Re George Raymond Pty Ltd; Salter v Gilbertson [1999] VSC 460

6. The first generation comprised the three partners, including Mr R.J. Gilbertson and Mr Ord whose son, Robin, married Laura, Mr R.J. Gilbertson's daughter. In 1928 R.J. Gilbertson Pty Ltd ("RJG") was incorporated to carry on the business and, by 1988, RJG and its subsidiaries owned and operated a number of abattoirs, meat processing plants and related enterprises in various States of Australia and sold their products throughout Australia and overseas. They also had substantial pastoral and other land holdings.

9. Following the death of Mr R.J. Gilbertson the management of the enterprises passed to five family heads who comprise the second generation, Robert H. Gilbertson, Frederick C. Gilbertson, Noel Overall, Robin Ord and John A. Gilbertson.

12. In 1960 R.J. Gilbertson (Holdings) Pty Ltd ("Holdings") was incorporated as the holding company for the group and in 1962 five further companies were incorporated as vehicles for each of the five family groups each of which held 20% of the share capital of Holdings. These companies and the family groups which they represented are as follows:

* Ian Graham ("IGPL") - Frederick C. Gilbertson family

* John Alexander Pty Ltd - John A. Gilbertson family

20. This proceeding concerns the first of the family group companies, GRPL, and the members of that family group, the Robert H. Gilbertson family. The members of this family group may themselves be conveniently categorised in four sub-groups, each headed by a child of Mr R.H. Gilbertson -

(a) The George Gilbertson family sub-group, comprising George Robert Gilbertson the first respondent, his wife Margaret Grace Gilbertson the second respondent, their daughters, Susan Ruth Yeend the third respondent and Christine Margaret Bliss the fourth respondent.

(b) The Raymond Gilbertson family sub-group, comprising Raymond John Gilbertson the sixthnamed respondent and his children, Andrea Joan Ashford the seventhnamed respondent, Christopher James Gilbertson the eighthnamed respondent, Samantha Joy Gilbertson the ninthnamed respondent and Robert Edward John Gilbertson the tenthnamed respondent.

(c) The Salter family sub-group, comprising Joy Margaret Salter the firstnamed applicant, her husband Raymond Cameron Salter the secondnamed applicant and their sons Paul James Salter the thirdnamed applicant and Robert Cameron Salter the fourthnamed applicant.

(d) The Paul Gilbertson family sub-group comprising Paul Langdon Gilbertson the eleventhnamed respondent, his wife Beverley Elaine Gilbertson the twelfthnamed respondent and their children Karen Lee-Anne Gordon the thirteenthnamed respondent, Heather Ruth Conlon the fourteenthnamed respondent, Debra Gay Gilbertson the fifteenthnamed respondent and Bradley Paul Gilbertson the sixteenthnamed respondent.

27. The corporate entity of this, the Robert H. Gilbertson family group is, as I have mentioned, GRPL. In 1988 there were 76,803 shares issued in GRPL, which shares were held by the members of the family sub-groups as follows:

Some shares within the George Gilbertson family sub-group were held by a company, Glenview Investments Pty Ltd (the fifthnamed respondent) as trustee of two discretionary trusts whose objects are the grand-children and further issue of Robert H. Gilbertson.

32. GRPL was not at any relevant time an active trading company. Historically, its principal source of income prior to 1989 was dividends from its 20 percent interest in Holdings. I say historically because, in the late 1980s, no dividends were being paid by this company. GRPL also owned farming land at Tylden and land at Melton and earned some income from agistment and other pastoral activities. Its management was entrusted to its directors, the children of Robert H. Gilbertson: Mr George Gilbertson, Mr Ray Gilbertson and Mr Paul Gilbertson. Mrs Salter was not, until 2 February 1990 a director of this company, but she had been its secretary between 1962 and that date.

35. A significant asset of GRPL in 1988 was its holding of 20 percent of the shares of Holdings. This company, in turn, held 46.6 percent of the shares in the principal operating company of the Gilbertson group, RJG. The remaining 53.4 percent of the shares of RJG were then held directly by a number of family members, trusts and some long-term employees of the Gilbertson group companies. It is convenient to treat these direct shareholders in three groups -

* The Robert H. Gilbertson family group: certain of the members of this family group, including Mrs Salter (0.2 percent), Mr George Gilbertson (3.4 percent) and his wife Mrs Margaret Gilbertson (1.7 percent) and certain trusts for the members of this family group held 2,734,927 shares (a total of 13.7 percent).

* The Frederick C. Gilbertson family group: certain of the members of this family group and certain trusts for these members held 2,146,264 shares (10.7 percent).

* Other shareholders including members of the John A. Gilbertson family group, the Noel Overall family group and the Laura Ord family group held 5,814,413 shares (29 percent).

41. RJG in 1988 conducted the Gilbertson meat business. It also owned land for residential sub-division at Caroline Springs. Holdings held, in addition to its 46.6 percent shareholding in RJG, all of the shares in Superior Foods Pty Ltd, a company which later became Marwen Properties Pty Ltd ("Marwen Properties"). Marwen Properties owned land at Derrimut for industrial sub-division known as the Gilbertson Industrial Estate.

44. The Board of Directors of RJG in 1988 comprised Mr George Gilbertson, Mr Ian T. Gilbertson, Mr Bruce N. Overall, Mr John A. Gilbertson and his two sons Andrew and Ken. Mr George Gilbertson, who had become secretary of RJG in 1964 and a director in 1972, was its chairman.

47. By 1988 the meat business was not returning profits to RJG or dividends to its shareholders. Furthermore, three of the five family groups, the Noel Overall family group, the Laura Ord family group and the John A. Gilbertson family group wanted to withdraw. By December 1988 it had been agreed that the other two family groups would buy the shares of the outgoing investors for approximately $37.6M and that this would be achieved with the assistance of a longstanding Japanese customer of RJG, Itoman Corporation Ltd, and by reorganising the share structure of Holdings, using for the purpose a new company, Marwen Investments Pty Ltd ("Marwen Investments"). The reorganisation of the Gilbertson group which this involved was referred to in this case as the Itoman reorganisation. The applicants complain that this reorganisation involved oppression of them and unfair prejudice at the hands of Mr George Gilbertson and his brothers.

50. Between 1988 and 1996, GRPL and certain other companies within the Gilbertson group made substantial loans, interest free and unsecured to Marwen Investments. These loans constitute the second oppression of which the Salters complain.

53. In 1996 the Gilbertson group sold its meat business and reorganised its share structure. This reorganisation, referred to as the Marwen reorganisation, constitutes the third area of oppression complained of.

57. At the very end of the trial counsel for the applicants tendered as Exhibit 33 revised schedules of loans made. This arose because an earlier schedule which had been tendered as part of Exhibit 15 did not show the individual advances with dates. I invited counsel for the respondents to indicate by subsequent memorandum whether they accepted the accuracy of the revised schedule or objected to the tender. Exhibit 33 was then the subject of extensive post-trial correspondence between the court and counsel. I have had regard to this correspondence, in the sense that I have done so in respect of a matter asserted in it where the parties are clearly agreed upon its accuracy. I should record that it comprised faxes and memoranda from counsel for the respondents dated 11 October 1999, from the court dated 14 October 1999, from counsel for the respondents dated 21 October 1999, from counsel for the applicants dated 22 October 1999, from counsel for the respondents dated 26 October 1999, from counsel for the applicants dated 28 October 1999, from counsel for the respondents dated 3 November 1999, from counsel for applicants dated 8 November and from counsel for the respondents dated 10 November 1999. By fax dated 11 November 1999 I directed that this correspondence cease. I make no complaint that counsel for the respondents acceded to my invitation. It does, however, seem to me that the continuance of the trial in this way by correspondence is not desirable.

60. I should record also that, after the conclusion of the trial a number of financial statements and other company records were tendered by consent. These were marked Exhibits 34, 35 and 36.

63. Finally, the parties were in agreement that I should not deal in this judgment with all of the issues in this case. I am to determine whether, and, if so, in what respects, oppression has been made out and what is the appropriate remedy. It was apparent as the trial progressed that no party contended for a winding up order and that, if oppression was made out, the proper course would be for me to make an order for the purchase of the shares of the Salters. The parties, then, were in agreement that the implementation of such an order, including any adjustments necessary to the accounts and the fixing of the price, should be stood over for further argument and, perhaps, evidence. Accordingly, I shall make findings on the oppression allegations in sufficient detail for the parties to return, if that be necessary, to deal with those matters.

67. Before I embark upon an analysis of the complex transactions and factual issues thrown up in this case, I will venture some general observations on the legal principles to the extent that they are relevant to the issues before me, for those were not in dispute.

70. The applicants allege that the affairs of GRPL have been conducted in a manner that is oppressive, unfairly prejudicial to or unfairly discriminatory against them as minority shareholders. It is only if the court forms an opinion that this allegation is made out that it may exercise the powers conferred upon it by s. 246AA(2). For brevity, I shall refer to conduct of one or other of these kinds simply as oppression or oppressive conduct, unless it is necessary that I draw some distinction between them. I accept the analysis of oppression set out by Richardson J in Thomas v H.W. Thomas Ltd [1984] 1 NZLR 686. This case, moreover, and those which have followed it make it clear that the interest of the court is focussed, not so much on the intent behind the acts of the majority as on their effect upon the minority. For the same reason, it has been held that the fact that the conduct in question was engaged in bona fide and even on legal or other advice, is no defence to an allegation of oppression: Re M Dalley & Co Pty Ltd [1968] HCA 82; (1968) 1 ACLR 489 at 492, per Lush J. This does not mean that the honesty or probity of the majority is to be ignored. Under the statute as it stood before 1984, oppression may manifest itself in conduct of that nature: Scottish Co-Operative Wholesale Society Ltd v Meyer [1959] AC 324 at 342, per Viscount Simonds LC.

