role of chief executive officer and he entered into an executive services agreement dated 30 March 2008 with RCMF ("Employment agreement"). As a result of the executive role he took, Mr Maclean became a director of RCMF.

14 Apart from the challenge of the new job, the attraction of the position for Mr Maclean was the opportunity to take equity in the company and to benefit directly from the success which would flow from acquiring the right businesses, developing them and improving them for re-sale. The lowest financial threshold to be met for Mr Maclean to qualify for equity was earnings before interest and tax ("EBIT") of $500,000 in any financial year in which case he was entitled to 50,000 Class B shares in RCMF. If EBIT exceeded $1 million, then a further 50,000 shares were to be issued to him.

15 Mr Maclean says that both before and after he entered into his Employment agreement, Mr Fahour said to him that he was sure that RCMF would achieve EBIT greater than $1 million during the financial year ending 30 June 2008 based on two things. First, there were his investigations into the financial affairs of businesses which he was in the process of acquiring for RCMF. Second, there were Mr Fahour's discussions with the people involved in those businesses.

16 Before RCMF was incorporated, Mr Celarc had already invested money in Fitdeck Pty Ltd. The Fitdeck business was based on an exercise system using decks of playing cards. The business was operated in the United States of America and under license in Australia. The Fitdeck business traded unsuccessfully. By about April 2008, after six months' operations, it had little income, about $60,000 of stock and was trading at a loss. Mr Maclean undertook a review of the Fitdeck business. After a visit to the United States to see the Fitdeck principals and to devise a strategy for the Australian operation, he decided to sell the existing stock as soon as possible and prepare a business plan to relaunch the business in 2009.

17 Also around April 2008, Mr Maclean was involved in discussions about RCMF acquiring the business of Coffee Please Pty Ltd. This business was owned by a friend of Mr Fahour. When Mr Maclean undertook a review of the Coffee Please business, he concluded that the business was worth no more than $1 million and that RCMF should not proceed with the purchase as it was too risky.

18 Around the same time, Mr Fahour and Mr Maclean also looked at the business operated by Kwiktron Computer Services Pty Limited as a prospective target for RCMF. Kwiktron was a computer repair company which dealt primarily with insurance and warranty claims. The business was based in Sydney but also had operations in other parts of Australia, New Zealand and Singapore. Mr Fahour had discussions with the owners, Mr Hasan Gencturk and Mr Yuksel Cifci. Mr Fahour struck a deal to buy Kwiktron for $6 million comprising $2 million cash and $4 million in RCMF shares (being 428,300 fully paid non voting B Class ordinary shares representing 30% of all issued shares). Mr Celarc accepted during his cross examination that the shares in RCMF were almost valueless at this time.

19 Handwritten Heads of Agreement and a more formal share sale agreement were entered into between RCMF and Mr Gencturk and Mr Cifci for the purchase of Kwiktron by RCMF. Settlement was to occur on 10 May 2008. One of the terms of the agreement was that Mr Gencturk and Mr Cifci were entitled to all profits of Kwiktron up to and including completion of the sale and, after that time, the profits would be for the benefit of RCMF. A deposit of $100,000 was paid by RCMF in May 2008. In order to pay the cash component of the purchase price, RCMF organised a $2 million bill facility from National Australia Bank Limited.

20 Also during May 2008, Mr Maclean and a management consultant engaged by RCMF, Mr Trevor Presser, conducted a review of the Kwiktron business. The purpose of the review was to ascertain how the performance of the business and its financial return could be improved. This was to be achieved primarily by reducing costs or improving earnings. Potential cost savings were identified in the areas of spare parts, working capital, freight, wages (the wives of both Mr Cifci and Mr Gencturk were on the pay roll), rent (Mr Cifci and Mr Gencturk owned the building and the rent paid by Kwiktron was above market value) and excess motor vehicles (the wives of Mr Cifci and Mr Gencturk each drove BMW four wheel drives).

21 In June 2008 Mr Presser, with the assistance of Mr Maclean, prepared an information memorandum regarding Kwiktron which valued the business at $8.5 million. In the information memorandum, the EBIT forecast for 2008 was $1.3 million and for 2009 was $1.82 million. The information memorandum was prepared as part of a sale process, even though at this time, RCMF had not completed the purchase of Kwiktron. Completion took place on 22 August 2008. Mr Maclean says the delay was caused by Mr Cifci and Mr Gencturk. Once settlement of the sale took place, Kwiktron became a wholly owned subsidiary of RCMF. Mr Maclean was appointed as a director of Kwiktron on 22 August 2008. An undated shareholders deed executed by Mr Celarc, Mr Fahour's company (Fuli1 Investments Pty Ltd), Mr Gencturk, Mr Cifci and RCMF, provides that the objectives of the shareholders in investing in and holding shares in RCMF are to conduct and share the profits of the business of RCMF and its subsidiaries. The deed provides that the shareholders must procure the company to enter into a services agreement with Mr Maclean which provides for an annual salary of $240,000 and an incentive package consisting of the issue of Class B shares with that entitlement not to exceed 107,500 Class B shares.

22 Later in August 2008, RCMF issued 107,500 B Class shares to Mr Maclean. He signed an application for shares. There is a signed written consent of the Class A shareholders (including Mr Celarc) to the issue of the shares to Mr Maclean. There are minutes of a meeting, signed by Mr Fahour as chairman, which record the resolution that the shares be issued to Mr Maclean. The minutes also record that Mr Fahour, Mr Celarc and Mr Maclean were present; that Mr Maclean's share application form and resolutions of the Class A shareholders approving the issue of shares to him were tabled at the meeting; and that Mr Fahour explained that in accordance with the Employment agreement entered into between RCMF and Mr Maclean, the company was obligated to issue and allot the shares to Mr Maclean. An ASIC Form 484 notifying of the change to the register of members in respect of Mr Maclean's shareholding was signed by Mr Maclean and lodged with the Australian Securities and Investments Commission. A "new shareholders" deed was signed by Mr Maclean and also by Mr Celarc on behalf of RCMF as an authorised person. It is not clear when it was signed, but it would seem from its terms that it is likely that it was signed before the shares were allotted to Mr Maclean. In this regard, the deed defines Mr Maclean as the "New Shareholder" and recites that he proposes to purchase or subscribe for Class B shares in RCMF. Mr Maclean agreed to observe and be bound by all the provisions of the shareholders deed and, with effect from when he became a shareholder in RCMF, he was to be entitled to enforce the shareholders deed as if he was a party to it.

23 At about this time, the Fitdeck shareholders, with the exception of Mr Celarc and Mr Fahour, sold their shares to RCMF for cash. From this time, both Fitdeck and Kwiktron were wholly owned subsidiaries of RCMF.

24 In September 2008, there was a buy-back of half of the shares held by Mr Fahour's company in RCMF for $150,000 (being approximately $3.45 per share). Half the purchase price came from RCMF and the other half from Kwiktron. An information statement to shareholders was prepared for the buy-back to satisfy the requirements of the Corporations Act. The share buy back offer was executed by RCMF by being signed by Mr Maclean and Mr Celarc as directors. A document recording a resolution by the shareholders approving the share buy back offer and waiving their pre-emptive rights to purchase the shares was signed by Mr Celarc, Gencturk Investments Pty Ltd (the company through which Mr Gencturk held his interest in RCMF), Cifci Investments Pty Ltd (the company through which Mr Cifci held his interest in RCMF) and Mr Maclean.

25 In early January 2009, Mr Maclean attempted to effect the transfer of $750,000 from Kwiktron's account to RCMF. Mr Maclean says that the transfer related to a security deposit that had to be paid so that he could inspect the books of a business that RCMF may have been interested in acquiring. Mr Celarc formed the view that the transaction was not genuine and that the transfer was intended only for the personal benefit of Mr Maclean. Consequently, Mr Maclean was removed as a director of RCMF and Kwiktron on 6 January 2009 and on 21 January 2009, Mr Celarc wrote to him confirming RCMF's decision to terminate his employment with effect from 6 January 2009 or, alternatively, terminating his employment on 21 January 2009 with immediate effect. More detail in relation to the events leading to the termination of Mr Maclean's employment are set out below in paragraphs [62] to [87].

26 On 11 March 2009, Mr Maclean began the Employment proceeding against RCMF in the County Court.

27 On 13 May 2009, Mr Maclean wrote to Mr Celarc, Mr Cifci and Mr Gencturk offering to transfer his shares in RCMF to them at a price of $6.50 per share. It was a requirement under the shareholders deed that such a sale offer must be made before the shares could be disposed of in any other manner. The offer was to remain open for 30 days and Mr Maclean noted that, in the event it was not accepted, RCMF was required to buy back the shares at the same price payable by way of instalments over a period of no more than three years. Mr Celarc says that the first time that he became aware that Mr Maclean held any shares was when he received this letter. At that time, Mr Celarc contacted his lawyers because the dispute with Mr Maclean was in their hands. By then, the Employment proceedings had already been commenced.

28 In about June 2009, Mr Fahour's company sold the other half of the shares that it held in RCMF for about $4.60 each.

29 Having had no response to his letter of 13 May 2009, Mr Maclean sent a further letter dated 21 July 2009 requiring RCMF to buy back the shares for the amount specified in the transfer notice, namely, $6.50 per share.

30 By email dated 11 August 2009, Mr Celarc advised Mr Maclean that the purported allocation of 107,500 Class B shares to him in September 2008 was ineffective. Mr Celarc said that Mr Maclean never qualified for the allocation of shares and the directors, insofar as they executed documents, were "the victims of a deception practised by you on them". Mr Celarc said that Mr Maclean was well aware that the conditions precedent in regard to the EBIT were not satisfied and so RCMF had nullified the allocation of the shares.

31 In early September 2009, Mr Celarc lodged an amended ASIC Form 484 with ASIC regarding changes to RCMF's share register with a covering letter in which he stated that the form had been amended to "correct unauthorised issue" of the shares to Mr Maclean.

