Plaintiffs v Defendants

INTEREST - Whether moneys payable under s 233 of the Corporations Act 1986 falls within ss 58 or 60 of the Supreme Court Act 1986 - Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520 and Re Adaz Nominees Pty Ltd (No 6) [2019] VSC 14 applied.

1 Mr Michael Reiner and Mr Ben Wajsman conducted a business known as the Big Ben Group through several companies: SRW Nominees Pty Ltd (SRW); Big Ben Speciality Foods Pty Ltd (BBSF); Big Ben Services Sydney Pty Ltd (BBSS); and Wickham Commercial Properties Pty Ltd (WCP). The main trading corporation is SRW. Mr Reiner held his half interest in SRW through Laurient Holdings Pty Ltd. Mr Wajsman held his half interest through Softpro Australia Pty Ltd. BBSS was owned by Mr Reiner, Mr Wajsman, Mr Sharrock and Mr Labrie in joint equal shares. SRW holds no interest in BBSS. SRW owns 50% of BBSF, with Mr Curtis owning the balance. WCP owns a factory property and was owned equally by Mr Reiner and Mr Wajsman.

2 Although Mr Reiner and Mr Wajsman conducted the business through corporations, it is convenient if I refer to the business and to Mr Reiner and Mr Wajsman instead of the various company names, unless it is necessary to refer to specific corporations. For convenience, I also refer to Mr Reiner and Mr Wajsman as partners, as in practice that is essentially what they were.

3 It is appropriate to repeat some of the background facts from my first judgment.[1] Mr Reiner and Mr Wajsman began their partnership in 1999 and conducted the business together until 2016. In May 2016, Mr Reiner suffered a heart attack. He ceased assisting in the management of the business and went to the USA to recover. In his absence, Mr Wajsman took sole responsibility for running the business. The business, however, was Mr Reiner's sole source of income. During Mr Reiner's absence from the business, Mr Wajsman refused to distribute any profits to Mr Reiner and purported to remove him as a director of all the corporations. For all intents and purposes, Mr Wajsman ceased conducting the business with Mr Reiner, and Mr Wajsman conducted the business as if it were his alone.

4 Mr Reiner instituted an oppression proceeding against Mr Wajsman and sought an order that Mr Wajsman purchase Mr Reiner's shares in the corporations at a price to be determined by the Court. Mr Reiner also seek_s_ damages and such further or other relief that may be necessary to remedy the consequences of Mr Wajsman's oppressive conduct.[2]

5 After a hearing of some nine days, I found that I was satisfied that the conduct of Mr Wajsman and the relevant corporations under his control had been and was contrary to the interests of the members of the corporations as a whole and oppressive to, unfairly prejudicial to, and unfairly discriminatory against Mr Reiner.

6 I found that it was not appropriate to wind up SRW. I did not consider it appropriate to order a sale of the business conducted by SRW to the public, as I was satisfied that the business was more valuable to Mr Wajsman than a potential third party buyer because of his close association with the operations of the business conducted by SRW. BBSS and BBSF have other interested parties so the only appropriate relief in respect of those companies was for Mr Wajsman to buy Mr Reiner's interest in them, as well as in WCP in which Mr Wajsman and Mr Reiner each held a half share.

7 In those circumstances, I found that the only fair remedy was to require Mr Wajsman to complete what he had done in practice - that is, take complete control and ownership of the business by buying out Mr Reiner's interest in the corporations.

8 Accordingly, on 11 June 2019, I ordered that Mr Wajsman and his company purchase Mr Reiner's interest in the corporations forming the group for a price to be determined. I otherwise reserved my reasons and the making of any orders in the disposition of the matter.

9 Reasons for these orders were published in Re SRW Nominees Pty Ltd (No 1).[3] I have now heard evidence and argument on the amount for which Mr Wajsman should purchase Mr Reiner's half share in the business and on other orders for compensation sought by Mr Reiner.

10 Mr Reiner seeks an order that his shares in the corporations be purchased for $3,900,628. On the other hand, Mr Wajsman contends that the shares should be purchased for $1,382,801.

11 Further, Mr Reiner seeks an order that he should receive compensation for the half share of the profits in SRW, and a quarter of the profit in BBSS and BBSF, that he was deprived of in the financial years 2017, 2018, 2019 and up to the date of final judgment.

12 On 26 November 2019, Mr Reiner made an application for a part payment of the purchase price by Mr Wajsman of his shares in the corporations as ordered by me. Previously, an initial valuation of the corporations was carried out by Mr Darryn Hockley, who was jointly engaged by the parties to conduct a valuation of the corporations. The report dated 10 October 2018 is known as the Hockley Report.

13 As Mr Wajsman had accepted the value of the shares of the corporations as found by Mr Hockley, the parties agreed that Mr Reiner could be paid half of the value as found by Mr Hockley on condition that Mr Reiner transferred his shares in the corporations to Mr Wajsman, without prejudice to Mr Reiner's claim that the shares should be valued higher than the valuation of Mr Hockley. Accordingly, the issue of whether any further sum should be paid for the shares in the corporations by Mr Wajsman to Mr Reiner was agreed to be decided in a further hearing before me in January 2020.

14 Although no orders were made as to the consequences of this agreement between Mr Reiner and Mr Wajsman, this transfer and part purchase effectively ended the quasi-partnership that had existed between Mr Wajsman and Mr Reiner. Until the order was made that Mr Wajsman pay Mr Reiner the sum based on Mr Hockley's valuation, Mr Reiner was unable to withdraw any of his capital from the business. This will become relevant in calculating any compensation for loss of earnings from the business suffered by Mr Reiner, as discussed below.

15 At the hearing in January 2020, the plaintiffs relied on an 'Amended Plaintiffs' List of Issues for Trial' ('Amended List of Issues'). At the hearing, I heard evidence from an expert called by each of the parties and submissions from counsel. At the conclusion of the hearing, I ordered that each side file written submissions and that the plaintiffs file a statement of their monetary claim. The written submissions make extensive reference to the Amended List of Issues.

16 Mr Campbell Jackson, called on behalf of the plaintiffs, provided an expert's report of 14 October 2019 and gave expert evidence on the value of SRW, BBSF, BBSS and WCP. Ms Dawna Kathleen Wright provided an expert's report of 3 December 2019 and gave expert evidence on the same issues on behalf of the defendants.

17 In their reports, both experts refer to the earlier expert report of Mr Hockley. As mentioned above, his report had been accepted by Mr Wajsman and was the basis of the calculation of the interim payment by Mr Wajsman to Mr Reiner, as referred to above.

18 Mr Jackson and Ms Wright also prepared a joint report dated 22 January 2020 ('Joint Report'). The Joint Report sets out the issues on which they agreed and any remaining areas of disagreement and their reasons.

19 The defendants prepared a document entitled 'Calculation of Plaintiffs' Claim, with Defendants' Response Incorporated Comparative Document' ('Comparative Document'). The Comparative Document incorporated a document filed by the plaintiffs entitled 'Calculation of Plaintiffs' Claim'. Thus the Comparative Document sets out the plaintiffs' and the defendants' respective calculations of (a) the fair value of their shares in the corporations; (b) the compensation that should be paid to the plaintiffs for the loss of profits for the financial years 2017, 2018, 2019 and 2020; and, (c) interest. The document also sets out the amounts paid to Mr Reiner since the May/June 2019 trial. This sum has been agreed.

20 A table of these items set out in the Comparative Document is as follows:

A. Fair value for the plaintiffs' shares in the corporations

B. Compensation for loss of profits for FY2017, FY2018, FY2019 and FY2020

Less amounts paid to Mr Reiner since the May/June 2019 trial (as at 5 February 2020) (agreed)

21 Before addressing the monetary claims, it is necessary to address the principles that should be applied in valuing the shares and in calculating compensation.

22 Section 233 of the Corporations Act 2001 (Cth) empowers the Court, upon a finding of oppression, to 'make any order ... that it considers appropriate in relation to the company, including an order ... for the purchase of any shares ...'.[4] In United Rural Enterprises Pty Ltd v Lopmand Pty Ltd,[5] Campbell J of the Supreme Court of New South Wales said that the section 'says nothing about the price for which purchase of the shares can be ordered, or the basis for calculation of such a price.'[6] His Honour said 'The only legal restriction on the way in which the price may be calculated is that it be a proper exercise of a judicial discretion.'[7]

23 Campbell J cited with approval In Re Bird Precision Bellows Ltd,[8] where the defendants held a majority interest in the company, the oppressed shareholders held a minority interest and the majority was ordered to buy out the minority. There, Oliver LJ rejected the submission that the shares of the minority to be purchased by the oppressing majority should be valued on ordinary valuation principles, by which the minority shares would be valued without any premium for control. Rather, his Lordship said:

For my part I find myself quite unable to accept this submission. It seems to me that the whole framework of the section, and of such of the authorities as we have seen, which seem to me to support this, is to confer on the court a very wide discretion to do what is considered fair and equitable in all the circumstances of the case, in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company; and I find myself quite unable to accept that that discretion in some way stops short when it comes to the terms of the order for purchase in the manner in which the price is to be assessed. It has been pointed out, and I mention it again, that section 75(4) is merely a collection of possible methods of giving effect to section 75(3), and it is expressed to be without prejudice to the generality of subsection (3), which gives the court a very wide discretion as to the granting of relief in general terms in respect of the matters of which complaint has been made.[9]

24 In Dynasty Pty Ltd v Coombs,[10] the Full Court of the Federal Court held that where an oppressed shareholder is ordered to be bought out by the oppressor, it was the duty of the Court 'to fix a price for the shares that represented a fair value in all the circumstances of the case.'[11]

25 In Patterson v Humfrey,[12] Le Miere J of the Supreme Court of Western Australia said:

The court's primary objective in providing for a valuation of the company's shares is to determine the fair value of the company's shares. Where the defendant's oppressive conduct has reduced the value of the shares then it must logically follow that the valuation must disregard the adverse effect of the oppressive conduct.[13]

26 In dealing with ascertaining the fair value of shares to be acquired in a case of oppression, Young J said in ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd:

The flavour of the judgments in the company oppression cases is that in looking to the fair value one must look at all the circumstances of the case and seek to put the oppressed in the same position as nearly as can be as if there had been no oppression, erring, if there is to be erring, on the side of the oppressed.[14]

27 I also bear in mind that the aim of the remedial relief is to put an end to the oppression.[15]

28 Accordingly, when calculating compensation for any income the plaintiffs have lost by reason of the oppression, and in particular the oppression constituted by excluding Mr Reiner from the management of the business, prima facie, expenses incurred in conducting the business that would not have been incurred but for the exclusion of Mr Reiner should be excluded from any calculation of lost income.

29 The outstanding issues raise allegations that certain expenses have been wrongly included in the operating expenses of the companies to be valued. I address how these issues should be addressed in Issue 5 below. In doing so, it is necessary to keep in mind the general principles discussed above.

31 As mentioned above, Mr Reiner seeks an order that his shares in the corporations be purchased for $3,900,628. This figure is based on a valuation by Mr Jackson, the valuer retained by Mr Reiner.

32 On the other hand, Mr Wajsman contends that the shares should be purchased for $1,382,801, which is based on a valuation by Ms Wright, the valuer retained by Mr Wajsman.

33 As further adjustments were made by both parties after their experts completed their reports, the amounts claimed do not correspond precisely with those of their experts. Instead, the Comparative Document provides for the amount for which each party now contends.

34 The parties have identified some 25 issues, the resolution of which should enable the Court to calculate the fair value of the plaintiffs' shares in the corporations, the compensation payable to the plaintiffs for loss of profits, and interest.

Issue 1: What capitalisation rate should be applied to maintainable earnings of SRW to arrive at the enterprise value of SRW?

35 Both parties agree that SRW should be valued on the basis of a capitalisation of maintainable earnings, which is a capitalisation multiple times the maintainable earnings of the business. This is a common method of valuing a corporation.

36 Maintainable earnings are determined based on EBITDA - that is, earnings before interest, tax, depreciation and other allowances. Both experts relied on the accounts for the financial years ending 30 June 2017 and 30 June 2018. The experts differed on the appropriate multiple. The plaintiffs submit that I should adopt the multiple adopted by Mr Jackson and the defendants the multiple adopted by Ms Wright.

37 For maintainable earnings, both parties submit that I should adopt figures similar to, but not the same as, the figures of their respective experts. Both parties made adjustments to their position on some issues, such as some 'add-backs' and management fees, after the experts completed their reports.

39 As indicated, Mr Jackson considered the appropriate multiple was 6x. He opined that the 'market multiple' that would be paid by an ordinary investor was 5x. He then considered it necessary to apply an uplift of 1x to reflect the 'special value' of the business to Mr Wajsman. Ms Wright, on the other hand, considered the appropriate multiple to be in the range of 3.5x to 4x.