73. The task of the court in determining whether allegations of oppression have been made out is to examine the conduct, not in isolation, but in the context in which it takes place: Reid v Bagot Well Pastoral Co Pty Ltd [1993] SASC 4323; (1993) 12 ACSR 197 at 212, per Debelle J (with whom King CJ and Millhouse J agreed). The mere fact that the conduct has an adverse impact on a minority shareholder does not establish oppression. The mere fact that a shareholder has an interest which is a minority interest means that this interest is liable to be outvoted by the majority and, further, that the shareholder is at risk that a decision made by the majority may have a financial consequence adverse to the minority. This is not, for that reason alone, oppression: Re M Dalley & Co Pty Ltd [1968] HCA 82; (1968) 1 ACLR 489 at 492, per Lush J. Moreover, under the enlarged provision introduced in Australia in 1984, the added matters include the word "unfairly". But, as Richardson J pointed out in Thomas v H.W. Thomas Ltd, the enlarged provision has a wider meaning, picking up conduct that is unjustly detrimental to a minority shareholder. It must, therefore, be shown that the conduct was beyond power or performed otherwise than in good faith or is unfair in accordance with ordinary standards of reasonableness and fair dealing: Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 at 472 per Brennan J. His Honour in that case added at 472-3:

"The question of unfairness is one of fact and degree which s. 320 requires the court to determine, but not without regard to the view which the directors themselves have formed and not without allowing for any special skill, knowledge and acumen possessed by the directors. The operation of s. 320 may be attracted to a decision made by directors which is made in good faith for a purpose within the directors' power but which reasonable directors would think to be unfair. The test of unfairness is objective and it is necessary, though difficult, to postulate a standard of reasonable directors possessed of any special skill, knowledge or acumen possessed by the directors. The test assumes (whether it be the fact or not) that reasonable directors weigh the furthering of the corporate object against the disadvantage, disability or burden which their decision will impose, and address their minds to the question whether a proposed decision is unfair. The court must determine whether reasonable directors, possessing any special skill, knowledge or acumen possessed by the directors and having in mind the importance of furthering the corporate object on the one hand and the disadvantage, disability or burden which their decision will impose on a member on the other, would have decided that it was unfair to make that decision."

77. The court is not, generally speaking, concerned with the commercial wisdom of managerial decisions honestly and properly arrived at: Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 at 469, per Brennan J. In Re Bright Pine Mills Pty Ltd [1969] VicRp 121; [1969] VR 1002 at 1011, O'Bryan, Smith and Pape JJ expressed themselves in this way:

"It is true to say, however, that it was not intended by s.186 or s.94 to give jurisdiction to the Court (a jurisdiction the courts have always been loath to assume) to interfere with the internal management of a company by directors who in the exercise of the powers conferred upon them by the memorandum and articles of association are acting honestly and without any purpose of advancing the interests of themselves or others of their choice at the expense of the company or contrary to the interests of other shareholders. On the other hand, it was accepted by Mr. Young, for the appellants that conduct would be oppressive within the meaning of s.186 if directors or shareholders holding a controlling power in the direction of the company's affairs were to pursue a course of conduct designed by them to advance their own interests or the interests of others of their choice to the detriment of the company or to the detriment of other shareholders."

Section 186 referred to was the comparable provision in the Companies Act 1961, but it is in different terms from the present s. 246AA. Nevertheless, I do not doubt that the passage is as applicable to the Corporations Law today as it was in 1963 when the case was decided.

82. A director of a company owes fiduciary duties to that company. One such duty is not to place themself in a position where their duty to the company conflicts with their own interest. A director in such a position may properly act only with the fully informed consent of the company. See, for example, Shears v Chisholm [1994] VicRp 75; [1994] 2 VR 535 at 627-8, per JD Phillips J. Following full disclosure, this consent may have to be obtained from the other directors, as was the case in Queensland Mines Ltd v Hudson (1978) 18 ALR 1 (PC); 52 ALJR 399, or from the shareholders, as in Furs Ltd v Tomkies [1936] HCA 3; (1936) 54 CLR 583 at 590-1 per Latham CJ. In the course of considering these and other cases in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688 at 720, Young J observed:

"The cases in this area of the law may sometimes appear to give a harsh result to a more or less innocent director. However, as a matter of policy, equity bares its teeth to ensure that fiduciary agents lead a pure corporate life."

86. An aspect of the severity of the law towards delinquent fiduciaries is that it is no defence that they acted honestly and reasonably or that the acts complained of produced a benefit to the complainant which it would not otherwise have enjoyed: Warman International Ltd v Dwyer [1995] HCA 18; (1994) 182 CLR 544 at 558, per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ. The common remedy for breach of such a duty is to require the fiduciary to account for profit or benefit received as a result of undertaking an investment which ought to have been offered to the complainant. Moreover, it is no answer to such a claim for the fiduciary to say that the complainant would not or could not have taken up the investment: Warman International Ltd v Dwyer [1995] HCA 18; (1994) 182 CLR 544 at 557-8.

89. GRPL is a member of a group of companies whose fortunes to a greater or lesser extent are intertwined. So far as this case is concerned GRPL is a holding company, holding shares in companies which actually engage in the commercial profit-making activities of the Gilbertson group. As will appear, in certain circumstances, witnesses in this case have sought to justify decisions and conduct as being in the interests of the group as a whole and in the interests of the ultimate shareholders, including the Salters. This is doubtless correct in a commercial sense and, to the extent that the court is concerned to assess the conduct of those in control of GRPL, these broad considerations cannot be ignored. Nevertheless, the primary legal obligation of a director in the management of a company is owed to that company. Where the question is whether the directors of a company have complied with their fiduciary obligations, such as that to act in good faith in the interests of or for the benefit of the company, or that to avoid conflicts of duty, the court will be concerned that the director complied with the duty owed to that company and not to other companies, even interrelated companies, within the group: Walker v Wimborne [1976] HCA 7; (1976) 137 CLR 1 at 6, per Mason J; Jenkins v Enterprise Gold Mines NL (1992) 10 ACLC 136 at 146-7, per Malcolm CJ, Rowland, Franklyn JJ. The other side of this principle is that, where a director of company A conducts the affairs of that company in compliance with the duties owed to that company, it may be difficult to characterise that as oppressive conduct in the management of company B simply because the director is a director of both companies and the act of company A has had an adverse effect on company B or its members.

92. The group of companies of which GRPL is a member was historically a family group in the sense that its shareholders and directors are, to a substantial extent, members of the Gilbertson family. Whether, for oppression purposes, a company should be regarded as a family company, or a group of companies as a family group, is a question of fact. Moreover, unlike companies, families do not last for ever. The characteristic of the company or group of companies as a family company or family group may change or disappear as the years pass and generations are replaced by successive generations. In this case, the current members of the Gilbertson family have drifted apart somewhat but it was submitted that the conduct of the affairs of GRPL must be understood against the background that dealings between family members are often informal, that loans within a family may not necessarily be made on a commercial basis and that certain family members may assume or be given a position of dominance over others. The requirements of s. 246AA that the conduct in question have the characteristic of unfairness and the concern of the courts to assess that conduct in a realistic way having regard to all relevant considerations, means that, where appropriate, this aspect of the conduct should not be ignored. See, for example, Thomas v H.W. Thomas Ltd [1984] 1 NZLR 686 at 695 per Richardson J; McWilliam v L.J.R. McWilliam Estates Pty Ltd (1990) 20 NSWLR 703 at 711, per Young J; Re Lowes Park Pty Ltd (1994) 62 FCR 535 at 552, per Burchett J.

96. It is convenient at this stage that I say something about each of the principal witnesses and my assessment of them.

99. Mr George Gilbertson is evidently considered by his brothers and sisters as the head of the R.H. Gilbertson family group and a very significant person in the management of the Gilbertson group generally. He is by training an accountant or a chartered accountant. He is the eldest of the children of R.H. Gilbertson, having been born in 1933. He has held directorial office in the companies with which I am concerned for over 30 years: of Holdings since 1960, of GRPL since 1962, of RJG since 1972 and of Marwen Investments since 1988. Mrs Salter described him as the Chairman of Directors of GRPL, of Holdings, of Marwen Properties and she thought he was Managing Director of RJG. It may be, however, that, at least in 1996, his proper title was that of Chairman rather than that of Managing Director. He was on any view a man whose views commanded respect within the family and he knew this to be the case. He told me that he acknowledged that his position carried with it responsibilities to the Gilbertson family members, responsibilities which he respected. He is a man who looked to the interests of the Gilbertson group as a whole as he perceived them. In this, his task was not easy. He must have been conscious that he was responsible for a large commercial enterprise which had been prosperous under the management of his father's generation and that of his grand-father. It was, however, an enterprise that was losing momentum to the point where collapse was not out of the question. Counsel for the respondents spoke of the events with which I am concerned as his responses to a series of crises for the Gilbertson group. This was probably correct. I am sure that Mr George Gilbertson's burden when confronted with these crises, was a heavy one and that he saw it as one which he alone, or perhaps with his cousin Ian, must bear.

102. He was accustomed to being the decision-maker; he was accustomed to the members of the family group which he led falling in with what he saw as the proper course to be followed. Such little evidence as was led on this matter suggests that he was not keen to trouble them with information underlying his decisions. In the events of 1988 and 1996 he preferred simply to announce his decision rather than to involve other affected parties in the decision-making process. In the context of the events with which I am concerned he perceived little difference between the interests of the R.H. Gilbertson family group and his own interests. What was good for him was good for them because he had the interests of the family as a whole as his abiding concern; and what was good for them was good for him. This attitude is demonstrated by his decision in 1988 to take control, with his cousin, Ian, of Marwen Investments and to assume personally the greatest liability under the 1988 guarantees to Itoman Australia. It meant, too, that any criticism of his conduct, particularly where he perceived the criticism to be motived by self interest and, more particularly, where the critic had not over the years shared the burdens of management, as he had, was seen by him as ingratitude. In paragraph 9.13 of his affidavit of 6 May 1999 he sets out the shareholdings in RJG in December 1988 and observes, significantly, that Mrs Salter "was one of the few shareholders in RJG who did not work in RJG (apart from working as a personal assistant for a short period while our father was alive)". He said that the allegations of the Salters have caused him deep sadness and distress and I accept this to be the case. It also caused him to be resentful of their ingratitude and, as the events of 1996 showed, to adopt a defensive attitude towards those who he considered to be obstructive dissidents.