32 By originating process dated 4 February 2010, Mr Maclean began the Oppression proceeding. On 21 April 2010, the Employment proceeding was transferred to this Court.

Was RCMF entitled to terminate Mr Maclean's employment summarily?

33 According to his Employment agreement, Mr Maclean's employment could be terminated summarily for a number of reasons, including if he breached any of its terms. Mr Maclean's employment could also be terminated without cause by giving 4 weeks' written notice, in which case he was entitled to the equivalent of one year's salary.

34 In the Employment proceeding, Mr Maclean claims that termination of his employment in January 2009 was in breach of the terms of the Employment agreement. He claims that he has suffered loss and damage totalling $258,461.53 (being the equivalent of four weeks' notice and one year's salary) and he seeks orders that RCMF pay $23,261.53 to his nominated superannuation trustee (being 9% on one year's salary including the period of notice).

35 RCMF says that it was entitled to dismiss Mr Maclean summarily because he breached the following terms of the Employment agreement:

(a) that he would well and faithfully serve RCMF and its subsidiaries and use his best endeavours to promote their interest and welfare;

(b) that he would not accept any payment or other benefit in money or in kind from any person as an inducement or reward for any act or forbearance in connection with any matter or business transacted by or on behalf of RCMF or its subsidiaries;

(c) that he would not, without the prior written consent of RCMF, either directly or indirectly in any capacity carry on, advise, provide services to or be engaged, concerned or interested in or associated with any business or activity which is competitive with any business carried on by RCMF or any of its subsidiaries.

36 RCMF also pleaded that Mr Maclean breached his duties as a director under ss 180 - 183 of the Corporations Act.

37 RCMF relies on the rendering by Mr Maclean of what it says were false invoices and payment of those invoices and the events of early January 2009 relating to the transfer of Kwiktron funds. I will deal with each of these matters in turn.

38 Prior to and during his time with RCMF and since, Mr Maclean has been the sole shareholder, director and secretary of Ollie Brands Pty Ltd (which, from its incorporation in March 2000 and until April 2009, was called Kamac Capital Pty Ltd) ("Kamac"). According to Mr Maclean, Kamac specialises in developing and implementing innovative business opportunities using a network of lobbyists and subcontracted specialists to assist in getting projects off the ground.

39 There are two invoices totalling $36,800 that RCMF claims were falsely rendered by Mr Maclean and paid to Kamac. Mr Maclean accepted that he did not have board approval to engage Kamac to provide services.

First false invoice: Wonga Views Pty Ltd $20,500

40 The first invoice is dated 31 July 2008 and was purportedly issued to RCMF by Mr Presser's company, Wonga Views Pty Ltd. The background to the issuing of this invoice is as follows.

41 At a board meeting of RCMF on 26 June 2008, which Mr Maclean and Mr Presser attended, it was resolved that Mr Presser's engagement with RCMF would not continue beyond 30 June 2008. Mr Presser agreed to do 5 days' handover work for RCMF in July for no payment. Mr Presser and Mr Maclean subsequently discussed the possibility of him having a role in the sale of the Kwiktron business after 30 June 2008. However, as far as he was concerned, those discussions were not consummated. In this regard, on 6 July 2008, Mr Presser emailed a letter to Mr Maclean offering the services of his company to RCMF in respect of the divestiture of Kwiktron. Mr Presser says that the letter was a draft and it was not acted on. Mr Maclean says that it was signed although no signed copy was produced. There is also a letter dated 7 July 2008 signed by Mr Maclean and addressed to Mr Presser purporting to accept Mr Presser's proposal to provide advice. Mr Presser gave evidence that he had never seen the signed letter before it was shown to him during the course of the trial.

42 The invoice dated 31 July 2008, which RCMF alleges is false, appears to be rendered to RCMF by Mr Presser's company, Wonga Views Pty Ltd, for $20,500. Of that amount, $5,500 was said to be for "Additional Project work as agreed re Kwiktron purchase" and the balance of $15,000 was said to be for "Contract completion 'bonus' including debts fund raising & Kwiktron sale process specifically Jolimont". Mr Presser did not prepare the invoice, nor did he give instructions for the invoice to be produced, nor did he receive any payment.

43 The format and style of the 31 July 2008 Wonga Views invoice is very similar to a Kamac invoice of the same date, but distinctly different from earlier invoices that Mr Presser had rendered to RCMF. It has a notation on it that it was paid by cheque no. 122. The cheque butt for that cheque states that the payee is Wonga Views "(held) K/Mac" and has a notation "see agreement, email". The cheque itself is made out to Kamac and is in Mr Maclean's handwriting. The cheque was deposited into Kamac's bank account on 20 August 2008. Mr Maclean sought to explain this by stating that he had given an undertaking to Mr Presser that if Kwiktron was sold, he would be paid something for his time and effort in July 2008. According to Mr Maclean, Mr Presser had little trust in RCMF and therefore the $20,500 was being held by Kamac to reassure Mr Presser that if the sale of Kwiktron went through, funds would be available to pay him. Contrary to the evidence of Mr Maclean, Mr Presser says he did not have any discussion with Mr Maclean about him putting aside a sum of $20,500 or writing a cheque for that amount and holding it in respect of work he might do in trying to find a buyer for the Kwiktron business. Mr Maclean conceded that Kwiktron was not sold and that none of the money paid to Kamac was paid to Mr Presser.

44 I had the advantage of observing Mr Maclean give evidence for more than a day. That opportunity aided me in my assessment of him as a witness. His evidence was contradictory, inconsistent and lacked credibility. His story changed a number of times. In an affidavit sworn before trial, he deposed that the payments to Mr Presser or his company were for consultancy services rendered to RCMF and were reasonable and justified. His initial oral evidence was that the Wonga Views invoice was prepared by HG & Co (who were his accountants), although later in cross examination Mr Maclean accepted that Mr Presser knew nothing about the invoice and that Mr Maclean knew that Mr Presser was paid no moneys in respect of it. All in all, Mr Maclean was a most unsatisfactory witness and I had no confidence in either his oral or affidavit evidence unless it was supported by other cogent evidence.

45 On the other hand, Mr Presser struck me as an open, honest and truthful witness. He was subpoenaed to give evidence and was independent of the parties. He was forthright in the evidence that he gave.

46 I accept Mr Presser's evidence where it is in conflict with the evidence given by Mr Maclean. In particular, I accept that although Mr Presser and Mr Maclean had discussions about a continuing role for Mr Presser with RCMF after 30 June 2008, no agreement was finalised and Mr Presser did not receive the letter of 7 July 2008 purporting to accept the offer of services that he made on 6 July 2008. I am also satisfied that Mr Presser did not authorise the 31 July 2008 invoice and did not have any discussion with Mr Maclean about putting the money aside or holding the cheque so that he would be paid if he found a buyer for the Kwiktron business. Mr Maclean's explanation that the money was put aside as a reassurance to Mr Presser was implausible.

47 I am satisfied that there was no proper basis for the Wonga Views invoice of 31 July 2008 and that that invoice was false.

48 The second invoice which RCMF alleges is false is also dated 31 July 2008. It is a Kamac invoice for $16,300 addressed to RCMF with $12,800 of the invoiced amount said to be for "FitDeck Go for your life project - Research, strategy document and presentation, mock ups for Fitdeck Junior and Senior, printing" with the balance of $3,500 said to be for "Ongoing fee for Sue Stanley as agreed". Sue Stanley had previously undertaken work for RCMF for which she had been paid. During the course of the trial, Mr Maclean conceded that Ms Stanley had not provided additional services nor had she been paid for any additional work. He accepted that Ms Stanley had only issued one invoice in respect of the original work she performed and that invoice had been paid some time earlier.

49 Mr Maclean sought to explain the reference to Ms Stanley in the invoice on the basis that there were discussions between Mr Fahour, Ms Stanley and him about Ms Stanley being engaged for an initial three month period as a consultant working as an ambassador or lobbyist for Fitdeck for a fee of $3,500. According to Mr Maclean, an invoice was raised so that they could start paying Ms Stanley but, at her instigation, she was not engaged because she could add no further value. When questioned as to why any payment to Ms Stanley would be made by Kamac rather than RCMF, Mr Maclean said that it was to avoid any direct link between the lobbying work that Ms Stanley was to do and RCMF. There is a second Kamac invoice of 31 July 2008 for the same amount of $16,300 said to be "for research opportunities Fitdeck and Go for Your Life project. Strategy preparation and go forward recommendation." Mr Maclean said that this invoice did not replace the first invoice but was a truer representation of the work that was going to be done on the "Go for your life" project and it was in respect of that work that payment was to be made. There were some cards that were prepared for the "Go for your Life" campaign and Mr Maclean suggested that they had been paid for with some of the money paid to Kamac.

50 Mr Maclean says that both Kamac invoices were prepared by HG & Co and he saw them before they were sent out. According to Mr Maclean, the main reason HG & Co prepared invoices for him was because, in his view, it maintains an arm's length relationship and is more independent.

51 On 5 September 2008, the first Kamac invoice of $16,300 was paid by cheque to Kamac signed by Mr Maclean. The payment was recorded in the RCMF bank register.

52 Mr Maclean submitted that it is noteworthy that Kamac was known to RCMF, was referred to in its accounts and that Mr Celarc had heard of the company and knew it was a company associated with Mr Maclean. It was submitted that this was not a situation in which Kamac sought to be secretive or hide its existence or role from RCMF. However, Mr Celarc was not involved in the day to day running of the business and he candidly acknowledged on more than one occasion when giving evidence that he should have paid closer attention to paperwork. His evidence was that he expected the senior employees with their experience to carry on the business affairs of RCMF in accordance with appropriate business practice and to comply with regulatory requirements. Mr Celarc made his investment in RCMF and then left the business to run itself. Whilst he knew of Kamac, I am satisfied that he did not realise that invoices were being rendered by Kamac to RCMF in effect for work that fell within the scope of Mr Maclean's employment.