40 Both experts began by identifying and assessing a range of 'comparable' transactions, being the sale of other small businesses. Mr Jackson ultimately settled on four comparable transactions. Ms Wright identified five comparable transactions, two of which were the same as those selected by Mr Jackson. Importantly, both sets of comparable transactions identified had the same range (3.8x to 6.2x) and average (5.0x). However, each expert analysed their set of comparable transactions in a different way, which produced different results.

41 Mr Jackson considered it appropriate to adopt the average of the four comparable transactions he identified. He then referenced two publications:

(a) a Grant Thornton Dealtracker 2019 Report, which noted that the median multiple for companies with earnings less than $20 million is 5.1x; and

(b) a US publication called Business Valuation Resources, which reported an average earnings multiple of 4.8x for companies with sales in the range of $1 million to $5 million.

Mr Jackson took 'reassurance' from the publications referred to above as an indication that the average multiple of 5x was 'within the range of a deal space'.

42 On the other hand, from her set of five comparable transactions, Ms Wright:

compared SRW with the short list of the relevant transactions in order to form an opinion as to the appropriate range of multiple to be applied to the adjusted maintainable earnings of SRW.

SRW's multiple should be at the lower end of this range, as it is closely aligned with the Australian acquisition of Absolute Liquid Waste Services and the US based Op-Tech Environmental Services, which have multiples of 3.8 times and 3.9 times EBITDA, respectively.

44 Due to the lack of direct comparability, Ms Wright:

made an adjustment from the selected comparable transactions for SRW's specific risks, such as key man reliance, the niche market in which SRW operates and the lack of diversification in operations and succession planning.

Ms Wright concluded that a multiple of 3.5x to 4x was the appropriate multiple to value SRW.

45 In her report, Ms Wright also identified three factors that account for the difference between Mr Jackson's chosen multiple (which is also the average multiple for her comparable transactions) and her own, which in her opinion Mr Jackson has either understated or not considered:

(a) key person reliance (a reduction of 10%);

(b) listed company acquisitions and synergy (a reduction of 5%-10%); and

(c) other SRW specific risks (a reduction of 5%-10%).

The plaintiffs' submissions on the appropriate market multiple

46 The plaintiffs submit that the selection of an earnings multiple, like the process of valuation itself, is an art not a science. They contend it is an exercise possessed of a certain amount of guesswork.

47 The plaintiffs submit that Ms Wright's process of reasoning is flawed and ought to be rejected. They contend that her process miscarried when she attempted, in the absence of any meaningful information about the transactions, to parse those five comparable transactions to draw speculative conclusions as to which were most like SRW.

48 The plaintiffs contend that an information deficiency renders Ms Wright's approach inappropriate and speculative. Ms Wright conceded that she was unable to find an identical match to SRW, and that she had limited information about the comparable transactions identified. The plaintiffs submit that very little is known about the identified comparable transactions beyond basic information such as the location of the company, the date of sale, the price, a general description of the business carried on by the company, and the identity of the purchaser. The plaintiffs contend that Ms Wright candidly acknowledged that there could be a range of factors that might bear upon the selection of a multiple in any of these transactions that cannot be ascertained by reviewing the available material.

49 The plaintiffs also contend that Ms Wright's report does not expose the reasoning for her opinion that SRW is more comparable to the two companies within her set that had the lowest earnings multiples. The plaintiffs submit that, as she failed to expose her reasoning, the Court cannot properly determine the weight that should be placed on her opinion.

50 In relation to the three specific factors Ms Wright advanced to 'account for' the difference between her and Mr Jackson's multiples, the plaintiffs submit that each of those factors do not withstand scrutiny, and address each in turn.

51 The defendants submit that a succession risk, or key person reliance risk, in SRW needs to be accounted for in circumstances where Mr Wajsman has given unchallenged evidence of an intention to retire and sell a share in the business, and SRW does not have a large or diverse management team which was likely reflected in data of comparable acquisitions by large public companies.

52 The plaintiffs contend that there is no doubt that the business is reliant on its key management, which now comprises only Mr Wajsman. However, the plaintiffs argue that SRW is not being valued for the purposes of a sale to a third party. The shares are being sold to the key man himself, Mr Wajsman.

53 The plaintiffs refer to the English case of Re Scitec Group Ltd,[16] where the Court rejected a reduction of 25% to the multiple made by the valuer to account for key man risk, holding that such a reduction:

misunderstands the basis and purpose of the valuation, and the parameters of the hypothesis underlying it and the sale ordered by the court. While the parties are presumed to act as commercially rational beings, it remains the fact that the purchaser is the defendant and not some third party, and the court is not required, or indeed permitted, to assume the contrary. The effect of the sale would be here to vest the entire shareholding in [the defendant], and it is unreal to suppose that he would have been prepared to jeopardise its value, or earning potential, by leaving the company.[17]

54 The plaintiffs argue so it is here. Additionally, they argue that Mr Wajsman has, by his own conduct, increased the key man risk by excluding Mr Reiner. Had Mr Reiner remained in the business, it would have had a broader and more diversified management and, thus, less risk.

55 Moreover, the plaintiffs argue that it would be fundamentally unfair for Mr Wajsman, given his conduct in forcing Mr Reiner into a sale, to invoke the risk that he may leave the business, or sell it in the future, in order to reduce the amount he is required to pay.

56 Finally, the plaintiffs say that Ms Wright was not able to identify any evidence to establish that the other transactions in her set of five did not also have key man risk.

57 In relation to listed company synergies, Ms Wright opined that:

Listed companies acquiring private companies generally pay higher earnings multiples due to the benefits that a listed company may expect to derive from an acquisition ...

58 The plaintiffs argue that no evidence was provided in her report to support this assertion, as Ms Wright does not cite any study or publication that makes good the assertion, and the particular synergies are not identified. In cross-examination, Ms Wright stated that she would 'generally assume' that if a public company is acquiring a private company 'there will be some advantage in doing so'. The plaintiffs submit that this reasoning is simply not compelling.

59 Mr Jackson disagreed with Ms Wright's premise. First, he said that he was not able to identify whether the comparable transactions did in fact contain a premium for listed company synergies. Moreover, his evidence was that, in his experience, where such synergies exist, 'often listed companies are not willing to give away a premium for synergy value. They would rather lock that down themselves and then ... post-acquisition ... deliver a higher return to shareholders'.

60 The final matter identified by Ms Wright were other SRW specific risks. Ms Wright reasoned:

In addition to the above, there are a number of other factors that affect the risk and growth profile of SRW, such as related party dealings and exposure to future tax liabilities. I apply an additional risk of 5%-10% for additional risks, which are not present in the set of comparable transactions.

61 The defendants contend that these company risks are more likely to be present in a private transaction which has not involved disclosure and due diligence.

62 The plaintiffs say that the risks are not identified with any particularity, with vague reference made to unidentified related party dealings and unidentified future tax liabilities. The plaintiffs submit that there is no evidence that the identified comparable companies did not have similar risks that were factored in when assessing the multiple applied in those transactions.

63 The plaintiffs contend that Ms Wright conceded in cross-examination that she was not aware of any specific future tax risks, and they argue that nor could she identify the related party dealings that she considered visited risk upon the enterprise. Even if such related party risks were present, the plaintiffs argue that Mr Wajsman is required to purchase Mr Reiner's shares in all the corporations, thus retaining control of, or influence in, each of the related parties. The plaintiffs submit that it is difficult to see how any related party risk could materialise in those circumstances.

64 Both experts acknowledged the limited information about the relevant transactions that were being used as comparables. The plaintiffs submit that Mr Jackson's approach of taking an average of comparable transactions is a sound and orthodox approach to respond to limited information. The plaintiffs argue that Mr Jackson's approach is likely to lead to a safer and more accurate indication of the market for shares in SRW than the speculative approach adopted by Ms Wright. They argue that in the averaging process, the impact of any peculiarities in a particular transaction are mitigated.

65 The plaintiffs submit that both experts agreed that, at a conceptual level, the earnings multiple is primarily a function of the risk associated with the maintainability of earnings into the future. The plaintiffs argue that consideration of the history and performance of SRW supports the approach taken by Mr Jackson, and the multiple he selected. The plaintiffs submit that the company has a demonstrated history of revenue and gross profit growth. The plaintiffs point out that Mr Wajsman acknowledges that the business has grown continuously since its inception. The plaintiffs submit that no evidence was led to suggest that there were any pending threats to the revenue stream, or its continued growth. The plaintiffs argue the business is a secure investment, particularly to Mr Wajsman, and that security must be reflected in the earnings multiple.

The defendants' submissions on the appropriate market multiple

66 The defendants submit that Ms Wright's assessment is corroborated by the opinion of Mr Hockley that a suitable multiple was in the range of 2.75x to 3.25x earnings. Mr Hockley's evidence was tendered by the plaintiffs with no reservations as to his opinion on multiple, and he was not called by the plaintiffs for cross-examination.

67 The defendants also point to evidence that when Mr Reiner calculated the purchase price for his initial investment, and for his and Mr Wajsman's buyout of Mr Sojka, he adopted a multiple of around 1.83x. There is also evidence of an approach in 2016 by a business called Ecowize to buy shares in the Big Ben Group 'at a multiple of 3 to 3+ with a considerable earn out component'.

68 Accordingly, the defendants submit that Mr Jackson's assessment of 6x is far in excess of all the other evidence of an appropriate multiple.

69 The defendants contend that Ms Wright's assessment of the data was more careful, rigorous and reasoned than Mr Jackson's, and as a result is more soundly based in the evidence. The defendants submit that Ms Wright emphasised that market data is only as good as its comparability, and accordingly searched in the transaction data for the most comparable.

70 The defendants submit that the evidence established that a strong factor is that smaller businesses transact at smaller multiples. They submit that Ms Wright's assessment of a multiple is consistent with SRW being smaller, with lower earnings among comparable transactions, whereas Mr Jackson did not apply that factor in considering his data.

71 The defendants submit that Mr Jackson rested with the straight average of his set of transactions and referred also to the straight average of a number of wider market surveys. They contend that Mr Jackson accepted that multiple features of comparability were relevant to aligning the data to SRW's circumstances, but despite recognising some differences in the data, he did not proceed to take account of particular features of those transactions and gave all transactions equal weight. He did not make any further adjustment and gave as a reason that he did not have sufficient further detail.

72 The defendants adopt Ms Wright's observation that an average is dangerous where there is a greater degree of variability among the data. The defendants submit that Mr Jackson's approach was flawed, and not a full or proper application of the methodology which he professed to have adopted. They argue that the more detailed assessment pursued by Ms Wright is stronger and more appropriate.

73 The defendants contend that Mr Jackson appeared to place significant reliance on the corroborating averages in two industry surveys. They argue that using those averages again masked, and did not make allowance for, the range of transaction size and industries included in those surveys. The defendants submit that Mr Jackson accepted the principle stated in the Dealtracker 2019 report that smaller transactions generally attracted lower multiples, and yet used the average (including much larger transactions up to $20 million) because he did not have access to the detailed underlying data.

74 The defendants conclude that Ms Wright's assessment of an appropriate multiple for transactions comparable to SRW is to be preferred.

75 As mentioned above, Mr Jackson applied an upwards adjustment of 1x to reflect what he considered to be the 'special value' of the business to Mr Wajsman over and above an ordinary third-party investor. It is convenient to set out Mr Jackson's reasoning as detailed in the Joint Report:

To reflect the value to Mr Wajsman, which Mr Jackson refers to as Special Value, Mr Jackson has added 1.0x earnings to the Market Value multiple. The additional value to Mr Wajsman arises because of his knowledge of the business, developed over many years, and the loyalty of his customers, and is consistent with the decision of Robson J that the value of SRW will be greater to Mr Wajsman than to a third-party purchaser in an open transaction.

Accordingly, Mr Jackson has adopted a 6.0x multiple to determine the Special Value of SRW. Mr Jackson has not taken into account any "excess" cash flows in calculating Special Value.

76 The defendants submit that Mr Jackson's report disclosed no reasoning for his conclusion, nor consideration of how any additional multiple was calibrated, and that Mr Jackson's justification that the uplift was required by the findings in the Liability Judgment was erroneous.

77 The defendants contend that the Court's observations in the judgment of the greater value to Mr Wajsman were limited findings made sufficiently for determining the form of relief, and that the judgment gave no measure or parameters for calculation of any such greater value, and Mr Jackson did not in fact apply any. The defendants contend that Mr Jackson accepted that he had not examined any information as to the nature of SRW's customer base and suppliers, or evidence as to personnel other than Mr Wajsman also being familiar with those matters.