105. His two younger brothers Mr Ray Gilbertson and Mr Paul Gilbertson were born in 1936 and 1942 respectively. Mr Ray Gilbertson is by training a qualified electrician and was employed by RJG for 20 years as an electrical engineer. Mr Paul Gilbertson, too, was employed within the Gilbertson group as a stock buyer. He gave his present occupation as that of lawn-mowing contractor. The two brothers have no accounting background. Until Mrs Salter joined the Board in 1990, these two men with Mr George Gilbertson had the conduct of the affairs of GRPL. They make no criticism in this proceeding of any decision of their brother, no complaint of any action of GRPL. My impression of them is that in 1988 to 1996 they did not have a detailed understanding of the technical accounting and financial implications of the complicated events or of the transactions which are the subject of this trial. They were, not surprisingly, content to act upon the recommendations of their elder and more experienced brother.

108. Mrs Christine Bliss, the daughter of Mr George Gilbertson, was born in 1962. She is by profession a chartered accountant and was employed as such by Arthur Young & Co between February 1985 and July 1989. She then took up the position of financial controller of RJG. She had, prior to this, become the secretary of Marwen Investments in April 1988 and of Holdings in February 1989. She remained with the Gilbertson group until February 1995. During this period 1989 to 1995 she held the positions of director of RJG from 20 June 1991 and its secretary from 1 July 1992, in each case until 17 February 1995 when she left the Gilbertson organisation. She was, as I have mentioned, also secretary of GRPL from 2 February 1990 and has held that office continuously to this date. After about 15 months absence working in executive positions for companies outside the Gilbertson group, she returned as an employee on 25 October 1996 and on 20 November 1996 she once again became secretary at RJG and its subsidiaries. She, therefore, had an intimate and informed knowledge of the events with which I am concerned. I formed the impression that she was and is, naturally enough, supportive of her father. She was, however, very defensive when faced with any suggestion that she had any personal involvement in the decisions of 1996. Whether or not she participated in his decisions with respect to management and reorganisation of the Gilbertson group generally, she, like her father, saw them as being in the long-term interests of the family. I, therefore, approached her evidence with some caution.

111. Mrs Salter, who was born in 1939, obtained a degree in commerce from Melbourne University with a major in accounting but has had no professional experience as an accountant. She is a secondary school teacher in accounting and commercial subjects. It is surprising, given this background, that until February 1990, she held no directorial office in any of the Gilbertson group companies, not even in GRPL. She was however the secretary of that company from its incorporation until February 1990 when she resigned and became a member of its Board of Directors. Mrs Salter, like her two brothers, appears to have been content to let Mr George Gilbertson make the decisions affecting GRPL, relying upon his seniority, experience and expertise and upon the fact that he, presumably, was in possession of the facts. It seems that, as secretary of GRPL, she was, likewise, content to record a very informal process of directorial decision-making by her brothers or some of them. In 1988, for example, she was not involved in the negotiations leading to the Itoman reorganisation and permitted her elder brother to execute important legal documents on her behalf and in her name under power of attorney. Indeed, it appears that it was not until 1992, possibly with some encouragement from her elder son who was then an accountancy student, that she began to take a more active and critical interest in her brother's decisions which affected her interests.

114. Mrs Salter's husband, Mr Ray Salter, gave as his occupation that of a legal administration officer with BP Australia. He explained that this involved him in the performance of duties which were more clerical in nature than legal. His involvement in the events with which I am concerned was minimal. His remarks at the family meeting of February 1990 to which I shall return were motivated by an enthusiasm to protect his wife from perceived injustices. He had her interests and that of his sons at heart on that occasion and in the witness box.

117. Finally, I come to Mrs Salter's two sons. Both of these men are chartered accountants. Mr Robert Salter qualified as such in 1996 and his brother, Paul, in 1999. Each of them had been employed in accounting firms for about three years prior to their qualification. I formed the impression that Mr Robert Salter in particular has involved himself with considerable enthusiasm in this litigation and that he feels strongly the injustices of which the Salter family complain. He told me that he had been engaged full-time in its preparation since he returned from overseas in March of this year. It was apparent that he had an intimate knowledge of the transactions under scrutiny and their consequences to his family interests. I have approached his evidence with some caution for these reasons.

121. The event which provoked this reorganisation was the decision of the shareholders other than the Robert H. Gilbertson family group and the Frederick C. Gilbertson family group to withdraw from the Gilbertson group. Mrs Salter said that there was a disagreement between these shareholders and the other family groups in February 1989 which led to this decision. The date must be an error for 1988. Mr George Gilbertson referred to this, not as a disagreement but as a contest. He said that in 1988 the outgoing shareholders made a take-over offer and that he and Mr Ian Gilbertson made a counter-offer through Marwen Investments which was accepted. A little more detail of these events appears in the letter of Ebsworth & Ebsworth written on behalf of Marwen Investments to the National Companies and Securities Commission on 14 November 1988.

124. The arrangements for the reorganisation must have been the subject of some negotiation with Itoman Corporation and between the heads of the family groups in the months leading to the family meeting in December 1988 when the details were announced to the members. This is surmise on my part since there was no evidence of the negotiations which led to the agreements. There is, however, in evidence a report from the accountants, Arthur Young, dated 1 June 1988 addressed to Mr George Gilbertson and Mr Ian Gilbertson in which the accountants analyse the proposed restructure. Furthermore, the agreement to give effect to the arrangements was entered into on 22 November 1988, some weeks before the family meeting. This document is called a shareholders' agreement, an unexecuted copy of which is in evidence as exhibit GRG 12. Mrs Bliss described it as an agreement in principle, with a lot of details worked out in the final months and said that the deal was not consummated until 23 January 1989. Finally, the Marwen Investments' cashbook shows that as early as September 1988 payments were being received in accordance with these arrangements including a substantial payment from GRPL. Be that as it may, the arrangement had been agreed in principle, if not in detail, at the time of the family meeting of December 1988. Before I turn to this meeting it is convenient that I set out the structure of the Itoman reorganisation. Essentially, it had two objectives: to buy out the interests of the outgoing three family groups and investors and to introduce a new investor, Itoman, as a shareholder of 40 percent of RJG. The reorganisation also involved the creation of Marwen Investments.

127. Marwen Investments had been incorporated in 1987 as Donbury Pty Ltd. It was restructured on 21 April 1988 upon the replacement of its former directors by Mr George Gilbertson and his wife, Margaret, and Mr Ian Gilbertson and his wife, Wendy. The company extract, however, shows Mrs Wendy Gilbertson as having been appointed on 21 August 1988 but nothing turns on this. On 20 June 1988 the company changed its name to Marwen Investments, perhaps as a contraction of the first names of the two female directors. Mrs Bliss was appointed its secretary in April 1988 and on 23 January 1989 Mrs Wendy Gilbertson was added as a second secretary. The 1990 Annual Return shows that its shareholding was 10,000 fully paid $1 shares held non-beneficially in equal shares by the four directors. In the 1991 Return and thereafter these shares are shown as held by these directors as beneficial owners. Mr George Gilbertson said that Marwen Investments was incorporated to make a counter-offer to purchase the interests of the outgoing shareholders and this is certainly the role it played.

130. It will be recalled from [8] above that the outgoing shareholders of RJG held directly 29 percent of the shares in that company and that Holdings held approximately 47 percent. Marwen Investments purchased the shares of the outgoing shareholders and on-sold them to Itoman & Co Ltd ("Itoman"). In order to make up the holding of Itoman to 40 percent, Holdings also sold to it 11 percent of its shareholding in RJG. All sales were at $3.05 per share. The consequence of this was that the outgoing shareholders received indirectly from Itoman $17.7M and Holdings received $6.5M.

133. The remaining interests of the outgoing shareholders were certain loan accounts and their 60 percent shareholding in Holdings. These shares, too, were sold to Marwen Investments for $19.9M. The difficulty with this transaction was that Marwen Investments had no funds with which to pay for these shares or to pay out the loans. Accordingly, it raised loan funds for the purpose. The principal source of these loan funds was another Itoman company, Itoman (Australia) Pty Ltd ("Itoman Australia") which advanced $9M, the balance being obtained from within the Gilbertson family. The loan agreement shows that $9M was lent by Itoman Australia to Marwen Investments upon the security of a guarantee by each of the continuing shareholders in RJG. The guarantees of Mr George Gilbertson and Mr Ian Gilbertson and the trustee companies Glenview Investments as trustee for the George Gilbertson Family Trust No. 2 and Jaswin Pty Ltd, as trustee of the Ian Gilbertson Family Trust were unlimited. The guarantees of the other shareholders were limited to the value of the time being of their respective shareholdings in RJG: cl. 4.1.

136. On a date in December 1988 a meeting of the two continuing family groups was held at the home of Mr George Gilbertson at 100 Hedderwick Street, Essendon. Representing the Frederick C. Gilbertson family group were Mr Frederick C. Gilbertson himself, his wife Mrs Nancy Gilbertson and their two sons, Ian and Graham. Representing the Robert H. Gilbertson family group were Mr George Gilbertson and his wife Mrs Margaret Gilbertson with their daughters Mrs Yeend and Mrs Bliss, Mr Paul Gilbertson, Mrs Salter and her husband Mr Ray Salter, Mr Ray Gilbertson and his wife, Mrs Beverley Gilbertson.

139. Mr George Gilbertson explained to the meeting what had been agreed and what he proposed. All present were in agreement. The necessary meeting of directors of Holdings was held on 20 December 1988 and the documents, or perhaps the remaining documents, required to consummate the agreement were executed on 23 January 1989. So much was common ground.

142. Of the thirteen people present at this meeting, evidence was given by Mr George Gilbertson, Mr Paul Gilbertson, Mrs Salter, Mr Ray Salter, Mr Ray Gilbertson and Mrs Bliss. There was, however, an important disagreement between them as to what was said to those present by Mr George Gilbertson or, perhaps, as to the effect of what he said. This related to the position of those family members other than Mr George Gilbertson and Mr Ian Gilbertson and their wives with respect to the ownership of the shares of the outgoing shareholders and about the source of the funds required for the reorganisation. There was no doubt in the minds of those present that the purchaser of these shares was Marwen Investments and that the shareholders in that company were Mr George Gilbertson and his cousin Mr Ian Gilbertson and their wives. But Mrs Salter said that her brother explained to those present that he and Ian were negotiating on behalf of their two family groups and not simply on their own behalf. She said that Mr George Gilbertson outlined the proposed agreement only in broad detail and that he explained that "Marwen would be used as a temporary takeover vehicle only and implied that all members of the two family groups were to somehow participate in the 60 percent of Holdings" which had been purchased from the outgoing family groups. She said that she understood that the reason why the other members of the family sub-groups were not to be shareholders in Marwen Investments was because Itoman was only prepared to deal with one group of people. She said that she understood that the agreement was for the benefit of all of the members of the two continuing family groups and that, in this way they would continue to control the Gilbertson group of companies. Her version of this was confirmed by her husband. It will be noted that part of Mrs Salter's evidence which I have summarised is in terms of what she understood and what was implied. I turn now to the evidence of the other participants as to what was actually said.