53 As I have said above, Mr Maclean was not a credible witness. I do not accept his evidence in relation to the Kamac invoice; it was implausible and unconvincing. For example, it is inherently unlikely that an invoice would be raised for payment to Ms Stanley before she had undertaken to do any further work. His explanation that the payment had to come from Kamac (rather than RCMF) in order to conceal the relationship between Ms Stanley and RCMF made no sense. Even accepting Mr Maclean's premise that it was in RCMF's interests to distance itself from Ms Stanley, rudimentary enquiries would have disclosed the connection: company searches would have disclosed that Mr Maclean was a director of RCMF and that, for all practical purposes, he was Kamac.

54 I accept RCMF's contention that the Kamac invoice of 31 July 2008 was a false invoice.

55 Mr Maclean accepted that various payments were made to Kamac by RCMF. On four separate occasions in September 2008, cheques on Kamac's account were cashed. The total amount of those cheques was $33,500 (part of which represented the $20,500 that had been paid to Kamac in August 2008[1] and the balance of which related to the $16,300 paid into Kamac's account in September 2008[2]). Mr Maclean said that the cash had been paid to a company called Financial Facilitations Pty Limited for lobbying and for payments it would make which would "open doors" for RCMF in government and business. No invoices were rendered by Financial Facilitations. However, a letter dated 20 December 2010 on Financial Facilitations' letterhead, which appeared to have been signed by a Mr TC Humphreys, stated that the company operates a financial services business with an essential part of its business being the maintenance of a wide network of business contacts and leads. The letter went on to state that during 2008 Financial Facilitations undertook various projects and assignments on behalf of Kamac which was representing RCMF. The letter also stated that Financial Facilitations facilitated various introductions for service rights consistent with Kwiktron business activities and, to enable these opportunities to be progressed, fees were paid, equipment purchased and consultants retained. The letter acknowledged receipt of the cash payments from Kamac. Mr Maclean's evidence was that he had known Mr Humphreys for some time and that they had previously been co-directors of a company. Mr Maclean gave evidence that Mr Humphreys has connections in government and can make introductions. He said that he made cash payments to Mr Humphreys for these services from about August 2008.

56 According to Mr Maclean, it is sometimes necessary for hospitality to be bestowed on influential people to obtain access to them for lobbying purposes or to repay them for a favour. Mr Maclean's evidence was that it is usual for cash to be paid for the purchase of the hospitality. An example given by Mr Maclean was the cash purchase of two tickets to the Australian Football League grand final for $5,000 so that those tickets could be given to repay a favour to somebody. He suggested that some of the cash given to Financial Facilitations had been used for similar purposes. In this regard, he said that he was pretty sure that money had been paid for a trip to Fiji for a public servant so that representatives of RCMF could get an appointment to see someone in the Department of Health about the "Go for your life" campaign that Fitdeck was developing. According to Mr Maclean, Mr Humphreys meticulously kept a dairy in which he recorded the details of these payments. Mr Maclean also gave evidence that Mr Humphreys would tell him what he was doing and what funds were required.

57 A company search for Financial Facilitations disclosed that the company had been deregistered since 15 December 2002 and that, at that time, Mr Timothy Christopher Humphreys was the sole director. A County Court of Victoria certificate confirmed that Mr Humphreys had previously been convicted of a number of counts of obtaining a financial advantage by deception.

58 It was submitted on behalf of Mr Maclean that his explanation as to the use of the funds paid to Kamac, while possibly a little surprising to those who work within the cloistered confines of the law, is not inherently unlikely. If a company is seeking access to work or trying to obtain a significant business opportunity, the demands of the commercial world are unforgiving - people are judged upon results. Hence, it was submitted, if there is a need to provide Grand Final tickets or a trip to Fiji in order to gain access to decision makers, that is what a company must do. It was put that as a matter of principle, it is the same as companies who entertain potential customers in order to encourage them to order or use their product. Insofar as the funds were put to these purposes, Mr Maclean contended that they were being used to advance the interests of RCMF.

59 I do not accept Mr Maclean's submissions. The story that Mr Maclean told is far fetched, even more so given that Financial Facilitations is, and has been for some years, deregistered and given Mr Humphreys' history. Not surprisingly, he was not called to give evidence.

60 I have come to the conclusion that a significant portion (if not all) of the money paid by RCMF to Kamac was not used for the benefit of RCMF but rather was applied for the personal benefit of Mr Maclean.

Entitlement to terminate Mr Maclean's employment summarily

61 The rendering of false invoices and the personal use by Mr Maclean of the funds paid by RCMF to Kamac is a serious breach of the terms of the Employment agreement. Even though these grounds were not known by RCMF in January 2009, they are sufficient to justify the termination of Mr Maclean's employment summarily.[3]

62 As I have found that the false invoices and use of funds by Mr Maclean constituted sufficient grounds for terminating his employment summarily, it is not necessary for me to consider any other ground for termination. However, much of the evidence and time taken at trial was concerned with events that took place in January 2009. Further, it was on the basis of those events that, at the time, RCMF terminated Mr Maclean's employment. Additionally, when assessing the credibility of Mr Maclean as a witness, I took into account the evidence that he gave in relation to the events of January 2009. I will therefore deal with those events in these reasons.

63 One of the businesses that Mr Maclean looked at for possible acquisition by RCMF was a service provider known as 199Buddy. If a customer wants to know the answer to a question, for example, a quiz question, a text message with the question can be sent to 199Buddy and, for a small fee, a reply with the answer will be sent within a short time. There are now a number of similar businesses operated from Australia and overseas. However, Mr Maclean said that the 199Buddy business had a unique feature in that if the answer was not provided within two minutes of the text question being sent, the answer was free. Mr Maclean said that this had captured the imagination of people. Mr Maclean also said that at the relevant time, 199Buddy was the only service of its type that was operating overseas.

64 There were two meetings in April 2008 between Mr Maclean, Mr Fahour and the sole director of 199Buddy. However, those discussions did not go any further for some time. Mr Maclean says this is because the 199Buddy director (who was only young) was a bit intimidated by Mr Fahour and felt that he was being cornered into a potential sale too quickly. Mr Maclean says that in about mid December 2008 an opportunity to look at 199Buddy came up again, when he met the sole director at one or two Christmas functions. Mr Maclean said that the director told him that he had expanded the business and he was interested in continuing discussions for the sale of 199Buddy. Mr Maclean says that he told the director that he would be quite happy to try and broker the right sort of deal for him if the principals of RCMF agreed to that. According to Mr Maclean, the director told him that he was using a broker in Hong Kong, Alan Cheung, of MarketLead Asia Pacific Ltd ("MarketLead"). Mr Maclean was familiar with Mr Cheung. There is no evidence that Mr Maclean had any connection with MarketLead at this time. However, in cross examination, Mr Maclean said that he was a director of that company for two months in late 2010 or early 2011.

65 Mr Maclean says that Mr Cheung telephoned him on the night of Sunday 4 January 2009 at approximately 9pm to tell him that a data room for the 199Buddy sale would be open the following day and that if he wanted to access the data room, then a security deposit of $750,000 had to be paid to an account in Hong Kong. Mr Maclean's evidence was that the business was potentially available for sale for about $2 to $3 million. To investigate the possible acquisition further, Mr Maclean says he needed to obtain access to the data room to examine the books of the business. Mr Maclean's evidence was that there was some urgency about this because there was a window of opportunity to purchase the business before it was sold to someone else. However, I note that over two years later, the 199Buddy business had still not been sold.

66 In late December 2008, RCMF's cash reserves were low and a decision was made to use Kwiktron's money to cover the outgoings of RCMF. Mr Maclean says that for this reason, shortly after 9.30am on 5 January 2009 he telephoned the banker for RCMF, Mr Ben Blake from the National Australia Bank Limited ("NAB") and asked him to transfer $750,000 from Kwiktron's account to the account of RCMF. Mr Maclean says that Mr Blake told him that there would not be a problem with that. Before telephoning Mr Blake, Mr Maclean did not speak to Mr Celarc nor to anyone else connected with RCMF about purchasing the 199Buddy business nor about payment of the deposit. Mr Maclean says that the money had to be transferred from the Kwiktron account to RCMF's account (rather than directly to MarketLead) not only because of the board decision that Kwiktron would fund RCMF's expenses, but also because of internal protocols. In addition, Mr Maclean says that the transfer from Kwiktron to RCMF was necessary because it was an RCMF transaction between that company and MarketLead and not a Kwiktron transaction.

67 Mr Maclean deposed that as managing director of RCMF, he had authority to transfer funds belonging to RCMF or Kwiktron. However, in relation to Kwiktron, his authority level was $10,000. In relation to RCMF, the shareholders deed provided that the board of RCMF (which includes Mr Maclean and Mr Celarc) was only authorised to enter into contracts with a commitment value up to $500,000. For anything above this, the approval of Mr Celarc as the Class A shareholder was required. Mr Maclean says that he did not view the payment of the $750,000 deposit as an ongoing commitment because it was fully refundable. Therefore, in his view, he did not require Mr Celarc's approval as the Class A shareholder for the payment to be made.

68 Mr Cifci controlled the Kwiktron account so far as internet banking was concerned. In cross examination, Mr Maclean initially denied (but subsequently accepted) that the real reason he asked Mr Blake to transfer the funds to the RCMF account was because the NAB would not transfer the $750,000 from Kwiktron's account to an account in Hong Kong but that he could do that electronically if the funds were in RCMF's account.