78 The defendants submit that, in contrast, Ms Wright's valuation did recognise that Mr Wajsman may be able to extract more value than a third party purchaser, and considered that any such additional benefit to Mr Wajsman was already reflected in the financial performance of SRW in the two financial years preceding the valuation date, during the period when Mr Wajsman was already operating the business alone. That is, to the extent Mr Wajsman is by reason of his experience or skill able to enhance the performance of the business, that fact is to be found and accounted for in the EBITDA figures used to assess maintainable earnings.

79 Accordingly, the defendants submit there is no evidentiary foundation for the Court to adopt the 'special value' uplift.

80 The plaintiffs argue, however, that Ms Wright's criticism fails to appreciate the proper purpose of the earnings multiple. As discussed earlier, the plaintiffs submit that the multiple is a function of risk. They say that the special value to Mr Wajsman manifests itself in two ways:

(a) his potential ability to generate higher profitability by virtue of his experience and skill; and

(b) the lower risk attached to the maintainability of those earnings whilst the business is in his hands.

The plaintiffs argue that Ms Wright's criticism conflates the two. If the Court is of the view that the investment is safer in Mr Wajsman's hands than those of an ordinary market participant, the plaintiffs argue that that fact must be reflected in the multiple.

81 As regards the defendants' contention that there is no evidentiary basis for Mr Jackson's conclusion that the business was in fact more valuable to Mr Wajsman, the plaintiffs make two points.

82 First, the plaintiffs submit that, on one hand, the defendants seek to stress the vital importance of Mr Wajsman to the business in order to justify a discount for 'key man risk' while, at the same time, asserting that there is no evidentiary basis to conclude that the investment is safer under his management.

83 Second, the plaintiffs submit that there is a solid foundation for their claim. They contend that, to a degree, it flows axiomatically from the fact of Mr Wajsman's long association with the business. They submit that the evidence at trial established that the corporations have a special value to Mr Wajsman over and above that of an ordinary investor.

84 The plaintiffs point to evidence of Mr Wajsman's intrinsic and institutional knowledge of his customers, and customer loyalty to him. In particular, the plaintiffs note Mr Wajsman's evidence that most customers are long-term clients, and that there are no contracts or agreements with clients, but instead the relationships were built on a 'handshake'.

85 The plaintiffs also point to evidence that, as a generous employer, Mr Wajsman has built a loyal staff base over a prolonged period of time and many members of staff have been with the business for a long time. In addition, a number of Mr Wajsman's family members work in the business.

86 The plaintiffs submit that in acquiring Mr Reiner's share, Mr Wajsman will go from a part owner of SRW to its sole proprietor. He will be freed of the restrictions in the Shareholders' Agreement and from the equitable constraints of a quasi-partnership. He will be able to run the business to suit his own interests and to remunerate himself from the cash flow of the business as he sees fit. Moreover, his stake in BBSS and BBSF will increase from a minority stake (25%) to a blocking stake (50%).

87 In response to criticism that Mr Jackson's reasoning in selecting an uplift of 1x was arbitrary, the plaintiffs submit that Mr Jackson acknowledged that it was an exercise of 'professional judgment' and pointed to Mr Jackson's explanation in cross-examination:

I agree that it's limited in terms of available information or facts to point to the uplift of one. But, in my opinion, the importance of Mr Wajsman is known within the material that has been provided, and I would pay a premium should Mr Wajsman remain in the business for the certainty of having him there to be able to (indistinct) the existing client base, his intimate knowledge of the business and eliminate the risk of (indistinct) transition given he will remain in the business and continue (indistinct).

88 The plaintiffs submit that the logic for the imposition of an uplift is sound. They say that identifying the extent of the uplift involves, like most aspects of the valuation exercise, a degree of guesswork. The plaintiffs argue that there is no reason not to defer to Mr Jackson's experience and expertise in that regard.

89 For those reasons, the plaintiffs submit that Mr Jackson's opinion, and an uplift of 1x, should be adopted.

90 The resolution of this issue cannot be a matter of exact science, particularly when two experts disagree. I consider there is substance to the defendants' argument that Mr Jackson merely took a straight average of multiples of the comparable transactions he examined. I also consider there is merit in the submission that, in an absence of sufficient information, Ms Wright placed too much weight on the lowest two multiples in her set of comparable transactions, when her comparable transactions showed a range of multiples from 3.8x to 6.2x. Although Mr Jackson identified different transactions, his comparable transactions also showed a range of multiples from 3.8x to 6.2x.

91 Both experts agreed that the multiple is a factor of risk. The greater the risk, the lower the purchase price, and thus the lower the multiple. On the issue of risk, SRW is a well-established successful business that has consistently made good profits. Even if Mr Wajsman retires from active day-to-day management, I expect that he would remain the controlling director who would guide SRW in its operations. I do not consider a significant discount should be applied for his age and his future intentions. I also take into account the existence of loyal customers and staff. In the absence of detailed information on the comparable transactions, I am not satisfied that SRW is subject to greater risks than comparable transactions.

92 My observation that the business is more valuable to Mr Wajsman than an outsider is already reflected in my findings about the loyal staff and customers. That is, in addition to being reflected in the earnings of SRW in the past two financial years, it is also reflected in my assessment of risk in determining the appropriate multiple. I do not accept that an uplift should apply. I do accept, however, that in choosing an appropriate multiple, I should keep in mind the matters that Mr Jackson referred to when he opined that an uplift of 1x was appropriate.

93 After taking into account the submissions of both parties and the factors referred to above, I find that the appropriate multiple is 5x.

Issue 2: What adjustments (if any) should be made to the management fees paid to Mr Wajsman by SRW in FY2017 and FY2018?

94 A significant issue in calculating maintainable earnings is whether the moneys received by Mr Wajsman as 'management fees' should be taken into account when calculating the maintainable earnings of SRW.

95 Management fees of $300,000 were paid to Mr Wajsman in FY2017 and FY2018. The plaintiffs contend that these fees should not be included as a business expense in the calculation of maintainable earnings, whereas the defendants contend they should be included.

96 The Joint Report states that Mr Jackson was provided with an instruction that the commercial salary for Mr Wajsman was $150,000 per annum. Accordingly, Mr Jackson considered that there was a profit component in the management fees and therefore the management fees (excluding the profit component) should be substituted for the commercial salary.

97 Ms Wright was of the view that it was reasonable to allow $300,000 for a salary for Mr Wajsman as the managing director. Her view was based on a report by Mercer, commissioned by the Big Ben Group ('the Mercer Report'), which indicates a range from $296,000 to $454,000 for companies with a turnover of less than $74 million.

98 The plaintiffs submit that I should exclude any sum paid to Mr Wajsman when calculating the relevant maintainable earnings because the valuation method should take into account the peculiar nature of the relationship between Mr Reiner and Mr Wajsman.

99 The plaintiffs submit that the business was conducted as if it were a partnership, and any payments to Mr Reiner and Mr Wajsman were treated as drawings from the partner's share of the profits so calculated.

100 As such, the plaintiffs argue that a fair price for their interest in the corporations should value what Mr Reiner, in fact, lost at the hands of Mr Wajsman, and that their loss is, in substance, the permanent deprivation of the benefits that attached to their half share in the partnership. As the business was conducted as if it were a partnership, the earnings should be calculated before any moneys were paid to the partners.

101 The plaintiffs' submissions do not align with their instructions to Mr Jackson to take into account a commercial salary for Mr Wajsman.

102 On the other hand, the defendants submit that earnings should be calculated as if Mr Wajsman was employed and paid a salary by the corporations as an employee, and that I should accept Ms Wright's view that $300,000 per annum is a commercial rate of remuneration for Mr Wajsman's role.

103 In relation to Issue 3 (below), the defendants also submit that, in calculating the maintainable earnings of the business, an allowance should be made for a salary to be paid for a person to carry out the prior duties of Mr Reiner (an 'operations manager'). These duties have been carried out by Mr Wajsman, as well as his own duties, since July 2016.

104 In the Liability Judgment, I found that the relationship between Mr Reiner and Mr Wajsman was that of a quasi-partnership.[18] Upon the incorporation of SRW, the partners entered into a Shareholders' Agreement, which I found was still on foot,[19] which had many features similar to a partnership. The Shareholders' Agreement provided that each of the nominated representatives of the corporate parties were entitled to be paid a salary or entitled to a weekly drawing at a figure to be agreed from time to time.

105 Prior to Mr Reiner going to the USA, the partners distributed the earnings equally between themselves. The profits of the business were calculated before any moneys were distributed to the partners or used to meet the partners' private expenses.

106 Both experts have sought to value the plaintiffs' shares on the basis that Mr Reiner's investment was in a company rather than a partnership, and on the basis that the value of Mr Wajsman's labour should be treated as an expense in calculating earnings. Further, the multiples used by both experts were derived from corporations where it may be inferred that the reasonable salaries and remuneration paid to shareholders who worked in the business were taken into account when calculating the earnings of the company, as distinct from the dividends paid to the shareholders.

107 In my opinion, the multiples in valuing a partnership may be lower than in valuing a corporation, because a partnership's earnings do not take into account the value of the labour of the partners, whereas in a corporation the earnings do. No evidence was provided to the Court of multiples for partnership businesses.

108 In view of the fact that both experts only used multiples of trading corporations and not partnerships, I find that the proper approach would be to allow a reasonable sum for the labour of Mr Wajsman in calculating the earnings of SRW. Ms Wright's evidence was that his services warranted an expense of $300,000. Even accepting Mr Jackson's instruction that $150,000 was an appropriate salary for the duties Mr Wajsman performed, one still should take into account appropriate compensation for the work required to be done by Mr Wajsman that Mr Reiner previously did.

109 As discussed above, Ms Wright found that compensation for a person performing Mr Wajsman's duties would be in excess of $300,000, and further allowance of some $160,000 should be made for the compensation for an operations manager, who would take over Mr Reiner's duties. In view of the fact that Mr Reiner and Mr Wajsman agreed that $150,00 would be appropriate compensation for Mr Wajsman to perform Mr Reiner's duties when Mr Reiner was absent in the USA, I consider it would be appropriate to allow $300,000 as adequate compensation for the performance of both roles.

110 Accordingly, I find that the future maintainable earnings calculation should include an expense of $300,000 to meet the remuneration of a notional person carrying out the duties previously performed by Mr Reiner and Mr Wajsman.

Issue 2A: What adjustments (if any) should be made to the vehicle expenses paid to or on behalf of Mr Wajsman in FY2017 and FY2018?

111 The expenses in issue are the expenses related to Mr Wajsman's luxury car, as set out in Schedule 2A of the Amended List of Issues. Mr Reiner gave evidence that the provision of the luxury car, with car washing and maintenance, was originally part of the agreement between Mr Wajsman and Mr Reiner to divide the earnings between them in a tax-effective way. That is, the car expenses could be claimed as a tax deduction even though they were essentially a distribution of profits to Mr Reiner and Mr Wajsman.

112 Mr Wajsman gave evidence that he used his car for business purposes. No evidence was led to clarify the 'motor vehicle' expense of SRW of almost $300,000 for FY2018, as detailed in the Hockley Report.[20] Under normal accounting principles, the capital cost of a new car would not have been included in 'motor vehicle expenses', but operating costs including leasing and depreciation would have been included in motor vehicle expenses. The expense would probably have included expenses for cars that the business used, that Mr Wajsman could have used if he needed a car for business purposes.

113 I accept Mr Reiner's evidence that the purchase and maintenance of a luxury car for each of Mr Reiner and Mr Wajsman by the business was agreed on by Mr Reiner and Mr Wajsman as a tax-effective way of distributing the profits of the business between them. In valuing the business, I find that it is appropriate to treat those vehicle expenses as a means of distributing profits and accordingly make the adjustment to exclude those sums from the expenses of SRW in calculating maintainable earnings.

Issue 3: What adjustments (if any) should be made to allow for the cost of an operations manager to be employed by SRW going forward?

114 Mr Wajsman instructed Ms Wright that he intends to employ an operations manager to assist with the management of the corporations. Ms Wright accordingly made an adjustment to EBITDA to include such a salary. Mr Jackson did not make any such adjustment.

115 In calculating maintainable earnings, I find that no further adjustment is warranted to the inclusion of $300,000 as an expense for the performance of Mr Wajsman's and Mr Reiner's former duties in the business, as discussed in Issue 2 above.

Issue 4: Should the rent paid by SRW to Wickham Commercial Properties for the use of the factory be adjusted to reflect market rent, in the manner so adjusted by Mr Jackson?