145. In his affidavit of 6 May 1999 Mr George Gilbertson described the meeting in these terms:

"11.15 My intention in planning the 1988 buyout was always to ask the family members other than myself and Ian (and our respective companies and trusts) to swap their shares in Holdings and RJG for shares in Marwen once the group had stabilized and the loans from Itoman had been repaid, so that Marwen would become the ultimate holding company for the families of Robert H Gilbertson and Frederick C Gilbertson. On the projections I had made, I expected to be in a position to do so by the end of 1992. In the meantime, I was prepared to carry personally with Ian an unlimited exposure to the loans from Itoman until they could be repaid, rather than ask other members of our respective families to share that burden. In my case, I considered that to be my particular obligation, as the oldest sibling and the one most directly responsible for the continued success of the Gilbertson Group. 11.16 A critical part of our strategy to maintain majority control in the interests of the family as a whole was to have the Gilbertson family shares in RJG controlled by a single entity, which itself was under the close control of the remaining Gilbertson directors. The result would be that the two Gilbertson families would be united in their dealings with Itoman and that any future fracturing between or within the families would not cause that majority position to be lost. This was also one of Itoman's pre-conditions, as they did not want to find themselves sharing a company with two minority groups. The single entity chosen for that purpose was Marwen. 11.17 I discussed my strategy with Ian and proposed it to other members of my family, including Joy and Raymond Salter, at a meeting at my house in December 1988. I explained that Marwen had been formed to make the bid for the shares and that Ian, I and our wives would hold the shares in that company. I invited everyone present at the meeting, including the Salters, to take up shares in Marwen, but they declined. I then said that [GRPL], [IGPL] and the trusts would need to make loans to Marwen to support the buy-out. No-one objected. Joy and the other RJG shareholders present at the meeting agreed with me and Ian that their shares in RJG could be used as a security for repayment of the Itoman loans and each also agreed to give a personal guarantee to Itoman Australia Limited to the value of those shares. After receiving those assurances, I was willing to proceed on that basis with the buy-out. I am informed by Ian and believe that he was of the same view that we had the entire support of our respective families."

149. Mrs Bliss said in her affidavit of 6 May 1999 that the meeting was told that Mr George Gilbertson and Mr Ian Gilbertson were negotiating on behalf of the two family groups to buy the shares of the outgoing shareholders. When she was asked in cross-examination about this she said that her reference to the two family groups was a reference to "George and his siblings and Ian and his father and siblings... but not the two companies [GRPL and IGPL]". She said that her father put to the family members that if any of them wanted to "come in" they would have to bear the risk of the $9M loan personally along with Ian and himself and that there was no query about this or other response. Mr Paul Gilbertson's recollection of the share offer was different. He said simply that his family was invited to contribute to the arrangement by taking up shares in Marwen Investments and that he declined, without knowing the cost involved, because he could not afford to. Mr Ray Gilbertson said that those present were asked in an informal way whether they wanted to participate. He recalled that his brother George expressly asked him and his brother, Paul, whether they had any money and he (Ray Gilbertson) responded that he had not, offering by way of explanation that he had just gone through a divorce and was "very cash poor". He said, rather inconsistently, that he thought he was being invited to put up an unspecified amount of cash or to give to Itoman Australia an unlimited guarantee, neither of which courses appealed to him.

152. Mrs Salter and her husband do not dispute Mr George Gilbertson's account, but they deny that any share offer was made. I accept their evidence on this matter. I reject the contrary evidence for a number of reasons. First, the intention of Mr George Gilbertson at the time was that Marwen Investments was to be the vehicle, not only for the interests of the four directors but for the two family groups. It is likely that he disclosed this intention. Second, he intended and told those present that there would be a restructure when the Itoman loans were repaid, an event which he had been advised should occur within five years. In the meantime, the assets of Marwen Investments were the assets of the families. Again, it is likely that he disclosed this. Third, his assumption of the unlimited guarantee was not connected with his shareholding in Marwen Investments but, as he said, because of his position in the family. It is significant that Glenview, too, gave an unlimited guarantee to the detriment of its trust beneficiaries including family members other than Mr George Gilbertson and his wife. Next, it is consistent with his attitude generally at the time, as I perceive it, of assuming a personal responsibility, not for his own interests but those of his wider family. It is consistent, too, with Mrs Salter's acceptance that her brother should execute the documents on her behalf, apparently, without her reading them and that family funds should be applied to support Marwen Investments. Finally, my assessment of the witnesses as they dealt with this issue was that I should place greater reliance upon the evidence of Mrs Salter than those who contradicted her. I add that her brother may have enquired whether the family members were minded to make some financial contribution, but that he did not invite them to take up shares in Marwen Investments. It should be noted that, while he did himself put a substantial sum into Marwen Investments, this was not by way of equity capital. The price of his and his wife's shares was only $5000. My assessment is that, if he had invited those present to pay a sum of that order to become an equal shareholder in Marwen Investments, some, if not all, would have been interested.

155. I was invited by counsel for the Salter family to infer, notwithstanding what he said, that at the time of this meeting, Mr George Gilbertson had in mind that he and his cousin, Ian, and their wives as the shareholders of Marwen Investments would acquire for their own benefit to the exclusion of the other family group members the 60 percent shareholding of the outgoing shareholders in Holdings and, through this in the whole Gilbertson enterprise. It was said that this inference is confirmed by the events of December 1992 to which I shall refer in due course at [59]. I do not accept that this is a proper inference which I should draw. I accept that, at this time, Mr George Gilbertson intended that the purchase of the shares of the outgoing shareholders was ultimately to be made for all the members of the Robert H. Gilbertson family group and that, when the Itoman loan was repaid there would be a restructure of their interests, perhaps within Marwen Investments, to reflect this intention. I accept that he said as much to those present. I was not asked to find and I do not find that the statements made at this meeting created in any person an equitable interest present or in the future in the shares of Marwen Investments held by Mr George Gilbertson or his wife.

158. I accept, too, that Mr George Gilbertson told the meeting, and those present accepted, that the payment of the balance of the funds necessary to purchase the interests of the outgoing shareholders would be raised internally within the Gilbertson group.

161. And it was on this basis that the Itoman reorganisation was implemented. Itoman paid to Holdings $6.5M for its 11 percent of the RJG shares. Itoman, as ultimate purchaser of the 29 percent of the RJG shares held directly by the outgoing shareholders paid $17.7M to Marwen Investments which in turn paid it to the vendor shareholders. As I have mentioned, Marwen Investments did not have the $19.9M required to pay for the 60 percent shareholding of the outgoing investors in Holdings. According to Mr George Gilbertson the total sum borrowed was $15.4M and was obtained from the following sources:

Marwen Investments (balance of Itoman sale proceeds)

Of these loans only those by Itoman Australia and F&N Gilbertson were to be interest bearing. None other than that made by Itoman Australia was secured.

166. Mrs Salter said that, in addition to these loans, Holdings lent to Marwen Investments $6,403,200 to take its total funds to a little over $21M. Mrs Bliss said that this loan was not made until January 1989 and was not, therefore, part of the funding for the Itoman reorganisation. Mr George Gilbertson said that this money was borrowed to retire the loan accounts of trusts associated with the outgoing shareholders. This aspect of the transaction, however, was not seen as significant at the trial and it is not necessary that I resolve this conflict, if it be a conflict.

169. The result of this, the Itoman reorganisation, then, was that Marwen Investments held 60 percent of the shares of Holdings and, through this, 60 percent of its wholly owned subsidiary, Marwen Properties, as well as 60 percent of Holdings' 36 percent shareholding in RJG. On the other side of the balance sheet, Marwen Investments owed substantial sums to Itoman Australia and to entities within the Gilbertson group. On a cash flow basis it had no income other than dividends payable by Holdings and a substantial interest liability to Itoman Australia and to F&N Gilbertson. The shareholding structure of the group after the Itoman reorganisation appears in the following chart:

174. In their final submissions counsel for the Salter interests did not place much emphasis on the Itoman reorganisation as an act of oppression but rather as setting the scene for those which followed it. I, too, do not see this reorganisation as amounting to conduct of the kind contemplated by s. 246AA.

178. After the Itoman reorganisation, the affairs of the Gilbertson group were conducted more or less as envisaged in the Arthur Young Report of June 1988. But no dividends were paid by Holdings to Marwen in any year thereafter except for a small dividend in 1992. The consequence of this was that Marwen Investments had no income from which to pay the interest due to Itoman. Between January 1989 and November 1996 Marwen Investments borrowed sums from companies within the Gilbertson group to meet its obligations.

181. These loans were substantial and the balances fluctuated over the period to November 1996 as the financial position of Marwen Investments changed. Some idea of their magnitude may be gained from their position at the end of this period before they were repaid.

187. The loans from GRPL to Marwen Investments and the repayments during the period January 1989 to December 1996 are set out in the schedule attached to these reasons. It was put on behalf of the Salter interests that these loans by GRPL were uncommercial loans made by its director Mr George Gilbertson to Marwen Investments, a company in which he had an interest. The loans were uncommercial since they were not interest bearing and were unsecured loans made to a company which, as it turned out, was insolvent. His acts in making these loans were in breach of the fiduciary and directorial duties owed by him to GRPL. They were acts in the conduct of the affairs of GRPL which were oppressive or unfairly prejudicial to or unfairly discriminating against the applicants.