69 At approximately 10.20am on 5 January 2009, Mr Maclean telephoned Mr Cheung and, according to him, he told Mr Cheung that he had made arrangements for the transfer of the deposit. He says that, on that basis, Mr Cheung was willing to give him access to some of the documents. Mr Maclean says that Mr Cheung told him that the data room was located at a rented semi serviced office in the Trak Centre in Toorak.

70 Just before 11 am, he sent an email to Mr Celarc, copied to Mr Cifci. The email read:

Hi Richard,

Know you are on a well earned break - so apologies for the email - great business for sale in Singapore - perfect bolt to Kwiktron and will make a lot of money so have put a $750k security on the offer for 7 days - all fully refundable.

Best,

Stuart

71 The 199Buddy business was not conducted from Singapore, and the broker, MarketLead, has its head office in Hong Kong. However, in cross examination, Mr Maclean said that he had been told by Mr Cheung that the sale process was being conducted through Singapore. He also gave evidence that the business was a perfect "bolt" to Kwiktron because it was in a similar area of technology (SMS, mobile telephones) to the computer repair business of Kwiktron.

72 Mr Maclean says that he went into the 199Buddy data room shortly after 11am and was there until late that afternoon looking at the documents provided to him and speaking to Mr Cheung. He said that he was given geographic expansion plans and "top line" revenue models but not profitability information. According to Mr Maclean, without payment of the security deposit, he could not obtain copies of the documents that he looked at nor could he inspect more detailed documents and information. Whilst he says he could access emails remotely in the data room during a supervised break for lunch, he says that the rules of the data room were that no telephone calls could be made. His mobile telephone records are consistent with him having made no calls during the time that he says he was in the data room.

73 After receiving the email Mr Maclean sent just before 11 am, Mr Celarc tried to speak to him without any success. Mr Maclean did not return his call. Mr Celarc was surprised and concerned by Mr Maclean's email because he thought a security deposit of $750,000 was very high; RCMF did not have the money; if the funds were provided by Kwiktron, that would leave that company short of cash needed for working capital and payment of tax; Mr Maclean had not mentioned to him that he was looking to purchase another business and it had not been mentioned in a previous management meeting held on 9 December 2008 or in an update email from Mr Maclean on 21 December 2008; and in August 2008, Mr Maclean's authority limit was $10,000[4]. Mr Celarc also said that he was concerned because he had been told by Mr Cifci that on 4 January 2009, he had received a text message from Mr Maclean saying that he was trying to sell the Kwiktron business. Although the intention had always been to sell that business, Mr Celarc found what Mr Cifci told him disturbing because, on the one hand, Mr Maclean was saying that he was trying to sell that business but, on the other hand, he was taking what Mr Celarc considered to be a very high risk position by taking the majority of Kwiktron's cash flow to pay a security deposit on another business that they knew nothing about.

74 Just after midday on 5 January 2009, Mr Celarc sent an email in response to Mr Maclean's email:

Hi Stuart

I tried to call, left a message.

Have you got an IM [ information memorandum] on this company? Are you sure it's $750,000 security, this seems very high?

Regards

Richard

75 Mr Maclean accepted that it is a standard business practice to have an information memorandum when a business is being sold. There was one prepared by him and Mr Presser for the proposed Kwiktron sale and also one in relation to an information technology business that was for sale in Darwin known as Hallmark, which Mr Maclean had previously considered for purchase by RCMF. In both these cases, potential purchasers were provided with the information memorandum without any payment being required. The Kwiktron information memorandum stated that taxation returns, unaudited trading accounts and balance sheets were available for review upon request without payment of any security deposit. At one point in cross examination, Mr Maclean said that there was an information memorandum for the 199Buddy sale, but later he said that there was not one. His explanation for why there was not one for the 199Buddy business was that the process was slightly different but not dissimilar to other sales with which he had been involved.

76 Mr Celarc tried throughout the day to speak to Mr Maclean but he was unsuccessful. He did speak to Mr Cifci who told him that $750,000 had been transferred out of the bank account of Kwiktron that morning. Mr Celarc had formed the view that the transaction was not genuine and he directed Mr Blake at the NAB to reverse the transfer.

77 During the evening of 5 January 2009, Mr Maclean found out that the transfer of the $750,000 had not been effected. Just after 8 pm, he sent an email in response to Mr Celarc's earlier email that day:

Just back in town so will call tomorrow - something odd with transfer of deposit so put my own in [sic] $$ in

Regards,

Stuart

78 In cross examination, Mr Maclean said that the email should have read "will put my own $$ in" (emphasis added). He said he was prepared to do this because, as a fully refundable deposit, there was no risk. However, no deposit was paid by Mr Maclean, apparently because he had other things to do with his money and, in his words, he had "much, much bigger fish to fry."

79 Mr Maclean did not make any enquiries about why the $750,000 transfer had not gone through. According to him, the reason he made no enquiries was because he had a discussion with Mr Celarc on 5 January 2009 and they agreed to offer a smaller security deposit of $250,000. Mr Celarc denies this.

80 At 8.45pm that evening, Mr Maclean again telephoned Mr Cheung. There is no evidence as to what they discussed. However, there is what on its face appears to be a draft of an agreement dated 6 January 2009 which was to be between RCMF and MarketLead. The draft is signed on behalf of MarketLead but has not been executed by RCMF. The draft recites that MarketLead is an agent/broker for businesses in the Asia Pacific region and that RCMF has declared an interest in 199Buddy and has entered into discussions with MarketLead. The draft goes on to state that to proceed with discussions and give access to business plans and financial information, MarketLead requires a security deposit of 10% of the proposed sale price. The deposit is specified as $750,000, making the proposed sale price $7.5 million.

81 On 6 January 2009, Mr Maclean electronically transferred $10 and $1,000 from the Kwiktron account to the Kamac account. The transaction detail recorded on Kwiktron's bank statement in respect of the amounts transferred was 'bonus'. Mr Maclean says that he transferred these moneys because he wanted to test the transfer system to see whether internet banking was working. He deposed that the transferred amounts were still held in the Kamac account. However, bank statements for the Kamac account disclosed that this was not the case. The amounts that were transferred to Kamac have never been repaid to Kwiktron. Mr Maclean says that he was advised by his lawyers to leave the money with Kamac.

82 According to Mr Maclean, he attended the data room again on 6 January 2009 and spoke to Mr Cheung. Just before 1 pm on 6 January 2009, Mr Maclean sent a fax "re business opportunity" to Mr Blake at the NAB from Toorak Village News (being the nearest available fax facility to the data room at the Trak Centre) asking him to transfer $250,000 from the Kwiktron account to a Hong Kong account in the name of MarketLead.

83 Mr Maclean said that because of the lower amount, there was no need this time (as, on his evidence, there had been with the proposed transfer of $750,000) for the money to be transferred from Kwiktron to RCMF's account before being paid into the Hong Kong account of MarketLead. A little after 1pm, Mr Maclean telephoned Mr Blake who he says told him that he had received the fax but did not tell him whether the money was being transferred. He also telephoned Mr Cheung twice. Mr Blake brought the fax to the attention of Mr Celarc who instructed him not to process the transfer. No funds were transferred.

84 Mr Maclean deposed that because the security deposit was not paid, he could not examine the books and participate in the process of trying to buy the 199Buddy business. In cross examination, he resiled from this evidence and, as described above, said that he had been able to look at some of the books of 199Buddy on 5 January 2009. Mr Maclean also deposed that this was not the first time that a failure or unwillingness to pay a security deposit prevented RCMF from participating in a potential purchase situation. In cross examination, Mr Maclean accepted that the other occasion on which access to the books had been denied was in relation to the Hallmark business that was for sale in Darwin. To obtain access to financial information, a refundable deposit of $25,000 had to be paid. At the time, Mr Maclean sent an email to Mr Cifci and Mr Gencturk (copied to Mr Celarc and Mr Fahour) saying that he was not going to pay the deposit and they all agreed that the deposit should not be paid.

85 Mr Celarc was suspicious as to the motives of Mr Maclean and came to the conclusion that he was attempting to withdraw monies for his own benefit. As a result of his suspicions and what he thought was the unusual nature of the transactions, he instructed RCMF's lawyers to remove Mr Maclean as a director of RCMF immediately. Later on 6 January 2009, RCMF's lawyer emailed Mr Maclean to advise him that he had been removed as a director of both RCMF and Kwiktron. Mr Celarc did not speak to Mr Maclean after this, although Mr Maclean did try to contact him.

86 Shortly after Mr Maclean had been removed as a director, he transferred $700,000 from the Kwiktron account to the RCMF account with the transaction details in the Kwiktron bank statement describing it as "bonus". He gave evidence that he did this as a cheap shot at Mr Celarc to show that the money could be transferred. He denied that he intended to move those funds from RCMF's account for his own personal use and said that there was nothing to stop him transferring the funds from the account of RCMF to an account that only he controlled. Mr Celarc was made aware of the transfer by Mr Blake and instructed him to reverse it.

87 On 21 January 2009, Mr Celarc, on behalf of RCMF, emailed a letter to Mr Maclean in which he confirmed the company's decision to terminate Mr Maclean's employment with effect from 6 January 2009 or, alternatively, terminating his employment on 21 January 2009 with immediate effect.

88 Mr Maclean's case was that the criticism of his conduct in early January 2009 and the related events was not the real reason for his termination. Before Mr Maclean's employment was terminated, Mr Celarc was happy with his work effort, thought that Mr Maclean was doing a good job and made no complaints or criticisms of his performance. Mr Maclean submitted that Mr Celarc felt embarrassed after RCMF purchased Kwiktron on the terms that it did. Mr Maclean's contention was that his employment was terminated so that Mr Celarc could appease or pacify Mr Cifci and Mr Gencturk when Mr Cifci, in particular, became annoyed with Mr Maclean's involvement in the Kwiktron business and the measures he took to improve the business. Mr Celarc denied that this was what motivated him.