116 The adjustment in issue is one made by Mr Hockley and Mr Jackson. In his report, Mr Hockley made an adjustment to the rent SRW paid for the factory it operates out of at Moorabbin. Mr Jackson made the adjustment on the basis that the factory is owned by Wickham Commercial Properties, of which Mr Reiner and Mr Wajsman are equal shareholders, and that, based on the value of the property, the rent paid by SRW to WCP is above market rent.

117 Mr Hockley determined the market rent by deciding an appropriate commercial rent yield for the property, based on average yields of similar commercial properties in the area. Mr Wajsman had informed Mr Hockley that the property had been valued at $450,000.

118 Mr Jackson adopted Mr Hockley's adjustment of the rent, and the plaintiffs contend that the adjustment should be maintained.

119 The defendants disagree. They contend that there are three relevant factories at 295 Wickham Street, Moorabbin. The defendants submit that Shagil Pty Ltd ('Shagil') owns the factory which is leased to SRW and that the factory owned by WCP is leased to BBSF. Mr Reiner accepted this in cross-examination. Thus, the defendants contend there are no grounds for reducing the rent as Mr Hockley did, as SRW is not leasing the premises owned by WCP that Mr Wajsman said was valued at $450,000.

120 I accept the defendants' contentions. I find that the rent paid by SRW that Mr Hockley reduced (and that Mr Jackson agreed with) should not have been reduced but kept at the original amount.

121 Thus, no adjustment should be made to the agreed recorded EBITDA in the Comparative Document.

Issue 5: Which (if any) of the remaining disputed add-backs, being those set out in Schedule 3, should be made to EBITDA of SRW?

122 Schedule 3 of the Amended List of Issues comprises a list of contested expenses. Mr Reiner contends these expenses should be added back to earnings of SRW in calculating the adjusted EBITDA, as they were not proper deductions to be taken into account in calculating earnings. Mr Reiner contends that these were in fact private and personal expenses of Mr Wajsman that should not be treated as an expense of the business.

123 Schedule 3 consists of some seven pages. The expenses cover both FY2017 and FY2018. The expenses are not totalled.

124 The original list of expenses challenged by plaintiffs at the liability hearing was far longer. Mr Wajsman was able to produce a large number of invoices in relation to the expenses challenged and, in many cases, the plaintiffs abandoned the allegation that the expense was personal to Mr Wajsman and improper. The defendants have also identified and accepted that certain expenses challenged by the plaintiffs should not be taken into account in calculating maintainable earnings.

125 The plaintiffs claim that there remain a number of expenses that are questionable on their face, or on the basis of the evidence given by Mr Reiner; for which the corporations have not been able to produce an invoice or other supporting document to establish that the expense is a legitimate expense of the business; and in respect of which Mr Wajsman's evidence to support the expense is absent, flimsy, or does not rise above a mere unsubstantiated assertion.

126 The plaintiffs also contest the propriety of the IT expenses paid to Mr Lev Rozenblit, on the basis that they are unusually high and likely to be one-off expenses and not appropriate to be taken into account in calculating maintainable earnings. This sub-issue will be discussed separately below.

127 The plaintiffs no longer press the payments to T3 partners set out in Schedule 3. An amended schedule was not submitted, and the plaintiffs' position in the Comparative Document still provides for these payments to be added back to earnings.

128 The plaintiffs contend that the Court should conclude on the balance of probabilities that the payments identified in Schedule 3, where no invoice or supporting document has been provided, are not legitimate expenses of the corporations.

129 The plaintiffs submit that the failure of Mr Wajsman to produce an invoice or an adequate explanation of the transaction, despite the procedures in place for recording transactions and retaining source documents, permits the Court to readily infer that the expenses are not proper expenses of the business. The plaintiffs argue that it is simply more likely that the expense is a personal expense (consistent with the corporations' long history of paying the partners' personal expenses) rather than a legitimate expense where the system for recording and retaining invoices has repeatedly and conveniently failed.

130 The defendants submit that none of the remaining disputed add-backs in Schedule 3 be made to EBITDA of SRW. The defendants contend that Mr Wajsman gave evidence that all of the putative add-backs in Schedule 3 were legitimate business expenses and explained the nature of those expenses. Nevertheless, the plaintiffs contend that any expense for which an invoice could not be located should not be treated as a legitimate business expense. The defendants submit that Mr Wajsman's evidence was not challenged. Further, the defendants submit that it was never expressly put to Mr Wajsman that any of the add-backs in Schedule 3 were not in fact a legitimate business expense of SRW. The defendants submit that it is not open to the plaintiffs to now contend that such expenses were other than legitimate business expenses which ought be added back into the earnings of SRW.

Issue 5 disputed add-backs resolution (other than IT)

131 This claim raises a difficult matter of principle. Mr Wajsman wrongly took over the SRW business and excluded Mr Reiner from any say in the business. Prior to wrongly abrogating the business to himself, Mr Wajsman and Mr Reiner were in the practice of treating many personal items of expenditure as business expenses. They would ensure that these were shared equally between the two of them.

132 As discussed above, the Corporations Act gives to the Court a wide discretion to do what it considers is just and equitable in all the circumstances of the case, in order to put right and cure for the future the unfair prejudice which the plaintiffs have suffered at the hands of the defendants.[21] Mr Wajsman, as the sole director of SRW, was duty bound to ensure that proper accounts were kept for the company. Accordingly, relevant receipts should have been kept for all expenditure where applicable. After Mr Reiner was improperly excluded from the conduct of the business and Mr Wajsman elected to carry it on without any consultation or accounting to Mr Reiner, it was incumbent upon Mr Wajsman to keep proper books and records of the expenses he claimed were attributable to the running of the business. Mr Wajsman must be assumed to have realised that eventually he would have to account to the plaintiffs for their part ownership of the business.

133 In my opinion, where the defendants failed to keep proper records to record that expenditure was properly incurred in running the business, then it is only fair and equitable that the oppressed party does not incur any loss by reason of the defendants' failure to keep proper records of the expenses incurred by the corporations.

134 It is also relevant that the evidence established that Mr Reiner was deliberately locked out of access to the books and records despite multiple requests by Mr Reiner to be allowed access to the books and records, particularly where he sought to ensure that expenses attributed to the business were properly so attributed. I also bear in mind the case law that provides in oppression cases that where there is doubt, the Court should err in favour of the oppressed party.[22]

135 I am not prepared to accept Mr Wajsman's evidence that disputed expenses were properly incurred in the operations of the business in circumstances where there are no accounting documents or records to support the assertion of Mr Wajsman. I found Mr Wajsman a most unsatisfactory witness. In the instances where there is an accounting document or record for a disputed item establishing that it was a proper business expense, I have accepted the expense as a proper business expense for the purpose of calculating maintainable earnings.

136 I have accepted the plaintiffs' contentions in Schedule 3 that particular expenses were not supported by an invoice. The defendants did not dispute the schedule listing expenses charged to the business.

137 In FY2018, there was a significant increase in IT costs paid to Mr Rozenblit, from $9,772 the previous year up to $17,353 in 2018. Mr Rozenblit provided IT services to the corporations and he is an old acquaintance of Mr Wajsman's.

138 The plaintiffs submit that the evidence demonstrates that some of the work done by Mr Rozenblit was work associated with these proceedings, and contributed to the issues faced by Mr Reiner in obtaining proper access to the corporations' electronic records. They also contend that the installation of a new server was extraordinary, one-off, or capital in nature; and that there is a significant overall increase in the IT costs incurred by SRW. The plaintiffs submit that Mr Wajsman did not lead any evidence to explain the material increase in IT costs.

139 The plaintiffs submit that it would be unfair to Mr Reiner for earnings to be depressed by reason of those large and unusual expenses. They contend that, at the least, the IT expense should be adjusted to reflect the average of the corporations' IT expenditure over the last four years. As the IT costs recorded were nil in FY2015, and $13,807 in FY2016, the average over the last four years is $10,223.

140 The defendants submit that there is no principled basis for the plaintiffs' contention. They submit that such add-backs are not required to compensate Mr Reiner for the oppression, nor are they otherwise necessary to normalise the EBITDA of SRW pursuant to ordinary principles of valuation such as to remove one-off expenses. The defendants also point out that neither Mr Jackson nor Ms Wright have made the adjustments for which the plaintiffs contend.

141 In my view, it is appropriate in allocating IT expenses to take an average of the previous four years. The wide fluctuations in expenditure indicate that the expenditure has been on an ad hoc rather than a regular basis. In my opinion, the fair treatment of IT expenses is to adopt the average of $10,223 for both financial years.

142 Accordingly, I find that, in calculating maintainable earnings, the IT costs should be deemed to be $10,223 in both FY2017 and FY2018.

Issue 6: Should the 'Net Related Party Loans' be adjusted in the manner proposed by Ms Wright?

143 Both Mr Jackson and Ms Wright added the value of related party loans payable to SRW to its enterprise value.

144 Ms Wright, however, reduced the value of the related party loans to SRW as she considered that, as at the agreed valuation date, their recoverability was impaired due to payroll tax liabilities of the related parties. Mr Jackson did not make this adjustment.

Mr Jackson was not provided with instructions to make adjustments for payroll tax liabilities and therefore did not make adjustments for these when determining the value of the related party loans.

If the Court determines that it is appropriate to make adjustments for payroll tax liabilities, Mr Jackson will recalculate the value of the related party loans to take account of these.

146 Since the Joint Report was prepared, the plaintiffs now concede that account must be taken of payroll tax liabilities.

147 There is no concession, however, that payroll tax liabilities should be taken into account in calculating the recoverability of related party loans as at the valuation date.

148 The plaintiffs submit that accrued debt for unpaid payroll tax should not be included on the balance sheet of the corporations for the purpose of the valuation, and that if the Court accepts that submission, it follows that no impairment should be made to the recoverability of the inter-party loans, and the adjustment made by Ms Wright should not be allowed.

149 The plaintiffs further submit that, even if the Court considers that the accrued debt should be carried on the balance sheets of the corporations, the impairment adjustment should still not be made. The debts are all owed by related parties. There is no suggestion that those entities will be wound up. They will continue to trade and, in the course of such trade, repay the accrued payroll tax debt.

150 The plaintiffs submit that to permit the adjustment would be unfair to the plaintiffs because it would reduce the equity value of their shares by reason only of the fact that their shares fall to be valued at a time that the payroll tax liability was discovered but unpaid.

151 The defendants submit that the adjustment is appropriate despite the subsequent payment of payroll taxation liabilities because the claim involves valuing the corporations as at the agreed valuation date, which necessarily requires having regard to the circumstances prevailing as at that date. Further, if the payment is taken into account, the corporations would have a lower cash balance. The defendants argue that to depart from the valuation date in one respect but not others would distort the valuation.

152 I accept the plaintiffs' argument that it is likely that in due course the related parties will meet their payroll tax liabilities and be able to repay the inter-party debts owed to SRW.

153 SRW is being valued on the basis of maintainable earnings, which is an estimate of what it will continue to earn in the future. Thus, the exercise is an estimate of future performance. As it is likely the related parties will be able to pay them off, I do not accept that the inter-party loans should be treated as impaired for valuation purposes. Accordingly, the plaintiffs' figure should be adopted.

Issue 7: Should the cash previously located in the safety deposit box at National Australia Bank, totalling $130,000, be treated as an asset of BBSF for valuation purposes?

Issue 8: Should the accumulated payroll tax liability of BBSF be treated as a liability of BBSF for valuation purposes?

155 The parties agree that BBSF does not have sufficient maintainable earnings to be valued on a capitalisation of earnings basis and should be valued on a net asset basis.

156 The plaintiffs submit that, because BBSF made a loss in FY2018, Mr Reiner stands to receive a negligible sum for his shares, despite the company returning a profit in FY2017 and FY2019. They contend that the limited value of BBSF is further depleted by Ms Wright's treatment of outstanding payroll tax labilities.

157 The plaintiffs argue that it is fundamentally unfair to Mr Reiner for the value of his shares in the corporations to be impacted by the payroll tax issue. It causes Mr Reiner, by reason only of the timing of his exit, to bear the burden of the payroll tax liability disproportionately.

158 As mentioned above, Mr Reiner accepts that the payroll tax expense should be accounted for. However, the plaintiffs contend that the accumulated debt, for BBSF and the corporations more generally, arises only because of the historical failure of the corporations to pay that expense. Accordingly, the plaintiffs submit that the accrued debt for unpaid payroll tax should not be included on the balance sheet of the corporations for the purpose of the valuation.

159 The defendants argue that BBSF's payroll tax liability as at 30 June 2018 should be factored into an assessment of BBSF's value as at that date.