190. The fact that these loans were made was not in issue. Mrs Salter, who was secretary of GRPL until February 1990, said that she minuted no loan to Marwen Investments for the purposes of the Itoman reorganisation. The minutes of the meetings of directors of GRPL after February 1990 show that on 26 April 1991 the directors resolved to make a short-term interest bearing loan to Holdings in the sum of $605,000 and that on 4 July 1991 they resolved to ratify unspecified loans made to Marwen Investments and to make a loan to Holdings in the sum of $700,000 on a short-term interest bearing basis. In fact the minutes of only three meetings in this period 1988 to 1992 were produced in evidence: those of 28 March 1991, 26 April 1991 and 4 July 1991. These are in the handwriting of Mrs Bliss and are signed by Mr George Gilbertson. Mrs Salter is shown in each as being present at the meeting. She says that they are false: she was not present at any meeting on 26 April 1991 or 4 July 1991 and indeed she was not given notice of these meetings. I accept her evidence as to this. Mrs Bliss sought to justify the minutes by referring to the practice of the Gilbertson family to record informal discussions between a majority of directors in minutes for later ratification. The loans are not set out in the Annual Accounts other than as the net balance in each balance sheet. The other directors say nothing of these matters. I am satisfied that the loans made by the company were made without the concurrence or knowledge of Mrs Salter.

193. I am satisfied, too, that Mr George Gilbertson, perhaps in consultation with his brothers, made these loans because he believed that it was in the interests of the group as a whole that they should be made. It was reasonable for him to suppose that, if the interest was not paid, Itoman Australia would take steps to enforce its rights with respect to its original $9M loan and its further loan to Marwen Investments of $1.5M made in September 1991 and its term loan of $7M to RJG. Whether this would cause the group to collapse, as he said he apprehended, or whether the lender would pursue him and his cousin and their trusts as unlimited guarantors, I do not know.

196. For my present purposes it does not matter. The law imposes many burdens on company directors. The court, however, will be reluctant to interfere with commercial or management decisions made by them provided these are within power and, more importantly, provided they are not in breach of fiduciary duty. It is well established that directors commit breaches of such a duty where they make uncommercial loans to companies in which they have a personal interest. A company such as GRPL is entitled to expect that its director will have no divided loyalty or conflict of interest. Where such exists in respect of an act or decision of the director then the duty of the director is to disclose it to those whose interests are or may be affected and to obtain their informed consent to the act or decision in question.

199. In this case it was not suggested that the decisions to make unsecured and interest free loans to Marwen Investments were disclosed to or acquiesced in by Mrs Salter. It was put on behalf of the respondents that this was a family group of companies and that such loans were made in accordance with long-standing practice within the Gilbertson group; second, that the family members were told and they accepted in December 1988 that inter-company loans would or may be made; third, that some of the loans were ratified by the Board of Directors of GRPL; and, finally, that the loans were made in the interests of the Gilbertson group as a whole and that all members, including the Salters, benefited from them insofar as they preserved the assets of the group so that, in due course, profits would be received. I reject the first, second and third submissions immediately. No sufficient evidence of such a lending practice was produced except for loans to downstream companies within the group. Indeed, the loan to Marwen Investments from F&N Gilbertson in 1988 and that from GRPL to Holdings in 1991 were interest bearing. On no view of the statements made at the family meeting of December 1988 was sufficient disclosure made or informed acquiescence sought or obtained. Mr George Gilbertson said he did not discuss the loans with Mrs Salter or his two brothers before December 1992 other than at directors meetings. I accept that the meetings recorded in the minutes of 1991 were not held. No evidence of other directors meetings within this period was led. The third submission provides no answer at law for the breaches alleged.

202. The fourth submission exposes the delicacy of the position of the respondents, especially that of Mr George Gilbertson. He maintains in this proceeding that Marwen Investments was and is the vehicle of the interests of himself, his cousin and their two wives only, and not those of the other members of the R.H. Gilbertson family group. An uncommercial loan to such a company cannot be of direct benefit to those excluded family members. It is beside the point to say, as he does, that they benefit indirectly because the loans prevented the companies within the group passing into liquidation with a consequent loss for all persons directly or indirectly interested in them. Likewise, it is beside the point to say that, if interest were chargeable, this would attract tax in the hands of GRPL and adversely affect the cash flow of Marwen Investments. The complaint levelled at the decision-makers is, not so much that they made the loans, but that they did so without making disclosure to the others and obtaining their consent. Furthermore, the evidence shows that when the matters were raised, the decision-makers were not forthcoming in making disclosures which they ought to have made at the time to the Salter family.

205. In the Annual Accounts of GRPL up to 1991, the balance sheet showed as a current asset a net figure for receivables. This figure was $553,637 as at 30 June 1990 and $2,097,971 on 30 June 1991. In the 1992 balance sheet the figure was $2,316,524 and further information was provided in note 5, as was then required to be disclosed with respect to director-related loans under the modified accounting standard which came into force in that year. This note set out the loans made to and those repaid by director-related entities in the accounting period and advised the reader that the loans were unsecured and interest free. The 1992 accounts are dated 30 November 1992 and were received by the Salters in December a few days before the Annual General Meeting of GRPL on 17 December 1992.

208. This Annual General Meeting was an eventful one. Mr Robert Salter said that it was the first formal meeting of this kind which he attended. According to the minutes kept by Mrs Bliss, fourteen family members apart from herself were present. There was some conflict between the evidence given by the witnesses of the discussions held at that meeting but not as to their tenor. At some stage the question of the interest free loans was raised by Mr Paul Salter. This was taken up by his brother. In response to a question as to when these loans were to be repaid, Mr George Gilbertson said that this would not be in the foreseeable future. The question then arose as to the propriety of describing these assets as current assets as was done in the balance sheet. At some stage, probably after these questions, Mr Ray Salter asked Mr George Gilbertson in a fairly aggressive tone who were the beneficial owners of Marwen Investments which had been the recipient of these loans and which was, since the Itoman reorganisation, the majority shareholder in Holdings. Mr George Gilbertson replied that the shareholders were his cousin, Ian, and his wife and himself and his wife. When pressed as to who were the beneficial owners of Marwen Investments and its assets, Mr George Gilbertson replied that it was the same shareholders. He made it clear that GRPL and its members other than himself and his wife were not to benefit from the assets of Marwen Investments. At this, Mr Ray Salter became angry. It is likely that he was abusive and had to be restrained. Two things further were said among the heated exchanges. First, Mr George Gilbertson said in response to his brother-in-law's criticism of interest free loans that "if you are that miserable we will pay you interest". Second, Mrs Salter said that her family wanted to sell their shares in GRPL. At one point there was an unedifying comparison drawn by the two fathers as to the accounting capacities of Mrs Bliss and of the Salter sons respectively. Mr Ray Salter was persuaded to leave the meeting and it proceeded to its conclusion without him. The evidence shows that the other persons present did not echo the concerns of the Salters.

211. Notwithstanding Mr George Gilbertson's statement to this effect, Marwen Investments did not pay interest to GRPL upon its loans.

214. Mr George Gilbertson was hurt by this incident. In his affidavit of 6 May 1999 he put it this way.

"I assumed after the argument at the meeting that no one in the Salter family wanted anything further to do with the company and that their only wish was to sell their shares if a buyer could be found. To be frank, I did not want anything more to do with any of them after their accusations aimed at my daughter, who had worked tirelessly since the 1989 buy-out to try and turn the fortunes of the Group around. Those accusations were particular galling to me from members of my own family who had enjoyed all the benefits of dividends from the company in the good years, even though none of them worked in the company but, when the dividends stopped, started attacking hardworking people whose work was for their benefit as much as anyone else in the family.".

This reaction was consistent with my impression of him and it goes a long way to explaining his conduct in the years which followed.

219. After December 1992 GRPL continued to make interest free, unsecured loans to Marwen Investments, but less frequently, and to other companies within the Gilbertson group. The balance of director-related loans recorded in the balance sheets for these years is as follows:

The minutes of the 1993 Annual General Meeting of GRPL held at 8.00 pm on 31 December 1993 record apologies for the Salters. No such meeting was held. By way of explanation Mrs Bliss said that her uncles told her that they did not want a repeat of the 1992 meeting. Notwithstanding this, she added in a supplementary affidavit that each member was asked whether a formal meeting should be held. She produced a notice of meeting dated 17 December 1993 which contained no such request. Mrs Salter says that she received no notice of this meeting and no copy of the financial statements for 1993. No complaint was made by her about this failure. On balance, I find that the letter and the accounts were in fact sent to Mrs Salter.

224. By letter dated 21 December 1994 Mrs Bliss forwarded to Mrs Salter the 1994 accounts and a notice of Annual General Meeting. The letter proposed that the meeting be not held and none was in fact held. In these accounts, the loans to director-related entities are shown as $2,439,799, including fresh loans to Marwen Investments of $74,628. By letter dated 7 January 1995 Mrs Salter expressed concern about the risk exposure to GRPL as a result of these loans and requested that a meeting of directors be convened for 17 January 1995. She made particular mention of a loan which was referred to in the trial as the Tylden loan and it is to this loan that I now turn.

228. In August 1993 GRPL obtained a overdraft from the ANZ Bank of $110,000 on the security of land owned by it at Tylden. The Bank's letter of offer dated 17 August 1993 shows that interest payable was currently 12 percent per annum. The Salters complain that GRPL was in this way incurring interest obligations which it could not service in order to obtain funds which were not needed by it but which were lent to Marwen Investments or Marwen Properties interest free and unsecured. The evidence shows that the overdraft was agreed to by Mr George Gilbertson and his brothers. Mrs Salter was not consulted. A minute of a meeting of directors of GRPL of 20 August 1993 authorising the acceptance of the bank's offer of 17 August is in evidence. Mrs Salter is shown as an apology. I find that no formal meeting was held and that she was not given notice of any such meeting.

231. Mr George Gilbertson said that he intended to apply for an extractive industries licence for the Tylden land and then to sell it with this licence for an enhanced price. He said that the cost of surveys, reports and the like for the purposes of obtaining the licence in fact totalled $91,463.25 although this was not expended immediately. Accordingly, the loan was taken out for GRPL's own purposes.

234. The GRPL cash book and trial balances disclose the following rather different picture. When the loan was approved in August 1993 the bank account of GRPL was in credit in the sum of $366, approximately its position as shown in the 1993 balance sheet. As soon as the facility was approved the account went into debit so that by November 1993 it was overdrawn by $97,206 and at the end of the 1994 financial year the overdraft stood at $106,602. The GRPL cash book shows that $57,117.85 was advanced to Marwen Investments in the 1993/94 year, comprising $23,683.21 on 26 August 1993 to enable it to pay interest to its loan creditor, Frederick C. Gilbertson; $14,591.19 on 3 November 1993 to enable it to make a payment to Itoman Australia; and $18,843.45 on 2 December 1993 to enable it to make another payment to Itoman Australia. On 30 June 1994 it advanced a further $20,000 and received back $2,490, the net figure of $17,510 only being shown in the accounts as a further advance to Marwen Investments. The total, or rather the net, advances to Marwen Investments in this financial year were therefore $74,628. In this year no payments were made from the GRPL bank account towards Tylden development costs. There was, however, a journal debit entry of $2,208 to that account.