89 In his affidavit evidence, Mr Celarc made a number of complaints about Mr Maclean's conduct in support of an allegation that Mr Maclean had breached the Employment agreement by failing to serve RCMF and the shareholders' interests while he was employed. The complaints included failing to return calls, communicate with and report to Mr Celarc about what he was doing and his whereabouts (particularly when he was travelling overseas); failing to obtain business opportunities for RCMF; failing to maintain appropriate and complete records; and approaching Fitdeck in the United States of America after his termination and attempting to obtain Fitdeck's rights in Australia. These matters were not pressed at trial by RCMF. However, in assessing Mr Celarc's credibility, Mr Maclean's counsel urged me to take into account that the allegations had been made and that Mr Celarc resiled from them in cross examination. It was also submitted that these additional grounds for termination indicate that RCMF was aware that the case for dismissal needed bolstering. It was put that the making of these allegations against Mr Maclean reflects badly on Mr Celarc and RCMF because it shows that the company was prepared to make significantly exaggerated, misleading or outright inaccurate claims against Mr Maclean to cast him in a bad light. It was also submitted that this was done in a calculated manner in that Mr Celarc had sworn an affidavit in support of the claims.

90 I accept that these additional claims that were made were exaggerated. In view of the evidence that Mr Celarc gave in cross examination, they could not be sustained. However, the fact that a number of allegations have been made which are not proved does not mean that all allegations must therefore be false and that I should not accept any of Mr Celarc's evidence. Whilst I am not confident that Mr Celarc's affidavit evidence was always reliable, his oral evidence was of a different quality. In the witness box, Mr Celarc appeared as a truthful witness. He did not attempt to support his earlier affidavit evidence if it was wrong; rather, in general he readily conceded when that evidence was incorrect. For example, in his affidavit evidence, Mr Celarc said that upon review of various bank statements, it appeared that Mr Maclean was paying his monthly remuneration under the Employment agreement to Kamac, rather than to himself. When challenged on this issue in cross-examination and asked to justify his allegation after examining the Kamac bank statements, Mr Celarc acknowledged that his statement in his affidavit was incorrect and that he had no basis for the comment made. Similarly, Mr Celarc's affidavit evidence was that a handwritten document connected with the Kwiktron purchase was drafted by Mr Maclean. When it was suggested to him in cross examination that it was drafted by Mr Fahour, he accepted this without demur.

91 I do not accept that Mr Celarc had any improper motives for terminating the employment of Mr Maclean and I do accept Mr Celarc's evidence about this. Taking into account that Mr Maclean had attempted to transfer significant funds from Kwiktron to RCMF without speaking to any of Mr Cifci, Mr Gencturk or Mr Celarc; that the transaction required payment of a very high deposit; that Mr Maclean did not respond to Mr Celarc's email asking about an information memorandum for the business; and that Mr Maclean did not call him to discuss the business, it is not surprising that Mr Celarc was suspicious and formed the view that the transaction was not legitimate and that Mr Maclean's employment should be terminated.

92 On the other hand, Mr Maclean's story is not believable. The security deposit of $750,000 was significantly higher than the deposit that had been sought in relation to the Hallmark business. In relation to the requested Hallmark deposit, Mr Maclean's view was that they should not pay it. Yet, he asks the Court to accept that RCMF should have paid a deposit hundreds of thousands higher in relation to the 199Buddy business. Further, on his evidence, the business was potentially for sale for $2-3 million, yet based on the amount of the deposit sought, the asking price was $7.5 million. At the time, they were continuing their efforts to sell the Kwiktron business. Whilst it is not necessarily inconsistent with those objectives for another business to be acquired "as a bolt" to Kwiktron, in this case it made little sense as cash was tight and using $750,000 of Kwiktron's funds for a security deposit would significantly deplete its working capital. The 199Buddy business was said to be for sale in Singapore, but it had no connection with Singapore. Mr Maclean's contention was that whilst this might seem unusual, it did not mean there was no link simply because it was not obvious on the evidence before the Court. That may be so if one were looking at the issue in isolation, but here, considered with all of the other evidence, the lack of connection with Singapore casts further doubt on the truth of Mr Maclean's explanations. Mr Maclean's affidavit evidence was that he was not able to review the books of 199Buddy, but then in cross examination, he gave contradictory evidence saying that he spent most of the day on 5 January 2009 in the data room reviewing at least some material. He has produced no documents at all in relation to the proposed purchase of 199Buddy. Mr Maclean contends that that is because he was not allowed to take anything from the data room. However, one would have expected that there would be some documentary evidence relating to the data room, arrangements to visit the data room or the sale of the business, whether by way of email, text message, information memorandum or a note that Mr Maclean may have prepared himself. There was nothing. Mr Maclean's evidence as to the need to transfer funds from Kwiktron to RCMF did not stand up to scrutiny and he was finally forced to admit that the reason for the transfer was because if the money was in RCMF's account, he could control the transfer of funds. All in all, Mr Maclean's attempts to explain the events of early January 2009 were most unsatisfactory.

93 Mr Maclean's conduct in early January 2009 constituted grounds for summary dismissal.

Has RCMF acted oppressively in its treatment of Mr Maclean as a shareholder?

94 In the Employment proceeding, Mr Maclean also claims that RCMF breached the Employment agreement by denying that the EBIT triggers had been achieved before his employment was terminated, by deciding that he had no entitlement to any shares in RCMF and by cancelling the shares that were issued to him. He claims that he has suffered loss and damage as a result of these alleged breaches. In broad terms, the alleged loss and damage is that Mr Maclean was deprived of the shares that were issued to him or of the opportunity to have a significant shareholding in RCMF and to sell shares issued to him.

95 In the Oppression proceeding, Mr Maclean seeks orders under s 233 of the Corporations Act that Mr Celarc or RCMF purchase his shares at a price to be agreed or determined by the Court. Alternatively, he seeks an order that RCMF be wound up under s 461 of the Corporations Act. He also seeks a declaration that the cancellation of his shares in RCMF is invalid or of no force or effect.

96 A person can make an application for relief under s 233 of the Corporations Act in respect of a company's oppressive conduct if they are a member of the company or they were a member and the application relates to the circumstances in which they ceased to be a member.[5] Relevantly, the court may make such an order if the conduct of the company's affairs is oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member (whether in that capacity or in any other capacity).[6]

97 Mr Maclean contends that he is entitled to seek an order under s 233 because he was entitled to his shares under his employment agreement with RCMF or he was otherwise issued with his shares in the company and RCMF has conducted its affairs unfairly or oppressively against him by:

(a) cancelling his shares without any or any sufficient reason;

(b) cancelling his shares without any payment;

(c) buying back the shares of Mr Fahour but not his shares;

(d) dismissing him from his employment in January 2009 without paying him his entitlements;

(e) dismissing him as a director and employee without making any offer to buy his shares and without paying him his employee entitlements.

Was Mr Maclean entitled to the shares under the Employment agreement?

98 The share incentive clause in the Employment agreement reads:

Total package: Salary: $240,000 (plus superannuation). Incentive package consisting of (a) the issue of 50,000 Class B shares in the event EBIT of the Parent Company exceeds $500,000 in any financial year and (b) the issue of a further 50,000 Class B shares in the event that EBIT exceeds $1 million in any financial year. Issue of shares is "triggered" on the achievement of the outlined financial milestones. In addition, the sale of RCMF within 12 months of the date of this agreement for a price exceeding $10 million will 'trigger' the issue of all 100,000 Class B shares.

99 RCMF is defined in the Employment agreement as the "Company" and there is no definition of "Parent Company". However, Mr Maclean accepts that the parent company was RCMF and that to qualify for shares, it was the EBIT of RCMF that had to meet the threshold.

100 Mr Maclean submitted that the terms of the incentive were later changed by virtue of the shareholders agreement so that the maximum entitlement of shares was 107,500 Class B shares. However, Mr Maclean is not a party to the shareholders agreement and there is no evidence of any amendment or variation to the employment agreement entered into by Mr Maclean and RCMF.

101 Courts adopt an objective approach in construing the terms of an agreement by determining what a reasonable person would have understood them to mean in the circumstances.[7] This normally requires consideration not only of the text, but the surrounding circumstances known to the parties and the purpose and object of the transaction.[8] Further, a literal interpretation of the terms of a contract will not be applied if it would lead to an absurd result.[9] Mr Maclean relied on what Lord Diplock said in the House of Lords in Antaios Cia. Naviera SA v Salen Rederierna AB:[10]

...if a detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.[11]

102 Mr Maclean contended that, properly understood, the employment agreement referred to the EBIT of either the parent company, RCMF, including its subsidiaries or the group because:

(a) the uncontested evidence is that the small investment company to be established by Mr Fahour, Mr Maclean and Mr Celarc was always intended to operate as an investing entity, that is, it would buy businesses, develop them and sell them off at a profit, rather than a company which would conduct its own manufacturing or productive operations;

(b) if RCMF were always to operate as a small investment company as it did with Kwiktron, it could never make any profit because it would only incur expenses but generate no income. Mr Celarc agreed that there could be no positive EBIT without profits;

(c) the originator of the idea for the small investment company was Mr Fahour. He offered Mr Maclean the inducement of shares, he said (as would have proved the case) that settlement of the transaction with Kwiktron was to take place soon so that the investment company, namely RCMF, would achieve the $1 million EBIT figure before 30 June 2008. When saying this in circumstances where RCMF had no business operations and no other means of making money, he must have intended that the profitability of the Kwiktron operation be taken into account when determining the financial performance of RCMF. Mr Fahour's later conduct was consistent with his expectation that Mr Maclean should obtain shares in RCMF when the $1 million EBIT figure was satisfied.