160 In cross-examination, Mr Grady put to Ms Wright that the liability may be less now and, therefore, that it was unreasonable to take it into account. Ms Wright, however, said that if the liability had been paid then the cash balances may be lower.

161 I acknowledge the plaintiffs' complaints about the effects of the payroll tax issue generally. However, as BBSF is to be valued on a net asset basis, it does not matter whether the liability has been paid off or not as the net assets would be the same. I accept Ms Wright's evidence that if the liability had been paid off, the cash balances may be lower.

162 Accordingly, I find that the accumulated payroll tax liability of BBSF should be treated as a liability of BBSF for valuation purposes.

Issue 9: Should the Related Party Loans be adjusted in the manner proposed by Ms Wright to account for the impact of the corporations' payroll tax liability on the recoverability of those loans?

163 In response to this issue, the parties repeat the submissions made for Issue 6 above.

164 In my opinion, the existence of the payroll tax liabilities should not be taken into account in valuing the related party loans. For similar reasons as in Issue 6, I find that the related party loans should not be adjusted as proposed by Ms Wright.

165 Issues 10 to 15 (inclusive) all relate to the valuation of BBSS. SRW has no interest in BBSS. Mr Wajsman and Mr Reiner each own a quarter interest in BBSS. An issue between the parties is whether BBSS should be valued on a net asset basis rather than on an earnings basis. Mr Jackson conceded that if earnings are too low, then it may be appropriate to value BBSS on a net asset basis.

166 As explained below, I have found that the earnings of BBSS are too low to value the business on an earnings basis. Thus the business should be valued on a net asset basis. Mr Jackson accepted that if the business is valued on a net asset basis then its value is nil.

167 I turn to the submissions on the earnings of BBSS and my findings which led to this conclusion. The plaintiffs contend that three adjustments should be made to the earnings as recorded in the books of BBSS. First, they submit that the management fees paid to Mr Sharrock and Mr Labrie should be added back to earnings. Secondly, they contend a series of disputed expenses should be added back. These expenses are alleged to be personal expenses of Mr Wajsman. Thirdly, the plaintiffs submit that if an allowance is made for the commercial salaries payable to Mr Wajsman and an operations manager in Issues 2 and 3, the salaries should be allocated between various entities in the group to reflect the time Mr Wajsman spent in managing each company.

168 On the assumption that those adjustments should be made, Mr Jackson concluded that BBSS had sufficient maintainable earnings to be valued on a capitalisation of maintainable earnings basis. Mr Jackson adopted a multiple of 6x. The plaintiffs contend that this multiple should be applied to a maintainable earnings of $89,000 for an enterprise value of $534,000. Once a chattel mortgage is deducted, the plaintiffs submit BBSS should be valued at $520,535.[23]

169 Ms Wright disagreed with the plaintiffs' adjustments to maintainable earnings and consequently with the valuation methodology Mr Jackson adopted.

170 Ms Wright did not make the adjustments contended for by the plaintiffs but prepared her own assessment of BBSS's future maintainable earnings. Based on this analysis, Ms Wright's opinion was that BBSS did not generate sufficient maintainable earnings in FY2017 and FY2018 to value it on a capitalisation of maintainable earnings basis. Rather, she applied the net asset methodology to value BBSS and consequently valued BBSS at nil.

171 Accordingly, before turning to the issue of valuation methodology, it is necessary to first rule on the three proposed adjustments, which are dealt with in Issues 10, 11 and 12 below.

Issue 10: What adjustments, if any, should be made to the management fees paid to Mr Labrie and Mr Sharrock?

172 As mentioned above, the plaintiffs submit that 'marketing consultant fees' paid to each Mr Sharrock and Mr Labrie in FY2018 should be added back to the earnings of BBSS for the purposes of calculating maintainable earnings. The fees paid totalled $68,180.

173 Mr Sharrock and Mr Labrie were appointed as directors and became shareholders of BBSS after the commencement of the oppressive conduct. The plaintiffs contend that Mr Wajsman's unilateral decision to appoint them as directors and cause emoluments to be paid to them was inconsistent with the partnership. They say that prior to the oppression, the decision to introduce new shareholders and pay them remuneration would have been made jointly by Mr Reiner and Mr Wajsman.

174 The plaintiffs submit that Mr Reiner should not be disadvantaged in valuing BBSS's shares by Mr Wajsman's decision, made without consultation and to the detriment of Mr Reiner. The plaintiffs submit that it is not unfair for Mr Wajsman to have to buy Mr Reiner out on the basis that this decision was not made.

175 The defendants submit that no adjustments should be made to the management fees paid to Mr Labrie and Mr Sharrock. They submit that it is not disputed that Mr Labrie and Mr Sharrock worked for BBSS and received remuneration for that work in the form of fees in FY2018. The defendants contend that prior to FY2018, the same amounts were paid to the two men as salaries.

176 The defendants further submit that there is no evidence that the management fees paid exceed the commercial rates of remuneration for the work performed.[24]

177 The evidence establishes that Mr Sharrock and Mr Labrie replaced other shareholders in BBSS. Accordingly, Mr Reiner's share in the company did not decrease due to their installation as shareholders.

178 The key question to decide is whether, but for Mr Wajsman's oppressive conduct, these payments would have been made. The defendants' contention that Mr Sharrock and Mr Labrie were employed and remunerated by BBSS prior to the oppressive conduct is therefore key.

179 In cross-examination, Mr Reiner conceded that the two men were each remunerated $75,000 per year when they were employees. BBSS's accounts indicate that management fees were paid from January in FY2018.

180 BBSS's accounts indicate that, whilst the sum for management fees increased from FY2017 to FY2018, the sum for salaried staff and superannuation decreased. However, I note the paucity of information before the Court regarding staff employed in those years.

181 In his evidence, Mr Reiner's main complaint seemed to be that the two men were appointed shareholders and directors without his consent. He further indicated that, as the prior shareholders worked and did not take remuneration, he expected Mr Sharrock and Mr Labrie to do the same.

182 I am satisfied on the balance of probabilities that, prior to the oppressive conduct, Mr Sharrock and Mr Labrie were employed by and worked in BBSS and were each paid a salary of approximately $75,000 per year. I am also satisfied that the fees paid in FY2018 were at or below a commercial rate for work performed. Accordingly, I am satisfied their remuneration was a proper expense of BBSS and therefore ought to be taken into account in calculating the earnings of BBSS.

183 In August 2016, after Mr Reiner took leave from the business, Mr Wajsman appointed Mr Sharrock and Mr Labrie as directors of BBSS without consulting Mr Reiner. The evidence indicates they replaced other shareholders. Mr Reiner did not dispute this evidence.

184 Mr Reiner's interest in BBSS was not affected by the introduction of the new shareholders as they merely replaced other shareholders.

185 In the accounts of BBSS, although now directors, Mr Labrie and Mr Sharrock are still paid as before, although the payment is described as a management fee. There is no suggestion by Mr Reiner that Mr Sharrock and Mr Labrie would not have been providing services to BBSS and remunerated for doing so, but for the oppressive conduct of Mr Wajsman.

186 Mr Reiner's complaint is essentially that Mr Wajsman unilaterally made the decision to change Mr Labrie and Mr Sharrock from employees to directors and thus the fees paid to them as directors is a fee incurred by reason of Mr Wajsman's unilateral decision. That may be right, but one cannot overlook the fact that the management fees replaced their salaries as employees, and BBSS is still receiving the same benefit from their services as before.

187 Accordingly, I find that in calculating the maintainable earnings of BBSS there should be no add-back of Mr Labrie's and Mr Sharrock's management fee as sought by Mr Reiner.

Issue 11: Which, if any, of the disputed add-backs, being those set out in Schedule 4, should be made to the earnings of BBSS?

188 The plaintiffs submit that each of the add-backs in Schedule 4 should be made to the earnings of BBSS. The defendants contend that none of the remaining add-backs should be made. Both parties repeat their submissions set out at Issue 5 above, which considered the same issue with regard to SRW. No submissions were made on the significance of the word 'deleted' in parenthesis throughout the schedule.

189 As Mr Jackson calculated maintainable earnings only by reference to the earnings in FY2018, the Court does not need to consider the alleged add-backs relating to FY2017.

190 For similar reasons to those given in Issue 5 above, I find that it is both fair and reasonable to add back the disputed items for which Mr Wajsman is unable to produce an invoice, in calculating BBSS's maintainable earnings.

191 I consider this appropriate to remove the consequences of the oppressive conduct of Mr Wajsman, in particular in failing to keep proper books and records to justify the expenses where he had wrongly excluded Mr Reiner from the business and its records and abrogated to himself complete and unfettered control of the business. There are some instances where there appears to be an invoice for a disputed item. In those circumstances, as in Issue 5, I have accepted the expense as a proper business expense.

Issue 12: Should further adjustments be made to the earnings of BBSS to (a) re-allocate service trust payments, as proposed by Mr Jackson; (b) allocate Mr Wajsman's salary, as proposed by Mr Jackson; and/or (c) allocate the salary of the operations manager, as proposed by Ms Wright?

192 As regards (a), the parties now agree on the adjustment for service trust payments.

193 As regards (b) and (c), as with SRW, discussed in Issues 2 and 3 above, the plaintiffs submit that no allowance should be made for Mr Wajsman's salary or for a salary of an operations manager. If an allowance is to be made for either salary, the plaintiffs submit that the salary should be allocated between the various entities within the group to reflect the time spent by Mr Wajsman in managing those companies.

194 The defendants contend that no reduction should be made in the costs provided in Ms Wright's valuation for Mr Wajsman's management fee or a commercial salary for an operations manager.

195 Above, at Issues 2 and 3, I found that $300,000 should be included as an expense in calculating maintainable earnings of SRW, for carrying out the duties previously performed by Mr Wajsman and Mr Reiner.

196 At Issue 13 below, I find that the maintainable earnings of BBSS are insufficient for it to be valued on a maintainable earnings basis and that BBSS should be valued on a net asset basis. Accordingly, there is no point in making an adjustment to increase the expenses applicable to BBSS.

197 Accordingly, no adjustments are required to BBSS's earnings by reason of any remuneration being attributed to Mr Wajsman and the notional operations manager.

Issue 13: Does BBSS have sufficient maintainable earnings to be valued on a capitalisation of earnings basis?

198 The plaintiffs submit that whether BBSS has sufficient earnings to be valued as a going concern depends on the answers to Issues 10 to 12.

199 Mr Jackson was of the view that if adjustments are made to the payments to shareholders (Issue 10) and the disputed add-backs (Issue 11), then BBSS has sufficient maintainable earnings to be valued as a going concern. The plaintiffs submit the Court should adopt this view.

200 If either of those adjustments are not made, the plaintiffs concede that BBSS cannot be valued on an earnings basis and has no net asset value. As discussed above, in Issue 10, I do not make the adjustment of adding back the payments made to Mr Labrie and Mr Sharrock.

201 The defendants submit that BBSS does not have sufficient maintainable earnings to be valued on a capitalisation of maintainable earnings basis. They contend that BBSS suffered losses in financial years 2015, 2016 and 2017. They contend BBSS only made a modest profit of $20,446 in FY2018, which was reported before its payroll tax liability was known. They point out that at 30 June 2018, BBSS had a net asset deficiency of approximately $160,000.

202 The plaintiffs concede that if payments to Mr Sharrock and Mr Labrie are not added back to earnings, then BBSS does not have sufficient maintainable earnings to be valued on a capitalisation of earnings basis. At Issue 10 above, I found that those payments should not be added back to the earnings of BBSS. Accordingly, I find that BBSS does not have sufficient maintainable earnings to be valued on a capitalisation of earnings basis.

Issue 14: If valued on a capitalisation of maintainable earnings basis, what capitalisation multiple should be applied to the maintainable earnings and what adjustments should be made to ascertain the equity value of BBSS?

203 I have held that BBSS does not have sufficient earnings to calculate its value on a multiple of earnings basis. If, however, for some reason, I should not have found that there are insufficient earnings to calculate the value of BBSS on an earnings basis, I address Issue 14.

204 The plaintiffs submit that I should adopt Mr Jackson's multiple of 6x for BBSS. Mr Jackson adopted the same earnings multiple of 6x for BBSS as for SRW, based on his 'understanding of the BBSS business and its similarities to SRW'. In the Joint Report, Mr Jackson observed that both companies offer the same services and that Mr Wajsman, as an owner, 'is able to use his experience and expertise to build the BBSS business'. He also observed that as a younger company, it has higher growth potential.

205 The defendants submit that a lower multiple should be applied but they do not propose a figure. As she valued BBSS on a net asset basis, Ms Wright does not adopt a multiple. She does, however, contend that a multiple of 6x is not appropriate because of differences between BBSS and SRW, such as revenue, assets and history of profitability.