237. In this same year 1993/94, the trial balance shows that $7,200 interest was paid by GRPL, presumably to the bank and that it had an operating loss after income tax of $8,751. These figures justify Mr Robert Salter's statement that GRPL did not have the income to service the interest on the Tylden overdraft.

240. In addition, in the same year, GRPL made advances to Marwen Properties of $1,869.55 on 30 August 1993 and $27,122.03 on 29 October 1993 and to Holdings of $5,000 on 24 September 1993. Against these loans to Marwen Properties totalling $28,991.58, the trial balance shows a journal credit entry of $2,490 so that the net loans to that company in the financial year were $26,798, as appears in the notes to the balance sheet as at 30 June 1994.

243. I have set this out in a little detail because the financial records show that the overdraft was almost entirely used for purposes other than the Tylden development. It was applied for the general purposes of GRPL or of the Gilbertson group. Mrs Bliss in cross-examination conceded as much. This Tylden loan was the subject of complaint from Mrs Salter in her letter of 7 January 1995 which she sent to the company after she saw the 1994 accounts. It was an important reason for the convening of the meeting of directors of GRPL on 17 January 1995.

246. At this directors' meeting all directors were shown as present other than Mr Ray Gilbertson. The minutes were taken by Mrs Bliss as secretary. The directors discussed a series of questions contained in a document submitted by Mrs Salter. Evidence was given at this meeting by Mr George Gilbertson, Mrs Bliss and Mrs Salter, but again there was conflict between the affidavits sworn by the first two and that of the third witness. Mrs Salter was not cross-examined as to these differences. When Mr George Gilbertson was asked about the meeting, it soon became apparent that the he had no independent recollection of the discussions at all. Mrs Bliss said that explanations were provided and accepted by Mrs Salter. I prefer the evidence of Mrs Salter as to this meeting. She said that Mr George Gilbertson maintained to those present that the Tylden loan was for the extractive industries licence and that it had been used for this purpose. I have found this to be incorrect. I find that Mrs Salter voiced her concerns to her co-directors about the practice of not holding meetings of directors and, as a consequence, it was agreed that quarterly update reports would be provided to all directors and that meetings would be convened and held in the future. I find, too, that she complained about the practice of GRPL making loans to Marwen Investments interest free and unsecured. She was told that this was the way things had always been done within the Gilbertson group. I accept, however, that Mr George Gilbertson told her that it was in the interests of the family that this should be so.

249. Following this meeting, no further sums were advanced by GRPL to the other companies within the Gilbertson group. The accounts produced show that in the financial year 1995 Marwen Properties repaid $15,120 and that on 28 May 1996 Marwen Investments repaid $125,000. The result of these payments was that on 30 June 1996 the sums advanced by GRPL to director-related entities was $2,299,678.56, which included $1,693,606.99 to Marwen Investments, $248,537.53 to Holdings and $43,737.06 to Marwen Properties.

252. It was submitted that the making of these loans by GRPL involved oppression by Mr George Gilbertson and his brothers, to the extent that they were involved in making them. Having regard to the accepted practice within the Gilbertson group of companies of making loans interest free and unsecured to downstream companies within the group, I do not find that the loans by GRPL to Holdings or to Marwen Properties amounted to oppression.

255. The loans to Marwen Investments fall into a different category and they have the added feature that they were made for the benefit of Mr George Gilbertson, a director of GRPL, inasmuch as they were made to a company in which he and his wife held a significant interest and they were used by that company to meet liabilities for which he was a guarantor. The loans were disadvantageous to GRPL inasmuch as they were not interest bearing. This meant that it was unable to use the sums advanced for income earning purposes of its own. The making of the loans in these circumstances by some of the directors and shareholders was conduct in the affairs of GRPL which was oppressive of and unfairly prejudicial to Mrs Salter and the Salter shareholders. The other non-commercial aspect of these loans, that they were unsecured, is of no consequence in that they were ultimately repaid. It is not, for this reason, necessary that I make a finding that, at the time they were made, Marwen Investments was insolvent or that, for some other reason, the unsecured nature of the loan was disadvantageous to GRPL.

258. The making of these loans was also a breach of fiduciary duty owed by Mr George Gilbertson to GRPL. I am satisfied that, in causing these loans to be made, he has conducted the affairs of GRPL in a manner that is oppressive or unfairly prejudicial to the other shareholders of GRPL, including the Salters. See Re Tivoli Freeholds Ltd [1972] VicRp 51; [1972] VR 445 at 453-4, per Menhennitt J.

262. Counsel on behalf of the Salters also complained that Mr George Gilbertson caused loans to be made to Marwen Investments by Holdings, a company in which GRPL held 20 percent of the share capital and by Marwen Properties, a wholly owned subsidiary of Holdings. The fact that these loans were made is undisputed. They were very substantial as appears from the balance of the loan accounts from time to time which I have taken from Exhibit 33.

As with the loans made by GRPL, these were unsecured and, with one notable exception, interest free loans. On 6 July 1995 Marwen Properties advanced to Marwen Investments $4.353M which it had borrowed from the Challenge Bank. This loan bore interest at "the appropriate commercial rate" and this interest was capitalised in the loan account.

267. Both these Marwen Investments loan accounts as they then stood were paid out on 15 November 1996 in circumstances which I shall describe below in [100].

270. It was submitted that these loans constituted oppression of the Salters because they held 25 percent of 20 percent of Holdings and of Marwen Properties. Any improvident disposition of the assets of either of these companies would cause them loss to the extent of their indirect interests.

273. Section 246AA speaks of oppression in the conduct of the affairs of GRPL. In the case of each of Holdings and Marwen Properties, its directors were Mr George Gilbertson, Mr Ian Gilbertson and their wives. It was put, then, that Mr George Gilbertson, in voting in favour of the loans from these companies to Marwen Investments, was conducting the affairs of GRPL and that he was in breach of fiduciary duty in that he was a person interested in the borrower. My concern, however, is with the affairs of GRPL. A director of multiple companies risks committing a breach of fiduciary duty in performing an act as director of company A if they subordinate the interest of that company to another of which they happen to be a director. This is because a director of company A acting as such, owes no fiduciary duty to company B. In this case, the shareholders of GRPL cannot assert breach of fiduciary duty or oppression against Mr George Gilbertson in his conduct of the affairs of Holdings or Marwen Properties.

276. I reject, therefore, the allegations of oppression based on these loans by Holdings and Marwen Properties to Marwen Investments.

280. In August 1993 Mrs Salter had sought to sell her 0.2 percent direct shareholding in RJG. She requested Mr George Gilbertson to sell it at $4.10 per share but he was unable to find a buyer at that price. In June 1995 she sold it to Holdings for $3.00 per share.

283. Meantime, there had been a reorganisation of the Japanese shareholder in RJG. Prior to 1994 Itoman was absorbed into another Japanese company, Sumikin Bussan Kaisha Ltd, which, in due course changed its name to Sumikin Bussan Corporation ("Sumikin"). In July 1994 Sumikin sold a part of its 40 percent shareholding in RJG, about 30 percent of the issued share capital, to Midoshuji General Industry Corporation ("Midoshuji") for $3.54 per share.

286. The Gilbertson group in mid-1996 faced yet another crisis. The expected trading profits had not appeared and delays were being encountered in the development and sale of its two sub-divisional properties. In May the ANZ Bank indicated that it would withdraw its support for the group. According to its letter of 15 May, the bank's facilities were then in excess of $31M. This decision created an immediate requirement for an injection of liquid funds to enable the group to continue. The principal assets of the group at this time, apart from those concerned with meat production, were two parcels of sub-dividable land: a parcel of about one square mile at Derrimut known as the Gilbertson Industrial Estate which was owned by Marwen Properties; and a substantial parcel at Caroline Springs on the Western Highway past Deer Park held for residential development by RJG as part of a joint venture. The profits from these developments were not expected to flow for some years after 1996.

289. These were, of course, matters of grave concern to Mr George Gilbertson and he considered a sale of the meat works. Mrs Salter and her son, Robert, were also concerned. By this time they had lost confidence in Mr George Gilbertson and his daughter, Mrs Bliss and they were aware that profits were not being generated. A meeting was held on 31 May 1996 at the office of Hughes Fincher, the auditors of GRPL and of other companies within the group. Present, apart from Mr George Gilbertson, Mrs Salter and Mr Robert Salter, was Robin Charles Pennell who was a partner in that firm and a director of RJG. Unfortunately, Mr Pennell had little recollection of the matters discussed. After a little while, Mr George Gilbertson left for a time and Mr Pennell spoke privately with the Salters. I find that the decision of the bank to withdraw its support was not mentioned by Mr George Gilbertson. He told those present, however, that, without a restructure, RJG would not survive beyond September 1996. He said that he was negotiating with Sumikin in the hope that the Japanese would buy the assets of the Gilbertson meat business, leaving the Gilbertson group as property developers. They discussed also a restructure of the shareholding of the group so that Marwen Investments would become the sole holding company. This was mentioned as a share swap in the sense that the shares held by GRPL and by IGPL in Holdings would be exchanged for shares to be issued in Marwen Investments. When asked by Mr Robert Salter, Mr Pennell told those present that Marwen Investments shares might have a negative value. Mr George Gilbertson said he disagreed with this view. I accept that his own view may have been more optimistic than that of Mr Pennell, but I find that he did not express it to those present. I make this finding notwithstanding Mr Pennell's evidence that he did not recall expressing this opinion and that he did not even hold it; he said he had no opinion one way or the other. Mr Robert Salter said that the Salters asked to be consulted about any proposed restructure and the meeting finished on that note.