103 Mr Maclean submitted that the background facts known to both parties were as follows:

(a) RCMF was a start up company which was to operate as a small investment company which purchased businesses, developed them and sold them at a profit;

(b) RCMF was to operate like the New Zealand private equity business which purchased Mr Celarc's printing business;

(c) the three individuals establishing the company each brought different skills or qualities to the business;

(d) on the basis of the work he had done, Mr Fahour as a founding director and shareholder of RCMF expected (and he communicated this expectation to Mr Maclean) that RCMF would achieve the $1 million EBIT figure before 30 June 2008;

(d) the purpose of the incentive provision was to provide Mr Maclean with the opportunity to earn equity in the business and make the position more attractive to him.

104 Mr Maclean contends that the commercial purpose of the clause was to provide a means for him to obtain shares in RCMF in the near future by the operation of the foreshadowed investment business. Mr Maclean further contends that if the agreement is read as confined to RCMF alone, the outcome will be impractical and not one contemplated by the parties. It arose in a commercial context and there must be a commercial solution sought by yielding to business common sense.

105 Mr Maclean pointed to the predictions which he says Mr Fahour made in about February/March 2008 about Kwiktron. In the financial year ending 30 June 2008, the Kwiktron business made a profit of $1.123 million. The settlement of the Kwiktron purchase was due to take place on 10 May 2008, a short time after the Heads of Agreement and the draft of the more formal agreement were signed. On this timetable, RCMF would have settled the purchase about seven weeks before the end of the financial year. Ultimately, the settlement was delayed until 22 August 2008.

106 Mr Maclean says that his interest in obtaining the shares quickly was borne out by the actions of RCMF in trying to on-sell the business immediately after acquiring it. He contends that RCMF's purchase of Kwiktron represented very good value for the buyer and RCMF was keen to capitalise on this through a quick sale. RCMF offered the business for sale for $8.5 million. In these circumstances, Mr Maclean contends that it was essential for him to obtain his shares promptly. Otherwise, if the sale took place, he says he would receive nothing because he was not a shareholder. Mr Maclean contends that these facts support his position that it was always intended and expected by RCMF, and understood by him, that the $1 million EBIT figure would be reached in the financial year ending 30 June 2008 and that he would be issued shares immediately in order to benefit from his contract.

107 RCMF and Mr Celarc objected to the contentions made by Mr Maclean as to construction of the incentive provision on the basis that the submission was not supported by the pleadings. The pleaded claim by Mr Maclean is that his entitlement arose because RCMF achieved EBIT of $1 million.

108 In addition to the pleading point, RCMF and Mr Celarc say that, in any event, the incentive provision only refers to the EBIT of the parent company, not any of its subsidiaries such as Kwiktron. Therefore they say, the meaning of the clause is clear and unambiguous and there is no basis upon which to construe the clause such that the EBIT of the subsidiaries would be taken into account.

109 In my opinion, the proper construction of the incentive provision in the Employment agreement is that the EBIT of RCMF is what is relevant, not the EBIT of RCMF and its subsidiaries. It is true that RCMF was to act as an investment company. Businesses were to be bought, improved and sold quickly. In short, it was through the sale of businesses that RCMF would make its money. It is a false premise to say that RCMF would never make a profit because it was a pure investment company.

110 The assumption that Mr Fahour expected RCMF to achieve the $1 million EBIT figure by 30 June 2008 does not lead to a conclusion that, when construed objectively, the incentive provision refers to the EBIT of RCMF and its subsidiaries. In this regard, the relevant date when construing the Employment agreement is when it was entered into (early March 2008) and not when the purchase agreement for Kwiktron was made more than two months later. In early March 2008, the EBIT target being reached by 30 June of that year through the purchase and quick sale of Kwiktron may have appeared achievable.

111 Mr Maclean did not have an automatic right to participate in RCMF; the EBIT threshold had to be met before he would qualify for shares. I do not accept that it was essential for Mr Maclean to obtain his shares before a sale of Kwiktron because otherwise he would not benefit from that sale. As noted above, RCMF acquired the Kwiktron business by purchasing the shares in the company (rather than acquiring its assets). If the Kwiktron business was on-sold by the same share sale method, then RCMF (not its shareholders) would have received the proceeds of sale and the EBIT target may well have been reached such as to entitle Mr Maclean to the shares and the possible receipt of dividends (should any be declared).

112 The EBIT triggers under the Employment agreement were EBIT of RCMF of $500,000 for the issue of 50,000 Class B shares and $1 million for the issue of a further 50,000 Class B shares.

113 Mr Maclean relied on expert evidence given by Mr Kevin Ferguson, who is a chartered accountant, to establish that the thresholds had been met. Mr Ferguson agreed that if it was the EBIT of RCMF that was to be considered, then the subsidiaries' earnings would not be taken into account and only the earnings of RCMF were relevant. If the earnings of Kwiktron were not taken into account, then there was a loss of $333,761 for the 2008 financial year and $470,139 for the 2009 financial year. These figures were reflected in a profit and loss statement for RCMF prepared by the company's external accountants.

114 Further, even if the financial position of RCMF and its subsidiaries is taken into account, the evidence does not establish that the EBIT threshold was reached at any time before Mr Maclean's employment was terminated in January 2009.

115 Mr Maclean prepared a consolidated profit and loss statement for RCMF, Fitdeck and Kwiktron for the 2008 financial year which recorded EBIT of just under $1.1 million. Kwiktron's revenue of approximately $6 million was taken into account in the calculation without which there would have been a loss. Mr Maclean submitted that the contract for purchase gave RCMF an equitable interest in the Kwiktron business. Even though RCMF was not able to access the profits generated by Kwiktron until after 22 August 2008, he submitted it nonetheless had an interest in Kwiktron from the earlier point during which time the Kwiktron business exceeded the $1 million EBIT. Mr Maclean's submissions made note that it is for this reason that, in the capital gains context, a taxpayer is taken to have an interest in property which is to be assessed for capital gains from the time of contract and not from the time of settlement.

116 However, in my opinion, there is no basis upon which the EBIT of Kwiktron could be taken into account prior to settlement of the sale of the purchase. Indeed, Mr Maclean knew at the time of preparing the consolidated statement that as at 30 June 2008, the Kwiktron purchase had not been completed and in cross examination he accepted that the consolidated statement was incorrect. He conceded that as at 30 June 2008, he had no entitlement to shares nor did he have any entitlement under the Employment agreement as at 22 August 2008, when the Kwiktron sale was completed.

117 Mr Ferguson's evidence in chief was that if the Kwiktron subsidiaries were taken into account, the EBIT of RCMF for the 2008 financial year was $1,075,826. In cross examination, Mr Ferguson accepted that as the Kwiktron purchase had not been settled by 30 June 2008, on any view its earnings could not be taken into account in calculating EBIT for that financial year. He accepted that his report was incorrect insofar as it stated that the EBIT of RCMF for the 2008 financial year was $1,075,826.

118 Mr Ferguson's report stated that on a consolidated group basis, the EBIT for the 2009 financial year as at 30 June 2009 was $1,422,467. Mr Ferguson conceded that that figure was flawed and should have been adjusted down to take into account that the purchase of the Kwiktron business did not occur until 22 August 2008.

119 He could not say at what date in the 2009 financial year a consolidated group EBIT figure of $500,000 or $1 million had been reached. There was no evidence that even on a consolidated basis either of the EBIT thresholds of the RCMF group had been met before Mr Maclean's employment was terminated. As such, there is no basis upon which Mr Maclean was entitled to the shares under the terms of the Employment agreement.

Was Mr Maclean otherwise entitled to retain the shares?

120 During the course of the trial, it was submitted on behalf of Mr Maclean that even if he was not entitled to the shares under the terms of the Employment agreement, the fact was they were issued to him and RCMF had no right to cancel the shares. RCMF and Mr Celarc objected to this submission on the basis that it was not pleaded and, had it been pleaded, they could have pleaded matters such as unjust enrichment and the like in response.

121 Indeed, there was no pleading by Mr Maclean in the Employment proceeding to the effect of this alternative submission put at trial. The Oppression proceeding was brought by way of Originating Process with supporting affidavits in accordance with rr 2.2 and 2.4 of the Supreme Court (Corporations) Rules 2003. However, Points of Claim and Points of Defence were ordered and filed. Mr Maclean sought to rely on the affidavits as a basis for the alternative submission having been made and also on a paragraph in the Points of Claim. The Points of Claim set out Mr Maclean's claim based on the terms of the Employment agreement and then continue with the following paragraph:

Further or alternatively, the defendants are now estopped or precluded from denying that [RCMF], with the knowledge and approval of [Mr Celarc] issued and allotted 107,500 B class shares to the plaintiff.

122 The response to this paragraph by RCMF and Mr Celarc in their Points of Defence reads:

Pending further and better particulars the Defendants deny each and every allegation contained in paragraph 18 of the Points of Claim and repeat Paragraphs 15, 16 and 17 herein.

123 Paragraphs 15 - 17 of the Points of Defence relate to the denial of Mr Maclean's entitlement to the shares under the terms of the Employment agreement. No further particulars of the Points of Claim were given.

124 Taking into account the affidavit material relied on by Mr Maclean, including the material in which he clearly states that his claim is based on an entitlement to the shares under the terms of the Employment agreement (which was confirmed by him during his cross examination), and the form of the pleading in the Points of Claim, it seems to me that (save to the extent that he relies on an estoppel argument) it was not open to Mr Maclean to seek to rely on his alternative submission. Nevertheless, much time was spent in closing on the submission and I will therefore set out my views on it.

125 Mr Maclean says that the Employment agreement condition regarding EBIT was designed partly to benefit him in allowing him to earn shares in the company and partly to benefit RCMF by making clear that there was no obligation upon it to issue shares to him unless and until the condition was satisfied. Mr Maclean could not compel or require RCMF to issue shares to him in circumstances where the EBIT condition was not met. However, Mr Maclean submitted that in the absence of an obligation on the company to do so under the EBIT incentive clause, the company could still choose, for whatever reason, to issue shares to him. He contended that that is what occurred.