206 The plaintiffs contend that Mr Jackson's reasoning for retaining the multiple used for SRW is cogent and, in the absence of the defendants advancing an alternative multiple, should be accepted.

207 I accept Mr Jackson's reasoning for retaining the multiple used for SRW. As mentioned above, I have found that 5x is the appropriate multiple for SRW. I find that, if valued on a capitalisation of maintainable earnings basis, 5x would also be the appropriate multiple for BBSS.

Issue 15: If valued on a net asset basis, should adjustments to goodwill and the accumulated payroll tax liability be made?

208 The plaintiffs accept that if BBSS is valued on a net asset basis, it is to be valued at nil. Accordingly, this issue is unnecessary to decide.

209 As I have found that BBSS does not have sufficient maintainable earnings to be valued on an earnings basis, I find BBSS should be valued on a net asset basis, and is valued at nil.

Issue 16: Are the plaintiffs entitled to compensation in a sum equal to the total profits of each corporation over the relevant period in proportion to their shareholding in that corporation?

210 It is common ground between the parties that Mr Reiner is entitled to compensation for his share of the profits of the corporations for the period during which his capital was locked up in the corporations without any distribution of profit. It is also agreed this period started on 1 July 2016.

211 The plaintiffs submit that compensation for profits should be calculated from 1 July 2016 up until the date of final judgment.

212 The defendants submit that the relevant period for calculation of profits ends on 24 January 2020, as the shares were transferred by the plaintiffs on that date.

213 I accept the defendants' submission. I find the relevant period for calculation of profits, payable as compensation, is 1 July 2016 to 24 January 2020.

Issue 17: Should the total profits during the relevant period be reduced by losses made by any of the corporations during the relevant period?

214 The plaintiffs submit that the total profits during the relevant period should not be reduced by losses made by any of the corporations because the three trading entities (SRW, BBSF and BBSS) were not conducted as a corporate group and it would be unfair to assume that they were for the purposes of calculating compensation.

215 SRW, BBSF and BBSS do not have common ownership and do not report on a consolidated basis. BBSS is owned by Mr Reiner, Mr Wajsman, Mr Sharrock and Mr Labrie in joint equal shares. SRW holds no interest in BBSS. SRW owns 50% of BBSF, with Mr Curtis owning the balance.

216 The defendants submit that in calculating the total profits for the purpose of compensation, profits should be reduced by losses incurred by BBSF and BBSS in the relevant period. For the reasons discussed below, I reject this submission.

217 The defendants contend that consolidating the results of the three businesses is appropriate, as accounting for losses is consistent with compensation fulfilling the legitimate expectation of a quasi‑partnership, in accordance with the terms of the Shareholders' Agreement. Consistent with the concept of sharing equally under a partnership, clause 17 of the Shareholders' Agreement provided that 'all expenses, profits or losses incurred ... shall be borne and shared equally by the parties'. The defendants submit that compensation sufficient to restore the plaintiffs to the position of equality under the quasi-partnership requires allowance for the losses sustained.

218 On the other hand, the plaintiffs contend that Mr Wajsman did not give any evidence that the entities were treated as a corporate group in practice, or that there was a practice of reducing drawings from profit-making companies by the amount of any losses in other entities. Nor, they say, did Mr Wajsman give any evidence that shareholders were required to contribute funds to make up any losses. Rather, the plaintiffs contend that losses were absorbed by retained earnings in the ordinary course.

219 SRW owns a half share of BBSF. It is possible to consolidate accounts even where a subsidiary is only partially owned; however, there is no evidence that consolidated accounts were prepared for SRW and BBSF.

220 SRW held no interest in BBSS. Therefore, there is no accounting basis for consolidating SRW and BBSS.

221 Further, I am not satisfied that Mr Wajsman and Mr Reiner would have made any reduction in the distribution of profits to themselves from SRW because of the loss suffered by BBSF due to its recently discovered payroll tax liability, particularly as they did not control BBSF.

222 I accept the plaintiffs' submission that shareholders were not required to contribute funds to make up losses, but, rather, losses were absorbed by retained earnings. I consider that in calculating the profits that Mr Reiner lost by reason of the oppression, he should be compensated for the loss of his share of the profit of SRW without making any adjustment for the losses of BBSF or BBSS.

Issue 18: In calculating the total profits of the corporations during the relevant period, what adjustments (if any) should be made to the management fees (or other direct payments) paid to Mr Wajsman, Mr Curtis, Mr Sharrock and Mr Labrie?

223 This proposed adjustment is solely for the purpose of calculating the profit share that Mr Reiner was denied by reason of the oppressive conduct.

224 The plaintiffs submit that, with the exception of the agreed payment to Mr Wajsman of $150,000 for FY2017, all payments made to Mr Wajsman, Mr Curtis, Mr Labrie and Mr Sharrock ought to be added back to the net profits of the corporations in order to determine what should have been available for distribution to Mr Reiner during the relevant period.

225 The defendants submit that no adjustment should be made in respect of management fees received by the individuals, because they relate to remuneration for work performed and not profit distributions to shareholders.

226 The Amended List of Issues sets out the contested payments in Schedule 6.

227 The plaintiffs submit that from July 2017 onwards, all management fees paid to Mr Wajsman should be added back to profit, as at that time Mr Reiner had returned to Australia but was excluded by Mr Wajsman from participating in the management of the business. They contend that but for the oppressive conduct of Mr Wajsman, Mr Reiner would have come back to work and would have been paid half the profits, without making any deduction for payments to Mr Wajsman. The plaintiffs contend that Mr Wajsman should not be permitted to rely on his own exclusion of Mr Reiner to justify the payment of a salary to himself before profits are split.

228 The defendants submit that the payments are legitimate business costs attaching to the work performed by Mr Wajsman, including in performing the role previously undertaken by Mr Reiner, and not a distribution of profits from SRW. They submit that provision for that cost, separately from the share of profits to be distributed to the plaintiffs, is consistent with the operation of the business before Mr Reiner's exclusion. They further submit that the cost of Mr Wajsman's work in generating the profits for both shareholders is not unbalanced, because Mr Reiner's exclusion from participation in management of SRW did not prevent him from working to earn a commercial rate of remuneration.

229 The plaintiffs repeat their submissions for Issue 10. As discussed at Issue 10, I found that Mr Sharrock and Mr Labrie were both remunerated for their work at BBSS prior to the oppressive conduct. Therefore, even if there had been no oppressive conduct, those moneys would not have formed part of the profits of BBSS.

230 The plaintiffs submit that payments to Mr Curtis should be added back to the net profits of BBSF before determining Mr Reiner's share.

231 The plaintiffs submit that prior to Mr Reiner's departure, Mr Curtis only received payments from BBSF by way of dividends for his 50% share, and did not receive remuneration for working in the business. They contend that Mr Wajsman made the decision to start paying Mr Curtis remuneration for the first time after Mr Reiner left, and that it was a unilateral decision to prefer one shareholder through payment of consultancy fees.

232 The defendants submit that the payments to Mr Curtis are payments for working in BBSF. They further submit that this remuneration is well below the commercial rate for the work done by Mr Curtis, as the Mercer Report indicates a market salary of $150,000 for Mr Curtis's position. Mr Wajsman's evidence was that he started paying Mr Curtis remuneration in 2016 because he was working very long hours, around 16 hours a day. Mr Wajsman agreed that prior to that, Mr Curtis only received dividends.

233 The list of contested payments in Schedule 6 includes a payment from BBSF to Shagil in FY2018. Shagil is another of Mr Wajsman's companies. Although the plaintiffs have not made specific submissions on this payment, I infer that the plaintiffs consider this payment is a payment to Mr Wajsman. The defendants submit that payments to Shagil are payments in respect of Greta Wajsman's (Mr Wajsman's wife) employment by BBSF. In cross-examination, Mr Reiner acknowledged that Greta Wajsman did act as accounts receivable officer in BBSF.

234 The authorities discussed above make it clear that the plaintiffs' compensation should be calculated on the basis of the loss suffered by the plaintiffs, calculated on the assumption that the oppressive conduct had not occurred.

235 In the Liability Judgment, I found that the relationship between Mr Reiner and Mr Wajsman was that of a quasi-partnership. Therefore, the initial position is to treat their joint entity, SRW, as a quasi-partnership and, accordingly, the profit should be calculated without taking into account an expense to remunerate partners for their work.

236 Where a business is not conducted as a quasi-partnership but rather is conducted as a corporate business between shareholders, it is appropriate in calculating profit for an allowance to be made for labour of any shareholder in the business.

237 As mentioned above, I found that SRW was conducted as a quasi-partnership.

238 In the Liability Judgment, I found that Mr Reiner and Mr Wajsman agreed that, for the time Mr Reiner was recovering in the USA, the latter would take an additional $150,000 per year 'off the top' of the profits as remuneration for completing the additional work. Mr Reiner left for the USA in July 2016, effectively at the start of FY2017. At the beginning of FY2018, Mr Reiner returned to Australia and sought to resume his management role in the corporations.

239 But for the oppressive conduct, I find that, apart from the agreed $150,000, Mr Wajsman and Mr Reiner would have continued their former practice of not paying themselves a salary but instead splitting the profits as in a partnership. I find that the sole reason Mr Reiner did not contribute any service in SRW in FY2018 was because he was precluded from doing so by Mr Wajsman.

240 Accordingly, I find that, in calculating the total profits of the corporation, all payments from SRW to Mr Wajsman, except for the agreed $150,000 payable to Mr Wajsman, should be added back to net profits.

241 Unlike SRW, BBSF was not wholly owned by SRW, or by Mr Reiner and Mr Wajsman, and was not conducted as a quasi-partnership. Rather, I find that BBSF was conducted as corporate businesses between shareholders, whereby SRW was a 50% shareholder and Mr Curtis was a 50% shareholder.

242 Accordingly, it is appropriate in calculating profit in BBSF for an allowance for remuneration to Mr Curtis for work he performed. On the balance of probabilities, I am satisfied that payments made to Mr Curtis were at or below a commercial rate for work performed by Mr Curtis for BBSF. Accordingly, I find that no adjustment should be made to the management fees paid to Mr Curtis by BBSF.

243 I find that BBSS was also conducted as a corporate business, with the shareholding of the business changing in recent years. Accordingly, it is appropriate in calculating the profits for allowance to be made for remuneration of Mr Sharrock and Mr Labrie for working in the business.

244 Furthermore, as discussed above, I found that Mr Sharrock and Mr Labrie were both remunerated for their work at BBSS prior to the oppressive conduct and therefore their remuneration would not have formed part of the profits of BBSS even if there had been no oppressive conduct.

Issue 19: In calculating the total profits of the corporations during the relevant period, which (if any) of the disputed add-backs should be made?

245 The plaintiffs submit that expenses taken into account in calculating EBITDA of each of the corporations, that were in fact personal expenses of Mr Wajsman and were not proper business expenses, should be added back to reach a proper calculation of EBITDA for SRW, BBSS, and BBSF.

246 The plaintiffs contend that in addition to the payments to shareholders, the following ought to be added back to the earnings of SRW available for distribution:

(a) the motor vehicle expenses discussed in relation to valuation at Issue 2A, on the basis that they are in substance a distribution of profit to Mr Wajsman;

(b) the agreed add-backs in Schedule 2 of the Amended List of Issues, on the basis that they are expenses personal to Mr Wajsman that are in substance a return of profit to Mr Wajsman. The defendants do not contest this adjustment; and

(c) the disputed add-backs in Schedule 3, discussed in relation to valuation at Issue 5 above. The plaintiffs contend that if, in considering Issue 5, the Court finds that some or all of those expenses are personal or otherwise improper for the purposes of valuing SRW, it follows that they must also be added back for the purposes of calculating compensation.

247 As regards BBSS, the plaintiffs submit that the contested expenses discussed in relation to the valuation of BBSS in Issue 11 should be added back to the earnings of BBSS available for distribution to the shareholders. The plaintiffs do not press for the fines and penalties to be added back for the purposes of compensation.

248 In relation to BBSF, the plaintiffs submit that it is only necessary to determine the propriety of the add-backs if the Court determines that profits should be offset by losses, as the contested add-backs only relate to FY2018, and BBSF made a loss in that financial year. As I found in Issue 17 that profits should not be offset by losses, it is not necessary to address contested add-backs to BBSF.

249 The defendants submit that the remaining disputed adjustments should not be made, for the same reasons as outlined in their submissions to Issues 2A, 5 and 11 above.

250 In the Comparative Document, the plaintiffs also include an add-back to SRW of $60,000 in FY2018 for the 'write-off of Axiom Investment', which the defendants contest. Neither party addressed this add-back in their written submissions.