292. Mrs Salter followed up the meeting with a letter to Mr Pennell dated 5 June 1996 raising a number of specific issues as to which she sought his written advice. Mr Pennell's response was to say that he had referred the letter to Mr George Gilbertson for his response and this he did. I accept Mr Robert Salter's evidence that he telephoned Mr Pennell on two occasions between the date of this letter and November 1996 to enquire about progress in the proposed sale. He was ultimately told to take the matter up with Mr George Gilbertson and this he left to his mother to attend to. She said that she sought information from her brother but obtained none. Mr George Gilbertson acknowledged that he received the letter of 5 June but said that he was unable to respond because the Sumikin negotiations were on foot and he did not know what their outcome would be. In the circumstances I find this explanation unconvincing. It is another example of his reluctance to disclose matters to those who were interested in them, and properly interested in them.

295. The Marwen reorganisation duly took place. RJG sold the meat works to Sumikin in November 1996. The decision to sell was taken by the board of directors of RJG. Mrs Salter who had sold her shareholding was not consulted or informed. Mr George Gilbertson took the view that it was none of her business. It may well be that, technically, this was correct. The same, however, cannot be said of those parts of the Marwen Reorganisation which directly affected GRPL, a company of whose affairs she had a right and a duty to be informed.

298. On 15 November 1996 the shares held by GRPL in Holdings were exchanged for shares in Marwen Investments. I accept Mrs Salter's evidence that she was, notwithstanding her requests in the last months of 1996, not consulted about or informed of any details of the transaction until after it had occurred. Mr George Gilbertson made the decision to swap the shares and implemented it without informing her, notwithstanding that she was a director of GRPL. He said that he did so "under the authority given to me by a majority of the directors of the company and ratified by their signature of minutes of those decisions prepared by my daughter, Christine, at my direction". The minutes of the meeting of directors of 14 November 1996 are in evidence. I find that all directors were not given notice of the meeting, that the meeting as such did not take place and that the statement in the minutes that Mrs Salter was present is false. The decision was taken in breach of the requirements of the constitution of GRPL. Article 102 vests the management of the business and affairs of that company in the directors, not in some only of them. The position is not saved by Article 112 which requires a flying minute to be signed by all directors. It is to my mind inconceivable that any person with the background of Mr George Gilbertson or Mrs Bliss could have contemplated as proper a decision to sell the principal asset of GRPL without consulting one of its four directors, especially one who had signified her interest in the matter and had requested to be kept informed. I reject the attempts of Mr George Gilbertson to explain or to excuse this disregard of his obligations as director of GRPL towards his co-director and towards 25 percent of its shareholders.

301. The Marwen reorganisation had two distinct objectives: first, to sell off the unprofitable meat business of RJG and to use the proceeds of sale to retire the debt owed to the ANZ Bank; and, second, to consolidate within Marwen Investments all the shareholdings of the Gilbertson family in the Gilbertson group.

304. The first objective was achieved by Sumikin purchasing the assets of the meat business for about $55M cash and by Sumikin and Midoshuji selling to Holdings their 40 percent of the shares of RJG for about Y2,300M, the then equivalent of about $27M, that is $3.40 per share. The funds required by Holdings for this purpose were provided by loan from RJG in the sum of $27M out of the price received by it for the meat works assets. This transaction took place between 18 and 22 November 1996.

307. The second objective was achieved by a number of transactions which took place some days earlier on or about 15 November 1996. The first transaction involved the issue by Marwen Investments of 10,000 shares to each of the four existing shareholders at par. This probably occurred on 13 November 1996. The shares were treated as fully paid since their cost was met out of the shareholders' loan accounts with Marwen Investments. I interrupt myself to remark that this allotment at par to the directors of Marwen Investments appears on its face to sit uncomfortably with the allotments to the Gilbertson family shareholders and to GRPL and IGPL at a substantial premium on the following day. This is particularly the case where, according to Mrs Bliss, it was done in preparation for the share swap and to enable the directors to retain a majority holding in Marwen Investments. See Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL [1968] HCA 37; (1968) 121 CLR 483 at 492, per Barwick CJ, McTiernan, Kitto JJ. Mrs Bliss said that this was done to ensure a continuity of ownership for tax purposes. This allotment was, however, the subject of no criticism at the trial and I say nothing further about it at this stage. The end result of this was that each of Mr George Gilbertson and his wife and Mr Ian Gilbertson and his wife now held 10,250 shares in Marwen Investments. GRPL and IGPL then each exchanged their 344,590 shares in Holdings for 16,650 shares in Marwen Investments which were transferred to them at $407 per share.

310. The second transaction, which occurred on 15 November 1996, was the elimination of the existing 24 percent shareholding in RJG held directly by the members of the R.H. Gilbertson family group and the Fredrick C. Gilbertson family group and trusts associated with them. These shareholders sold their shares to Holdings at the same price, $3.40 per share. This purchase price was paid, not to the vendor shareholders but, at their direction, to Marwen Investments in return for an issue of shares in that company to them at a premium of $404 per share.

313. The consequence of these transactions, so far as the Gilbertson group is concerned, was that the assets of the Gilbertson group now comprised essentially the Gilbertson Industrial Estate and the Caroline Springs development which were owned by the two wholly owned subsidiaries of Holdings. Holdings in turn was a wholly owned subsidiary of Marwen Investments. The shares in Marwen Investments were now held as to 13.52 percent by GRPL, as to 13.52 percent by IGPL, as to 40.55 percent by its original shareholders, namely, Mr George Gilbertson, Mr Ian Gilbertson and their wives, and as to 32.4 percent by the persons and trusts who were formerly direct family shareholders in RJG.

316. The aspects of these transactions criticised by the Salter family, apart from their having been excluded from the decisions to enter into them, were essentially two-fold: first, the price of $3.40 paid by Holdings for the RJG shares previously held by the Gilbertson family members was said to be excessive; and, second, the value of the shares in Marwen Investments which GRPL received was less than that of its shareholding in Holdings. In each case it is said that this was to the prejudice of the Salters and unfairly so.

320. It was put on behalf of the Salters that the share price of $3.40 adopted for the RJG shares in the Marwen reorganisation was inflated; their true value was $1.61.

323. The starting point for this contention was that, prior to October 1996, $1.61 was the price adopted for the purposes of the sale of those shares by the Japanese interests. The basis for this price was set out in a letter sent by Mr George Gilbertson on 6 September 1996 to the shareholders of RJG. Since Mrs Salter had sold her shares she did not receive this letter; she said she did not see a copy of it until May of the following year. Mr George Gilbertson said that the terms of the sale were confidential and that no person other than the directors, senior executives, officers and professional advisers of Sumikin, RJG or Holdings was informed in advance as to its terms. Mrs Bliss confirmed that she had no knowledge of these matters before October 1996.

326. In the 6 September letter, Mr George Gilbertson speaks of an agreement having been reached with Sumikin subject to shareholder approval, that is, subject to approval by shareholders of both parties. The agreement at this stage was for Sumikin to pay to RJG $40.822M for all the net assets of the meat business of RJG except the Grafton abattoir. Excepted too, was its non-meat business asset, namely, the Caroline Springs development. This sum was made up as follows:

The various components of this price had been valued for the purposes of the sale by professional valuers. According to the letter, the price was agreed by negotiation based on valuations as at 30 June 1996.

331. In the agreement as it stood at this time, RJG was to buy back and cancel the 40 percent shareholding held by the Japanese companies and this cost to RJG would be set off against the price received by it for its meatworks assets. As presented to the shareholders, this buy-back price was $1.61 per share calculated on a net asset backing basis as follows:

Agreed value of retained assets (Grafton abattoir and Caroline Springs)

The total issued share capital of RJG was 19,586,712 shares. As a matter of arithmetic the asset backing per share was, therefore, $1.61.

336. The value, therefore, of the 40 percent shareholding of the Japanese shareholders was $12.82M which was the agreed buy-back price. A meeting of the shareholders of RJG was convened for 2 October 1996 to approve the buy-back. On the day before this meeting the solicitors for the Japanese interests wrote to the solicitors for RJG raising a number of objections to the documentation which had been forwarded to them. Mr George Gilbertson said that this represented a rejection of the offer and that the negotiators had to return to make another agreement. This may be so. What did happen was that on 31 October 1996 a fresh agreement was reached which departed from the early agreement in three respects. First, instead of a share buy-back by RJG, the Japanese interests sold their 40 percent shareholding to Holdings. Second, the share price was increased to $3.40 so that the amount payable to the Japanese vendors was $27M. Calculating backwards from this figure to the net assets of RJG, the increase in the share price represented an increase in their value from $32.064M to $67.5M. Third, of these assets, the net price of the meat works assets sold to the Japanese interests was increased from $40.822M to $55.1M. These assets of RJG were not revalued in its accounts to represent this increase. In terms of the net in-flow of funds to the Gilbertson group, this change made little, if any, difference.

In her evidence Mrs Bliss said that the actual price paid for the Sumikin shares was $26.017M and not $27M as mentioned by Mr George Gilbertson. This is explained by relative movements in the value of the currencies because the price of the shares was fixed in Japanese Yen. This means also that the price per share actually paid to the Japanese was $3.27 and not $3.40 as assumed. The difference, however, is not significant for my present purposes.

341. The explanation of Mr George Gilbertson for the changes was that the new increased share price was dictated by the Japanese vendors of the shares. He said he had no option but to accept it and he was not minded to make a stand because the Japanese parties were prepared to pay the corresponding increase in the price of the meat works. The first change, the sale to Holdings rather than the buy-back by RJG may well have been likewise dictated by the Japanese negotiators for they agreed to pay stamp duty which became payable as a result. Even so, the renegotiations did not take long for the Memorandum of Understanding for the sale of the meat works is dated 5 October 1996.

344. While it is doubtless correct to say that the changes in the asset values and in the share price were of no particular significance to the two negotiating parties, they had an impact on the asset position of the several companies within the Gilbertson group.

347. The price paid by Holdings for the shares of the Gilbertson family members was $16.03M. This was calculated by reference to the $3.40 share price negotiated with the Japanese. In terms of the actual funds paid, this sum was provided by an overnight unsecured loan made by the ANZ Bank on 14 November 1996. The movement of the money within the Gilbertson group on 15 November was as follows:

(1) From ANZ Bank to Holdings $16.103M by short-term loan.

(2) From Holdings by direction of the Gilbertson family shareholders $16.103M to Marwen Investments -

(a) the payment to the family shareholders was the price for their 24 percent shareholding in RJG at $3.40 per share;

(b) the payment by the shareholders to Marwen Investments was in payment of 39,852 shares in Marwen Investments (32.4 percent) allotted to them at a premium of $404 per share.