126 In this regard, all parties agree that the shares were issued to Mr Maclean in 2008. He contends that the circumstances in which the shares were issued are irrelevant because neither Mr Celarc nor RCMF has pleaded or put forward any case to set aside the issue of the shares on the grounds of fraud, misrepresentation, duress or some other disqualifying event which might impugn the transaction. It was contended that once the shares were issued, they were Mr Maclean's property and RCMF was not entitled to use the self help measure of cancelling the shares.

(a) RCMF issued 107,500 shares in the company to him in 2008;

(b) it was known by all parties at the time the shares were issued that the EBIT condition had not been satisfied;

(c) RCMF, through Mr Fahour and Mr Celarc, was aware of the proposed share issue to Mr Maclean before it took place - indeed, as the only two Class A shareholders in RCMF, Mr Fahour and Mr Celarc had to agree to the share issue (and did so);

(d) RCMF, through Mr Fahour and Mr Celarc, was aware of the share issue after it took place and they took no action to reverse, cancel or set aside the issue (at least until August 2009 when Mr Celarc as the sole director and sole Class A shareholder did take action);

(e) RCMF and Mr Celarc took no such steps because Mr Celarc agreed with the share issue to Mr Maclean and approved of it. He intentionally agreed to the share issue and then sat on his hands until August 2009;

(f) the company (and Mr Celarc) is bound by the action of issuing the shares to Mr Maclean because:

(i) there is an estoppel by deed;

(ii) the shares were issued with knowledge that RCMF was under no obligation to do so;

(iii) RCMF (or its representatives) acted in such a way, for example, by signing documents as to bind it. Hence it had the requisite knowledge or it is bound because signed documents constitute an admission and/or something third parties can rely upon.

128 A solemn and unambiguous statement of fact in a deed is binding between the parties so that they are estopped from adducing evidence to prove that the fact is not true.[12] The estoppel only arises in an action brought to enforce rights arising out of the deed.[13] Mr Maclean submitted that by virtue of this doctrine, RCMF and Mr Celarc are estopped from denying that he is a shareholder.

129 Mr Maclean relies upon the new shareholder deed signed by Mr Celarc on behalf of the company. That document defines Mr Maclean as the "New Shareholder" and states that the new shareholder agrees to be bound by all the provisions of and to assume, observe and perform all the obligations under the shareholders deed. However, as noted above, that document appears to be one entered into at a time when the shareholder "proposes" to purchase or subscribe for shares. It does not contain a statement that Mr Maclean holds the shares. Merely defining him as the "New Shareholder" does not create an estoppel.

130 The second document relied on by Mr Maclean is the document in which the shareholders approve the resolution to buy back Mr Fahour's shares and waive their pre-emptive rights. It was submitted that the Oppression proceeding is brought on this document in the sense that Mr Maclean cannot complain of oppression as a member of RCMF unless he is or was a shareholder. It was contended by Mr Maclean that the document confirms his status as a shareholder and precludes any derogation from that position or the adoption of a different position. The document begins with the following words:

We, the undersigned ("shareholders"), being all of the members of the company, state that we are in favour of the following resolution ..."

131 For a document to be a deed, it must be signed,[14] sealed (or expressed to be sealed)[15] and delivered. Delivery is established by an act that shows that the party intended that the document would bind them and would take effect as a deed.[16] No evidence was given by any of the signatories to the document as to their intention when executing it. The execution clause for Mr Celarc stating that it is "signed sealed and delivered" is consistent with execution as a deed and in the absence of other evidence, then the fair inference is that it is in fact a deed.[17] However, the execution clause for Mr Maclean makes no reference to sealing or delivery and is not consistent with the document being a deed. Nor is the execution by the two companies (who were shareholders in RCMF) consistent with execution as a deed.[18] There is no statement of intention on the face of the document that it is a deed nor is its overall form suggestive of a deed. The content of the document is in two parts - the first part is a resolution for the approval by the shareholders of the selective share buy back and the second part is a waiver of the shareholders' pre-emptive rights. These matters are not of the type that would be expected to be found necessarily in deed form. In my opinion, on a proper construction, the document is not a deed and no estoppel by deed arises.

132 In any event, Mr Maclean is not seeking to enforce either document and no estoppel by deed could arise. The oppression claim arises out of his position as a former shareholder which was not in dispute.

RCMF's knowledge and acting in a way that binds it

133 It was submitted by Mr Maclean, and I accept, that in a practical sense, Mr Celarc constituted the heart and mind of RCMF. It was further submitted by Mr Maclean that, given the significance of his actions in the context of this case, Mr Celarc bound RCMF.

134 Mr Maclean says that Mr Fahour was involved in the process for the issue of shares to him. Mr Maclean relies on:

(a) his uncontested evidence regarding his conversations with Mr Fahour on the matter of EBIT and the issue of shares to Mr Maclean;

(b) the lack of evidence of any allegation by Mr Fahour to the effect that in some way, or for some reason, Mr Maclean should not be a shareholder in RCMF;

(c) in an email sent to Mr Maclean and Mr Celarc on 13 August 2008, Mr Fahour responded to an email sent the previous day by Mr Maclean enclosing the final updated Shareholders Agreement which was to be signed at a meeting three days later. Mr Fahour commented:

Hi Stu, this looks fine, however I cannot find any mention to [sic] your performance shares?

Mr Maclean contends that the only reasonable way for the Court to interpret this document is to say that, in relation to the imminent settlement of the Kwiktron transaction and the simultaneous sorting out of the ownership of Fitdeck whereby the other shareholders sold out to Mr Celarc and Mr Fahour, Mr Fahour expected Mr Maclean to obtain shares in RCMF;

(d) there was no evidence of any complaint by Mr Fahour that Mr Maclean should not have been involved in consenting to the share buy-back involving the purchase of half of Mr Fahour's shareholding in RCMF in about September 2008.

135 Mr Fahour and Mr Celarc had a close commercial relationship. Mr Celarc relied on Mr Fahour and trusted him. They were in regular contact by telephone and email. Mr Maclean contends that in such a close commercial relationship, the probability is that Mr Fahour would keep Mr Celarc informed of any significant matters which might affect RCMF or the value of Mr Celarc's investment in the company and that this included the issue of the shares to Mr Maclean.

136 It was also contended by Mr Maclean that Mr Celarc had knowledge of the issue of shares to him through a variety of documents and personal involvement which Mr Celarc had in connection with the issue. First, there were emails which were sent to Mr Celarc with shareholding tables which showed Mr Maclean as a shareholder. Second, there were the events in relation to the issue of the shares to Mr Maclean. Finally, there were the documents that were signed in relation to the buy back of shares from Mr Fahour. I will deal with each of these in turn.

137 From time to time, Russell Kennedy, the former solicitors for RCMF, produced spreadsheet tables that listed various people or entities as shareholders in RCMF. In many of these tables, Mr Maclean was recorded as a shareholder of RCMF holding either 107,500 or 75,185 B Class shares. Mr Maclean's evidence was that the tables reflected a number of possible scenarios, dependent upon whether the Kwiktron, Coffee Please or Fitdeck businesses were included. Mr Celarc did not provide instructions to Russell Kennedy to draft documents regarding the issue of shares to Mr Maclean nor to prepare the share calculation tables. His evidence was that there were a number of these tables that were produced, some of which he received by email (both before and after the shares were issued to Mr Maclean), but they did not represent the actual position but rather were speculative and showed the hypothetical positions that would be reached if the Kwiktron, Coffee Please or Fitdeck businesses (or some of them) were taken into account. After a while, Mr Celarc tended to disregard the tables that he received on the basis that when the events necessary to change the shareholdings occurred, then the shareholdings would be adjusted accordingly.

138 On 23 July 2008, Mr Andrew Parlour of Russell Kennedy sent to Mr Maclean one of the shareholding tables and what he described as an updated shareholders agreement. The draft agreement contained a schedule which listed Mr Maclean as holding 107,500 Class B shares as did the shareholding table. On Tuesday, 12 August 2008, Mr Maclean forwarded the email and attachments to Mr Fahour and Mr Celarc and stated, "'Final' updated shareholders agreement as discussed at the board meeting. We can all sign at our meeting next Friday." The next day, Mr Fahour responded stating, "Hi Stu, This looks fine, however I cannot find any mention to [sic] your performance shares?" The email was sent to both Mr Celarc and Mr Maclean. Mr Celarc does not recall receiving these emails nor does he recall speaking to either Mr Fahour or Mr Maclean about them. He says that he did not know at that time that Mr Maclean was to be awarded shares in August 2008.

139 Mr Maclean sent an email to Mr Celarc and Mr Moustafa on 9 September 2008. He attached a shareholding table dated 27 August 2008 (which had been prepared by Russell Kennedy) showing him as holding 107,500 B Class shares in RCMF. His email stated:

The attached relects [sic] the final shareholdings in RCMF following the share buy back from minority shareholders [that is, the Fitdeck shareholders]. This was included in the package that was signed off on the 22/8 but I am forwarding in case it got 'lost' in the paperwork.

140 Mr Maclean's case was that the table attached to the email accurately recorded his shareholding at that time. Mr Celarc did not deny receiving this email and the attached table.

141 On 29 October 2008, Mr Parlour sent to Mr Maclean details of the RCMF shareholdings after the buy-back of 43,415 shares previously held by Mr Fahour's company. Mr Maclean forwarded this Russell Kennedy table to Mr Celarc, Mr Fahour, Mr Cifci and Mr Gencturk. The table included an entry showing Mr Maclean as holding 107,500 shares on trust.