251 As discussed at Issue 2A above, I find that one of the means of distributing the profit made by SRW was for each partner to have his private motor vehicles expenses met by the company. Accordingly, the motor vehicle expenses should be added back to the profit of SRW before it is split between Mr Reiner and Mr Wajsman.

252 As discussed at Issues 5 (SRW) and 11 (BBSS) above, as Mr Wajsman wrongly excluded Mr Reiner from access to the records of the business and has not produced invoices to justify the claimed expenses, I am not prepared to accept Mr Wajsman's evidence that the disputed expenses were properly incurred.

253 Accordingly, I find that in calculating the profits of SRW and BBSS, expenditure on items for which Mr Wajsman is unable to produce an invoice that establishes the expense was a proper business expense, should be added back to properly calculate profits.

254 As in Issues 5 and 11, I have accepted an expense as a proper business expense where an invoice establishing that fact has been produced. Accordingly, I accept the reported IT costs as a proper business expense, save for a sum of $1,000 in FY2018, for the reasons that follow.

255 The evidence at the trial established that some of the work done by Mr Rozenblit was related to work associated with these proceedings and contributed to the issues faced by Mr Reiner in obtaining proper access to the electronic records. I accept that Mr Rozenblit was obstructive in his advice to Mr Reiner about gaining computer access to the corporations' accounts. I infer that the giving of this obstructive advice was charged to SRW and formed part of the IT expenses for FY2018. I attribute a sum of $1,000 to Mr Rozenblit's obstructive conduct in hindering Mr Reiner obtaining access to the corporations' accounts.

256 I found Mr Reiner's explanation of Axiom difficult to follow. Doing the best I can, it appears Mr Reiner's wife's uncle made an investment in Axiom that failed and that SRW took a transfer of the shares at full value (despite them having no value) and entered the value in the books at $60,000. Mr Reiner says that the investment was then written off to give both he and Mr Wajsman a tax deduction, or more accurately SRW a tax deduction.

257 This transaction had no bearing on the actual profitability of SRW. It may have had an impact on the tax liability of SRW, although I am not suggesting it was a proper transaction.

258 I hold it was incumbent on Mr Reiner to properly explain this transaction and why $60,000 should be added to the divisible profit. He failed to do so. Accordingly, I will not make the adjustment sought by the plaintiffs in the Comparative Document.

Issue 20: Should the amount payable to the plaintiffs by way of compensation for profit not paid be reduced by the prevailing rate of corporate income tax (30%)?

259 The defendants submit that the amount payable to Mr Reiner as compensation for profits that were not distributed to him should be reduced by 30%, because the profits calculated in accordance with the adjustment do not include an allowance for the corporations' income tax liabilities.

260 The defendants contend that the plaintiffs are entitled to receive only the amount which ought to have been received by them but for Mr Wajsman's refusal and failure to distribute profits to Mr Reiner. They argue that the corporations could only ever have been in a position to distribute (or the plaintiffs could only ever be entitled to receive) profits after tax.

261 The plaintiffs contend that the amount payable should not be reduced to account for company tax for two reasons.

262 First, the plaintiffs submit that the Court should assume no tax was payable, as Mr Reiner and Mr Wajsman would have structured the affairs of the corporations in a 'tax-effective manner'. The plaintiffs point out that the profit was not all distributed as drawings, but rather through tax-effective mechanisms, such as management fees, vehicle expenses and other personal payments. They contend that reducing the notional amount of profit available for distribution would be to proceed on the fiction that the partners distributed the profits entirely as dividends, after income tax had been paid on those amounts.

263 Secondly, the plaintiffs submit that as the amount of profit determined by the Court as being available for distribution is a notional sum and does not represent the actual recorded profits of the corporations, the corporations will not in fact have paid income tax on those amounts. Therefore, they contend that a reduction of 30% is likely to deliver a windfall to the corporations, and thus Mr Wajsman, as the amounts he has taken have not been so reduced.

264 The plaintiffs contend that if there is to be any deduction for income tax, then it should only be the deduction of the actual amount of income tax paid. They say that the defendants did not lead any evidence on the amount paid, if any.

265 I reject the plaintiffs' submission that the Court should assume that no tax was payable.

266 In my view, the appropriate adjustment would be to deduct the actual liability that was accepted by the Commissioner for Taxation. In his report, Mr Hockley provided a profit figure after tax; however, no evidence was led of the actual amount of income tax paid. Mr Wajsman has that information, but I am not aware whether Mr Reiner obtained discovery of SRW's, BBSS's, or BBSF's tax returns.

267 In those circumstances, I consider it appropriate to provide for a tax expense of 30% of the reported profits less payroll tax expense of each corporation, as recorded in the Comparative Document.

268 Unfortunately, the parties have been unable to agree even on the reported profits, despite in two cases only disagreeing by $1. In my calculations, given the small monetary sum at stake in the discrepancy, I have adopted a figure midway, save for when the difference is only $1, in which case I have adopted one of the figures.

269 Accordingly, I find that, prior to calculating Mr Reiner's share of the profits, the determined profits of SRW, BBSS, and BBSF should be reduced by the following amounts as a tax expense:

Tax expense, being 30% of reported profit[27]

Issue 21: Should the compensation payable to the plaintiffs for the period 1 July 2018 to the date of judgment be calculated by reference to the average total profit of the corporations determined by the Court for FY2017 and FY2018?

270 The plaintiffs contend that the average total profit of the corporations in FY2017 and FY2018 should be used as a deemed profit figure for FY2019 and FY2020 (to date). This is because there is no direct or expert evidence of the profits of the corporations in FY2019 or FY2020, as the valuation date selected was 30 June 2018.

271 The defendants are content for the average of the properly assessed profits of financial years 2017 and 2018 to be applied in respect of the period from 1 July 2018 until 24 January 2020.

272 As discussed in Issue 16 above, I find that the relevant period for compensation of profits is from 1 July 2016 until 24 January 2020, not until the date of judgment.

273 The compensation payable to the plaintiffs for the period 1 July 2018 to 24 January 2020 is to be calculated by reference to the average of Mr Reiner's share of the total profit of the corporations in the financial years 2017 and 2018, as determined by the Court.

Issue 22: Should any allowance or deduction be made to account for the possibility that the actual profits of the corporations since 1 July 2018 are or might be less than the average calculated in accordance with Issue 21?

274 The plaintiffs submit that no deduction should be made, because the profits in financial years 2019 and 2020 were probably higher than the average of financial years 2017 and 2018.

275 The defendants submit that payroll tax liabilities from 2015 and 2016 should be taken into account in calculating compensation for unpaid profits in FY2019 and FY2020. The defendants say that SRW, BBSS and BBSF incurred extraordinary delayed payroll tax liabilities relating to 2015 and 2016, which were not provided for or shared between the parties in those years. The defendants contend that SRW's payroll tax liability for 2015 and 2016 plus interest amounts to $101,428, that BBSS's payroll tax liability for the same period plus interest is $37,950, and that BBSF's corresponding liability is $37,459.

276 In 2019, Mr Wajsman self-reported the failure of the corporations to pay the appropriate payroll tax in prior years. This caused payroll tax liabilities for the corporations. As discussed above, the plaintiffs concede that account must be taken of payroll tax liabilities in determining the earnings and profits of SRW in FY2017 and FY2018.

277 Although the payroll tax liabilities relate to 2015 and 2016, I find that it is only fair that the corporations' expenses should be borne equally by the plaintiffs and the defendants. I accept the defendants' submission that the payroll tax liability relating to 2015 and 2016, and interest which was or is to be paid in 2019 or 2020, amounts to $101,428 for SRW, $37,459 for BBSF and $37,950 for BBSS.[28] Accordingly, I find that an allowance should be made for those payroll tax liabilities in determining the deemed profits of FY2019 and FY2020.

278 In calculating Mr Reiner's compensation for profits not distributed to Mr Reiner in FY2019 and FY2020, I find that a sum of $69,567 should be deducted from the compensation payable to him, this being Mr Reiner's share of the payroll tax liability.[29]

Issue 23: If the answer to Issue 21 is no, are the plaintiffs entitled to compensation for the period on and from 1 July 2018 and, if so, how is such compensation to be calculated?

279 As I have found the answer to Issue 21 is yes, it is unnecessary to decide this issue.

Issues 24 and 25: Should an award of interest be made on the amounts found to be payable for the shares and for compensation, and if yes, what interest rate should apply, when should interest start to run, and on what basis should interest be calculated?

280 In the Calculation of Plaintiffs' Claim document, the plaintiffs quantified their interest claim as interest on their share of unpaid adjusted profits from 30 June of each respective year, at a rate of 10% per annum, which is the rate currently fixed under s 2 of the Penalty Interest Rates Act 1983 (Vic). The plaintiffs do not press for interest on the sum to be paid for their shares.

281 The plaintiffs submit that justice cannot be done to Mr Reiner without an appropriate award of interest on the amount of compensation fixed by the Court. They say that Mr Reiner has been kept out of his money for a significant period of time and Mr Wajsman has had the use of those funds in the meantime.

282 The plaintiffs submit that in Re Optimisation Australia Pty Ltd (Costs),[30] Brereton J said that he did not doubt that the Court's power under s 233 of the Act included a power to award interest to reflect 'the time value of money'.[31] In that case, Brereton J awarded interest 'on ordinary compensatory interest principles'.[32] The plaintiffs rely on those same basic principles in contending that an award of interest should be made.

283 The plaintiffs submit that for each financial year for which compensation is ordered, interest should run from the last day of that financial year up to the date of judgment. They submit that, although this method is advantageous to Mr Wajsman as the amounts sought were in fact payable throughout the year on a monthly basis, the method is convenient and avoids the need for a complicated and costly exercise.

284 As mentioned, the plaintiffs submit that the rate to be applied should be that fixed under the Penalty Interest Rates Act 1983 (Vic), being 10%.[33] They argue that the Court should not be deterred by any concern that the imposition of that rate might be said to be punitive as Mr Wajsman's conduct was wrongful and improper. The plaintiffs contend that Mr Wajsman improperly and oppressively failed to distribute profits of the business to Mr Reiner, which represented Mr Reiner's sole source of income, and then resisted all attempts by Mr Reiner to obtain a fair outcome, including through his behaviour in this litigation.

285 The defendants submit that the claim for interest is not substantiated and is overstated.

286 First, the defendants contend that the claim under s 233 of the Corporations Act is not a claim for debt or for damages within the meaning of ss 58 or 60 of the Supreme Court Act 1986 (Vic). They submit that, accordingly, the Penalty Interest Rates Act 1983 (Vic) is not engaged directly, and the rationale is inapplicable by analogy. For the reasons discussed below, I reject this submission.

287 Second, the defendants say that the interest rate provided by that Act is punitive and not compensatory, and interest at such a high rate would exceed the effect of oppressive conduct.

288 The defendants point to Benjamin Corp Pty Ltd v Smith Martis Cork & Rajan Pty Ltd, where Carr J held that a claim for interest at a rate of 10.5% was 'on the high side' even in what was then an 'economic climate of gradually increasing interest rates'.[34] Carr J allowed an interest rate of 7%.[35] The defendants note that the allowed interest rate was 1.75% above the then prevailing Reserve Bank of Australia ('RBA') cash rate.[36]

289 The defendants point out that this proceeding has been conducted in a climate of reducing interest rates. When submissions were filed, the RBA cash rate was 0.75% and the inflation rate was 1.8%. At the time of writing, the RBA cash rate is 0.25%, following a further reduction.

290 The defendants contend that, as determined in Benjamin, any compensatory award of interest should correspond with these measures of the value of money over the period in dispute, and be a rate no more than 3%.

291 In particular, if the Court is minded to award interest, the defendants submit that the RBA cash rate or the rate of inflation, prevailing from time to time, are objective measures of the value of money over time, and accordingly are objective measures of the rate required to compensate the plaintiff for delay in payment. They contend that any greater sum would represent a windfall gain. Alternatively, the defendants submit that a rate modestly above those rates should be used, to reflect the possible value of any investment of that money.

292 The defendants submit that the plaintiffs' claim does not take into account the interim payments already made, which should be applied to the compensation in respect of earliest unpaid profits. The defendants' calculations in the Comparative Document did not, however, provide for adjustments to interest to account for interim payments.

293 Finally, the defendants submit that, given that the profits for each of the corporations in each of the financial years in question would not be immediately known and able to be paid to the plaintiffs as at 30 June of each of those financial years, that interest should instead run from the 30 July following the conclusion of each relevant year.

294 Section 60 of the Supreme Court Act 1986 (Vic) provides:

60 Interest in proceedings for debt or damages

(1) The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.