142 In relation to the issue of the shares to Mr Maclean, there are undated minutes of a meeting of the board of directors of RCMF, an application for shares, a "new shareholders deed" and written consent of Class A shareholders. The last two documents were signed by Mr Celarc. The minutes of meeting list as those present Mr Fahour (chairperson), Mr Celarc and Mr Maclean. They were signed by Mr Fahour and record a resolution that 107,500 Class B shares be issued to Mr Maclean. The minutes are evidence of the resolution unless the contrary is proved[19]. As well as recording the resolution for the issue of shares, the minutes record the reason for their issue as being that the preconditions for entitlement under the Employment agreement were said to have been fulfilled. The new shareholders deed is between RCMF and Mr Maclean and describes him as the "New Shareholder" and he agrees to be bound by the shareholders deed. It is executed by Mr Celarc on behalf of RCMF and by Mr Maclean.

143 The RCMF documents for the buy-back of shares from Mr Fahour's company also include reference to the position of Mr Maclean as a shareholder within the company and include a document signed by Mr Celarc (on the first page) and Mr Maclean (on the second page) as shareholders confirming approval of the resolution to undertake the selective share buy-back and waiving the shareholders' rights of pre-emption under the shareholders deed and constitution.

144 Mr Maclean also relies on the letters dated 13 May and 21 July 2009 that he wrote to the other shareholders in RCMF, including Mr Celarc, advising of his intention to transfer his entire shareholding in RCMF and requiring RCMF to buy back his shares. Mr Celarc says that he did not know before he received these letters that Mr Maclean had shares in RCMF.

145 Mr Celarc denies that at any stage shares were properly issued to Mr Maclean and says that the shares were issued without his knowledge or approval. Mr Celarc denies having any conversations with Mr Maclean as to the EBIT target being reached that would entitle Mr Maclean to the shares under the Employment agreement. He denied that he agreed with Mr Fahour that it was appropriate to issue shares to Mr Maclean even though the EBIT threshold had not been met. Mr Celarc denied that he was present at any board meeting when the documents relating to the issuing of the shares to Mr Maclean were presented or resolutions for the issue of the shares were made. His evidence was that there was never any meeting in which the issue of shares to Mr Maclean was on the agenda.

146 Mr Celarc accepted that he signed some of the documents relating to the share issue to Mr Maclean, but he denied reading them or being told by anyone what they contained. According to Mr Celarc, he was often asked to sign documents by Mr Maclean, sometimes when he was in a hurry. He says that he trusted Mr Maclean who would simply place documents before him, tell him they needed signing and then take the documents away once they were signed. He believes that it was on one of these occasions that Mr Maclean placed in front of him the documents relating to the issue of shares to Mr Maclean.

147 Mr Maclean says that Mr Celarc should not be believed. Mr Maclean relied on the evidence of Mr Celarc that he would do whatever he regarded as necessary to avoid paying Mr Maclean any money for his shares and says that that evidence taken with Mr Celarc's evidence about the overreaching claims that I have dealt with in [89] and [90] above should lead to the conclusion that Mr Celarc's evidence should not be accepted.

148 Mr Maclean attacked Mr Celarc's credit as a witness by reference to a number of matters. Mr Maclean contends that the Court should reject Mr Celarc's evidence and find that at all material times, Mr Celarc knew and approved of the share issue to Mr Maclean. The fact of Mr Maclean's shareholding was, he contends, apparent by late August or early September 2008. Mr Maclean submitted that if Mr Celarc's complaints about his shareholding were genuine and he truly held the views he asserted in Court, he would have acted in September or October 2008 to rectify the position in order to return the company's shareholdings to what he maintains was its correct state. But, he says, Mr Celarc did nothing. Moreover, Mr Maclean submits, there is no evidence that Mr Celarc even thought of acting in any manner which is consistent with the case which he now asks the Court to accept. Mr Maclean contends that the objective evidence, and the stark inconsistency between Mr Celarc's actions at the relevant time and his more recently adopted position, means that the Court should not accept his evidence unless it is independently verified from another source.

149 When attacking Mr Celarc's credit, Mr Maclean pointed to the affidavit evidence of Mr Celarc in which he implied that there may have been something improper in relation to some of the documents that appear to bear his signature and that relate to the issue of shares to Mr Maclean. Mr Celarc suggested that the signature on the document headed "Written Consent of Class A Shareholders" might not be his even though it appears to be. Towards the end of his cross-examination, Mr Celarc maintained his view that Mr Maclean issued the shares to himself. In that context, he was equivocal about his signature and when asked whether he was saying that Mr Maclean forged his signature, he said "I can't say". When questioned further, Mr Celarc acknowledged that he was not asking the Court to find that Mr Maclean forged his signature on the documents. This evidence did not lead me to conclude that Mr Celarc ought not to be believed because all it amounted to was a conclusion that Mr Celarc has serious doubts about how the documents came to be signed by him.

150 Whether conduct is unfair or oppressive in a commercial company is assessed objectively through the eyes of a commercial bystander. [20] If the conduct is so unfair that reasonable directors would not have thought it fair, then relief will be granted.[21] The conduct will be considered in its context.[22]

151 It was submitted by Mr Maclean that the significance of the actions of RCMF and Mr Celarc and their state of knowledge is that having awarded the shares to Mr Maclean, they cannot subsequently cancel them. To do this in the present circumstances, so Mr Maclean's argument runs, would be to "run hot and cold" or "approbate and reprobate". It was contended that RCMF and Mr Celarc are bound by their actions and by the documents that Mr Celarc signed in the absence of any invalidating claim such as misrepresentation, fraud or the like.

152 The documents signed by Mr Celarc bind him and RCMF in the sense that they cannot deny that the shares were issued to Mr Maclean. [23] However, I am not satisfied that there was a decision made to issue the shares to Mr Maclean even though the EBIT threshold had not been met. In respect of this, I have had particular regard to the minutes of meeting which strongly suggest that the resolution for the share issue was based on an entitlement having arisen under the Employment agreement. I have also had regard to Mr Maclean's evidence which was to the effect that the shares were only issued to him because he was entitled to them under the Employment agreement. I have also taken into consideration Mr Maclean's subsequent evidence that he had no entitlement to the shares.

153 As I have said above, in the witness box, Mr Celarc appeared as an honest witness and his evidence about his knowledge of Mr Maclean's shareholding did not lack conviction. I accept his evidence that he was not aware of Mr Maclean's shareholding until he received the letter of May 2009 from Mr Maclean. I do so even though Mr Celarc signed and was sent documents that concerned the issue to or holding of shares by Mr Maclean in August 2008. Mr Celarc readily conceded that he had not paid as much attention to the documents that he was sent or signed as he should have. He received many emails and did not pay due regard to them. He essentially left the running of the business to Mr Fahour and Mr Maclean. His failure to take action on receipt of the letter of May 2009 is explained by the fact that by that time, there were already proceedings on foot and I accept his evidence that he referred the correspondence to his lawyers.

154 There is no evidence that Mr Maclean relied in any way on the fact that the shares had been issued to him such that he has suffered any detriment which would make it unfair for him to be deprived of the benefit of them.

155 In my opinion the cancellation of the shares was not unfair or oppressive conduct, in circumstances where the shares were issued on the basis of an entitlement that did not exist; Mr Maclean accepts that he was not entitled to them; Mr Celarc had no actual knowledge of the issue of the shares until after Mr Maclean's employment had been terminated; and Mr Maclean has not suffered any detriment by relying on the actual issue of the shares. I do not think that it was necessary for RCMF to maintain some invalidating claim before or after cancellation of the shares. As Mr Maclean accepted, he had no automatic entitlement to the shares - he had to qualify for them. If he did not, then the bargain he made was that he would be an employee, but not an owner of RCMF.

156 Mr Maclean's claims in each proceeding will be dismissed. I will hear the parties as to costs.

[1] As to which see, paragraph [43].

[2] As to which see, paragraph [51].

[3] Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 21; (1931) 45 CLR 359; Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693.

[4] As noted in paragraph [67], this limit related to Kwiktron, not RCMF.

[5] Section 234(a) and (c) Corporations Act.

[6] Section 232(a) and (e) Corporations Act.

[7] Toll (FGCT) Pty Limited v Alphapharm Pty Limited and Ors [2004] HCA 52; (2004) 219 CLR 165 at 179; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 462.

[9] Fitzgerald & Anor v Masters [1956] HCA 53; (1956) 95 CLR 420.

[10] [1985] AC 191 at 201.

[11] This dictum was referred to with approval in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 at 198 per Gleeson CJ, Gummow and Hayne JJ.

[12] Greer v Kettle [1938] AC 156 at 171; Cousens v Grayridge Pty Ltd [2000] VSCA 96.

[13] Re Patrick Corporation Ltd and the Companies Act [1981] 2 NSWLR 328.

[14] Section 73 Property Law Act 1958 (Vic).

[15] Section 73A Property Law Act 1958 (Vic).

[16] Xenos v Wickham (1867) LR 2 HL 296 at 312, Backstop Nominees Pty Ltd v Goscor Pty Ltd [1990] VicRp 41; [1990] VR 468 at 470, Paulet v Stewart [2009] VSC 60 at [269].

[17] Xenos v Wickham (1867) LR 2 HL 296 at 312, Rose & Ors v Commissioner of Stamps (SA) (1979) 22 SASR 84 at 87.

[18] The companies executed the document by being signed by their sole director and secretary in accordance with s 127(1) of the Corporations Act 2001 (Cth), but nowhere is it stated that the document is executed as a deed: s 127(3) Corporations Act.

[19] Section 251A(6) Corporations Act.

[20] Aqua-Max Pty Ltd and Others v MT Associates Pty Ltd and Others [2001] VSCA 104; (2001) 3 VR 473_, Wayde v NSW Rugby League Ltd_459, Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692.

[22] Vigliaroni & Ors v CPS Investment Holdings Pty Ltd & Ors [2009] VSC 428; (2009) 74 ACSR 282.

[23] Wilton v Farnworth [1948] HCA 20; (1948) 76 CLR 646, Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at 180 - 182 and 185.