(2) Nothing in this section -

(a) authorises the granting of interest on interest;

(b) applies in relation to any sum on which interest is recoverable as of right by virtue of any agreement or otherwise;

(c) affects the damages recoverable for the dishonour of a negotiable instrument;

(d) authorises the allowance of any interest otherwise than by consent on any sum for which judgment is entered or given by consent;

(e) applies in relation to any sum on which interest might be awarded by virtue of section 58 or 59; or

(f) limits the operation of any enactment or rule of law which, apart from this section, provides for the award of interest.

(3) If the damages awarded by the Court or jury include or if the Court in its absolute discretion determines that the damages awarded include any amount for -

(a) compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest;

(b) compensation for loss or damage to be incurred or suffered after the date of the award; or

(c) exemplary or punitive damages -

the Court must not allow interest in respect of any amount so included or in respect of so much of the award as in its opinion represents any such damages.

295 In Re Adaz Nominees Pty Ltd (No 6),[37] I considered the application of s 60(1) of the Supreme Court Act 1986 (Vic). I there referred to the decision of the High Court of Australia in Victorian WorkCover Authority v Esso Australia Ltd[38] as follows:

The High Court of Australia addressed the meaning of the phrase 'any proceeding for the recovery of debt or damages' as appearing in s 60(1) of the SCA. Under the Accident Compensation Act 1985 ('Compensation Act'), a third party who was liable to pay damages to an injured employee was obliged to indemnify the Victorian WorkCover Authority ('VWA'), established under the Compensation Act, and to an insurer FAI, for payments they had made to the injured employee.

At the trial, Cummins J made orders that Esso pay particular sums to the VWA and FAI, with a specified amount of interest. His Honour also made a declaration as to FAI's entitlement to indemnification by Esso in respect of further payments of compensation. On appeal, the Court of Appeal (comprising Winneke P, Tadgell, and Chernov JJA) set aside the orders and declarations made by the primary judge and in place substituted an order that Esso pay certain sums to the VWA and FAI, and that FAI was entitled to be indemnified by Esso in respect of further payments up to a maximum sum.

The Court of Appeal held that the trial judge should not have allowed interest upon the sums that Esso was ordered to pay. The Court of Appeal accepted Esso's submissions that the action tried by Cummins J had been a claim to enforce an entitlement to indemnity created by statute which could not be comprehended by the words 'proceeding for the recovery of debt or damages' as contained in s 60(1) of the SCA. The Court of Appeal accepted that the orders for payment of the sums to each of the VWA and FAI were 'a necessary incident' of the entitlement to indemnity which was established, and that the sums were neither a debt nor damages.

The High Court in VWA v Esso observed that s 60 could be traced back to s 422 of the Supreme Court (Common Law Procedure) Act 1865 (Vic) (the '1865 Act'), which in turn was derived from s 29 of the Civil Procedure Act 1833 (UK). After thoroughly canvassing the history of s 60(1) and its predecessors in the United Kingdom, the plurality, Gleeson CJ, Gummow, Hayne, and Callinan JJ, held that the phrase 'any proceeding for the recovery of debt or damages' in s 60 should be understood:

... as a composite expression. It embraces any proceeding in which a claim for money is made, in contrast to declaratory relief and claims for specific forms of relief such as mandatory injunctions, charging orders and orders for specific performance. The circumstance that relief of that description is sought in addition to a money claim does not deny the application of s 60 in respect of that money claim. The phrase in s 60 is not 'in any proceeding only for the recovery of debt or damages'. Thus, the claim in this litigation for declaratory relief to determine the 'ceiling' did not take the case outside s 60 with respect to the money claims which were made.

Thus the High Court held that the claim to be indemnified fell within s 60(1), as it was a claim for a money sum.[39]

296 In this case, the plaintiffs claim a money sum under s 233 of the Corporations Act as compensation for the failure of the defendants to distribute profits. Applying the principles espoused in the authorities above, I reject the defendants' submission that the claim for interest under s 233 is not a claim for debt or for damages within the meaning of ss 58 or 60 of the Supreme Court Act 1986 (Vic).

297 Interest rates have varied over the course of this dispute. For example, at 30 June 2017, the RBA cash rate was 1.50%. It has reduced from time to time since then and, at the time of writing, the cash rate is 0.25%.

298 In view of the varying level of interest from 2017 to now, I consider the Penalty Interest Rate of 10% to be too high to do justice between the parties. In my view, a rate of 5% per annum would be adequate to compensate the plaintiffs for the defendants' oppressive conduct in withholding profits from the plaintiffs.

299 As for the interim payments, I accept the principle that some allowance should be made for these in fixing the amount of interest to be paid, which will be calculated up to the proposed date of final orders.[40] However, for the reasons that follow, no allowance need be made. I consider it appropriate to treat lump sum payments as payments towards the fair value of the plaintiffs' shares, for which the plaintiffs do not claim interest. It only remains to consider the interim monthly compensation payments of $15,000, which commenced 12 June 2019. As will be seen in my calculations, the sum for compensation for profits due to Mr Reiner in FY2020, less the pro-rata apportionment of Mr Reiner's share of payroll liability, is $152,776.[41] To date, Mr Wajsman has paid $180,000 in monthly payments. The additional payments made by Mr Wajsman above the profits due to Mr Reiner amount to $27,224, which represents just less than two monthly interim payments of $15,000. Given the small sum of interest which would have accrued in those payments over the period of less than two months, no adjustment to interest to account for interim payments will be made.

300 As regards the date from which interest is payable, I accept the plaintiffs' submission that, whilst the payments were payable monthly, it is convenient to make interests payable from the last day of the financial year. Accordingly, I reject the defendants' submission that an additional month would be needed to determine profits for the prior financial year.

301 I propose to use the tables in the Comparative Document as a template for the calculation of the moneys payable to the plaintiffs.

302 I set out below the calculations I have made to reach the amount to be paid to the plaintiffs.

A. Fair value for the plaintiffs' shares in the corporations (Judgment table 9)

B. Compensation for loss of profits for FY2017, FY2018, FY2019 and FY2020 (Judgment table 14)

Less amounts paid to Mr Reiner since the May/June 2019 trial

303 Particulars of the quantum of each claim are set out below.

Plus management fees paid to Ben Wajsman[44]

Plus add-back vehicle expenses (in Schedule 2A)[45]

Plus add-back accepted disputed add-backs, excluding IT costs (Schedule 3)[46]

304 The parties have agreed that the Court should use the average of the two years' adjusted EBITDA as the maintainable earnings to value SRW.

Less adjustment to GES Service Trust Loan[53]

305 As discussed in Issue 13, BBSS had insufficient maintainable earnings to be valued on a CME basis. BBSS's value = nil on a net asset basis (agreed).

Plus add-back to Mr Wajsman's management fees[55]

Plus add-back vehicle expenses (Schedule 2A)[57]

Plus accepted add-backs (Schedule 3)[58]

Plus add-back write-off of Axiom investment[60]

Reported profit (less payroll tax expense) (agreed)

Plus management fees paid to Mr Labrie and Sharrock[65]

Plus additional contested add-backs (Schedule 4)[66]

Mr Reiner's average share of profit in FY2017 and FY2018 = $313,780

Mr Reiner's share of the 2015 and 2016 payroll tax liability = ($69,567)[69]

Less pro-rata apportionment of Mr Reiner's share of payroll liability

Less pro-rata apportionment of Mr Reiner's share of payroll liability

306 I direct that the plaintiffs provide draft orders reflecting my decision within seven days of this day. I will hear the parties on costs and the final form of the orders on 23 June 2020, or such other date as the Court directs. If a payment is made after this day pursuant to my order of 11 June 2019 for periodic payments to Mr Reiner, then the plaintiffs should adjust the payment sum in the draft orders.

[1] Re SRW Nominees Pty Ltd [2019] VSC 547 ('Liability Judgment').

[2] Mr Reiner was given leave to file an amended points of claim dated 22 May 2019.

[3] [2019] VSC 547.

[4] Corporations Act 2001 (Cth) s 233(1)(d).

[5] [2003] NSWSC 910; (2003) 47 ACSR 514.

[8] [1986] 2 WLR 158.

[10] [1995] FCA 1447; (1995) 59 FCR 122.

[12] (2014) 291 FLR 246.

[14] (1994) 15 ACSR 536, 540.

[15] Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343, 365 [125] (Barrett J).

[16] Re Scitec Group Ltd [2012] EWHC 661 (Ch).

[21] In Re Bird Precision Bellows Ltd [1986] 2 WLR 158, 166.

[22] ES Gordon Pty Ltd v Idameneo (No 123) Pty Ltd (1994) 15 ACSR 536, 540.

[23] The plaintiffs' expert, Mr Jackson, used a higher maintainable earnings figure. This is likely because he was instructed not to take into account the payroll tax liability, a position which the plaintiffs later resiled from.

[24] Indeed, the defendants contend that the evidence, namely the Mercer Report, points to Mr Sharrock and Mr Labrie receiving well below a commercial rate of remuneration. The plaintiffs led no evidence of commercial rates of remuneration.

[25] For BBSS, the Comparative Document provided figures for reported profit (before payroll tax) and for payroll tax expense. I have deducted the agreed payroll tax expense of $19,262 from the agreed reported profit of $88,846.

[26] I have deducted the agreed payroll tax expense of $16,051 from a reported profit of $20,770, which is a midpoint between both parties' positions, calculated in the manner I discussed above.

[27] I have calculated the tax at 30% of reported profit.

[28] The plaintiffs made no objections to the defendants' figures.

[29] I have calculated this sum by adding together 50% of SRW's liability of $101,428, 25% of BBSF's liability of $37,459, and 25% of BBSS's liability of $37,950. The percentages refer to Mr Reiner's effective equity share in each corporation.

[30] [2018] NSWSC 280.

[33] Being the maximum rate allowable under the provisions of the Supreme Court Act 1986 (Vic), s 60.

[34] [2003] FCA 1471, [358].

[36] On the date of judgment, 11 December 2003, the RBA cash rate stood at 5.25%.

[37] [2019] VSC 14 ('Re Adaz (No 6)').

[38] (2001) 207 CLR 520.

[39] Re Adaz (No 6), [18]-[22] (citations omitted).

[42] This amount comprises: payment of $200,000 on 18 June 2019, pursuant to the Orders of Robson J made on 11 June 2019, voluntary payments of $40,890.50 and $28,318.99 on 8 and 9 September 2019 (towards the unpaid school fees of Mr Reiner's children); payments of $100,000 on 2 December 2019 and $1,143,002 on 24 January 2020 paid pursuant to the Orders of Robson J made on 26 November 2019; and monthly payments of $15,000 paid on 12th day of each month, from 12 June 2019 to 12 May 2020, pursuant to the 11 June 2019 Orders. I assume the monthly payments continued to be paid in accordance with my orders.

[48] Average of SRW adjusted EBIDTA from FY2017 and FY2018 (Judgment table 5).

[51] Agreed on by both experts, and consistent with the plaintiffs' figure.

[53] Mr Jackson made an adjustment of ($5,548) for 'GES Service Trust Payment'. The plaintiffs' figure allows for the adjustment made by Mr Jackson.

[54] Midpoint between plaintiff and defendant positions in the Comparative Document.

[59] This figure of $28,850 comprises the add-backs in Schedule 3 for which Mr Wajsman did not provide an invoice, plus $1,000 for the IT expenses which I disallowed.

[64] Midpoint between plaintiff and defendant positions in the Comparative Document.

[67] This figure differs from the Schedule 4 add-backs in determining the fair value of shares as, in the compensation context, the plaintiffs did not press fines and penalties which amounted to $220.88.

[69] Being the sum of 50% of SRW's liability of $101,428, 25% of BBSF's liability of $37,459, and 25% of BBSS's liability of $37,950. The percentages refer to Mr Reiner's effective equity share in each corporation.

[70] I have apportioned the liability pro-rata between FY2019 and FY2020 to 24 January 2020 to calculate the FY2019 share. There are 572 days in FY2019 and up to 24 January 2020. I have divided Mr Reiner's payroll tax liability of $69,567 by the 572 days, and multiplied the result by 365.

[71] I have arrived at this figure by dividing the average of Mr Reiner's share of the profits in FY2017 and FY2018 by 365 days, and multiplied the result by 207 days, to determine the pro-rata profit for FY2020 up to 24 January 2020.

[72] I have applied the calculation as in the footnote above to determine the pro-rata liability for FY2020 (up to 24 January 2020). That is, I have divided Mr Reiner's payroll tax liability by the 572 days and multiplied the result by 207 days.

[74] Being $313,780 less the apportioned payroll tax liability of $44,391.