(3) (a) From Marwen Investments to Holdings $10.551M to discharge its loan debt to that company which had accumulated over the years since 1987 as described in [75] above.

(b) From Marwen Investments to Marwen Properties $5.552M to discharge its loan debt to that company which had likewise accumulated since 1989 as described in [75] above.

(5) The payments received by Holdings from Marwen Investments and Marwen Properties totalling $16.102M were paid to the ANZ Bank in repayment of its overnight loan.

358. From the perspective of GRPL the significance of this circulation of funds lies in the fact that the loans owed to Holdings by Marwen Investments and Marwen Properties totalling $16.103M were replaced as an asset on Holdings balance sheet by the 24 percent shareholding in RJG purchased from the Gilbertson family shareholders. This shareholding at the price of $1.61 per share was worth only $7.6M. It was put that this difference of $8.5M represented a loss to Holdings of which 20 percent passed to GRPL because of its shareholding in Holdings and of this, 25 percent to the Salter family shareholders in GRPL. If the adopted share price of $3.40 was appropriate this loss disappears.

361. Conflicting positions were adopted at the trial with respect to the provenance of the $3.40 share price. Mr George Gilbertson said that $3.40 was the figure stipulated by the Japanese negotiators in October and that he agreed to it. Counsel for the Salters submitted that I should infer that it was a contrived price, fixed so as to provide a consideration of $16.103M which, in the way I have described, would be used to pay out the debts owed by Marwen Investments and Marwen Properties to Holdings. This would mean that the price came from the Gilbertson negotiators. I prefer the explanation offered by Mr George Gilbertson. He was pressed in cross-examination on this matter and his responses struck me as plausible. It was in the interests of the Gilbertson group, he said, to pay as little as possible for the shares as long as the net receipts for the sale of the meat works were maximised. He said that it was a coincidence that the revised share price when applied to the Gilbertson family shareholding produced the exact sum needed to discharge the debts due to Holdings. In essence it was this coincidence which provided the main, if not the only, plank for the argument put on behalf of the Salters that the price was contrived. I was pressed in argument to draw this inference, and to do so the more readily because no evidence was called from the solicitors or others who participated in the renegotiations. On reflection, I think I should not do so. I accept the uncontradicted evidence of Mr George Gilbertson that the figure of $16.103M just fell out as a result of the arithmetic. Suspicion is no substitute for evidence. Moreover, the difficulty with the Salters' position is that the evidence shows that an agreement, in principle, was achieved in September at the $1.61 price. If the Gilbertson negotiators had intended to structure the transaction to provide funds to pay out the loans to Holdings, it is surprising that this September agreement was reached and further that its details were circulated to the RJG shareholders.

364. Next it was put that I should find that $1.61 and not $3.40 was the appropriate value of the RJG shares at the time of the purchase of the shares of the Gilbertson family members on 15 November 1996. I should say that nothing in the nature of a share valuation exercise was undertaken at the trial. The two proffered values were derived from their asset backing of the shares.

367. In support of $3.40 I was told of two recent sales: to Midoshuji in 1994 at $3.54 and to Mrs Salter in 1995 at $3.00. I put to one side the sale by Sumikin at $3.40 in 1996, not because it post-dated the sale in question, but because I have found that it had special characteristics including the fact that Holdings as purchaser was not in a position to haggle. No witness was prepared to support the price of $3.40 on an asset backing basis or, indeed, on any other basis. There was no expert evidence of this nature at all. I find that, of the two prices, $1.61 more closely approximated the value of the RJG shares at the time of the sale to the Gilbertson family members.

370. But this does not dispose of the question before me, which is whether the adoption of this price by Holdings in its dealings with the Gilbertson family shareholders and the use made by it of the proceeds of sale amounts to conducting the affairs of GRPL in a manner oppressive of the Salters. When expressed in this way, the answer is obvious. The agreement by Holdings to buy shares at an over-value is not such conduct. Even in the context of a family group of companies and, accepting that Mr George Gilbertson is chairman of directors of each of Holdings and GRPL, it is not possible to describe the making of the agreement between Holdings and the Gilbertson family shareholders as conducting the affairs of GRPL. Nor is a different answer given if the transaction is looked at in a broader perspective, involving RJG and the Japanese investors.

373. Furthermore, even if it were possible to treat the purchase of the shares from the Gilbertson shareholders as conduct of the affairs of GRPL I would not conclude that the decision to adopt the price, $3.40, amounted to oppression. I found Mr George Gilbertson's evidence on this point compelling. Given the fact that he had just negotiated a sale of a substantial parcel of RJG shares at $3.40, he considered it unfair to adopt a different value when buying shares from his own family members or interests associated with them. I conclude, therefore, that the fixing of the price in this way does not amount to oppression. The consequence of this was that a sum of money, which was conveniently in the amount of $16.103M, became available in the hands of Marwen Investments as soon as the Gilbertson family members had sold their shares in RJG and, as part of the reorganisation, agreed to invest the proceeds in Marwen Investments.

377. In essence, what was involved here was the sale to Marwen Investments by each of the two family companies, GRPL and IGPL of their 344,590 shares (20 percent) in Holdings at about $19.66 per share and the issue to each of them by Marwen Investments of 16,650 shares in that company (13.5 percent) at $407 per share on 14 November 1996. As a matter of arithmetic, the sum involved for each transaction with each company was $6.776M.

380. It is necessary to have regard to the sequence of events constituting the Marwen Reorganisation insofar as they concern Marwen Investments.

Marwen Investments issued 40,000 shares to its directors at par.

Marwen Investments purchased from GRPL and IGPL their shareholdings in Holdings and issued to them 16,650 shares at $407 per share.

Marwen Investments issued to the Gilbertson family members 39,852 shares in Marwen Investments (32.4 percent) at $404 per share.

Putting to one side the failure to consult the Salters about this share swap, it is put that it seriously disadvantaged their interests as shareholders in GRPL inasmuch as the value of the Marwen Investments shares issued to GRPL was less than the value of the Holdings shares transferred by it to Marwen Investments.

385. Mrs Bliss said that sometime after the transaction Mrs Salter asked her to set out in writing how the figures were arrived at and that, in response, she produced a document entitled "Explanatory Memorandum" which bears a print date 2 June 1997. This document was in evidence as Exhibit J87.

388. Mrs Bliss said that the document reflected the formula which produced the share swap, but not the thought process. This evidence was not pursued. Mr George Gilbertson said that he approved the document when it was produced. The debate before me proceeded, therefore, on the content of this Explanatory Memorandum.

391. The document proceeds on the basis that each of GRPL and Marwen Investments was a holding company and that the substantial asset of each was a parcel of shares in Holdings. Holdings, in turn, was a holding company whose assets were its shares in Marwen Properties and, more importantly, for present purposes, its RJG shares. Broadly speaking, what Mrs Bliss did was to calculate the value of the Holdings shares by reference to their asset backing and then to distribute to the new shareholders shares in Marwen Investments so as to preserve the same proportion in the underlying asset backing of the Marwen Investments shares. This was achieved by a process involving a number of steps.

394. Step 1 was to acknowledge the fact that the value of the 20 percent shareholding of GRPL in Holdings is equal to 20 percent of the net assets of Holdings. Since a substantial asset of Holdings was its 36.15 percent shareholding in RJG, this value must have regard to the value of the RJG shares. The net assets of Holdings as shown in its draft accounts as at 30 June 1996 were $46.019M. If this figure is adjusted to reflect a different value of the RJG shares as at November 1996, the figure becomes $49.260M on the basis that these RJG shares are worth $3.40, or $36.411M if they are worth only $1.61.

397. In Step 2 Mrs Bliss adopted the larger figure $49.260M as the value of the Holdings assets and deducted from it $15.683M being the debts owed to Holdings by Marwen Investments and Marwen Properties which were repaid on 15 November 1996. This caused the value of Holdings to be restated at $33.577M. If the same adjustment is made to the value of Holdings and the lower price for the RJG shares had been adopted, the restated value would be $20.728M. The relative shareholdings in Holdings prior to the restructure were 60 percent by Marwen Investments, 20 percent by GRPL and 20 percent by IGPL. In terms of their underlying asset value, these holdings may be shown as follows:

401. Step 3 involves bringing into account the contribution of the Gilbertson family members who sold their RJG shares and were to take an equivalent value in Marwen Investments shares. The proceeds of the RJG shares in their hands was $16.103M which is taken to be the value which they bring to the reconstruction. The relative value of the contributions of the participants then becomes as follows:

405. Step 4 then determines the number of shares to be issued in Marwen Investments to the incoming investors. The object is to retain the relative percentage of the value each held in Holdings. The existing members of Marwen Investments totalling 100 percent of its shares held a total of 50,000 shares, including the recent allotment at par. If this shareholding is to represent the same percentage of the share capital of Marwen Investments after the new share allotments are made, the number of shares to be issued will be approximately as follows:

409. Step 5 involves the fixing of the share price for the Marwen shares on allotment. Having determined the number of shares to be allotted, the price per share is a matter of dividing the number of shares into the value contributed to Marwen Investments by the investor. Thus, the price for each of the 16,650 shares allotted to each of GRPL and IGPL in exchange for their $6.716M worth of Holdings shares is about $403 for which $407 dollars was adopted. A similar calculation produces a share price of $404 for the shares allotted to the Gilbertson family members.

412. There are three aspects of the calculations in the Explanatory Memorandum which were the subject of challenge. The first was that each share in RGJ had an asset backing of $3.40. I have found that it did not. I accept that Holdings was entitled to buy the 24 percent of RJG shares held by the Gilbertson family members and the 40 percent of RJG shares held by the Japanese investors at any price which suited it. This does not, however, entitle it to re-value the acquired assets accordingly. Step 1 was, therefore, challenged and, to my mind, the point is well made. The value of the assets of Holdings did not increase as a result of its purchasing RJG shares at an over-value. Arguably, it may have diminished their value, but this point is not taken.

415. The second criticism was that in calculating the value of the assets of Holdings one should not deduct the current receivables totalling $15.083M, being loans owed to Holdings by Marwen Investments and Marwen Properties. Various justifications were offered for this deduction. John Selak, an executive director of Ferrier Hodgson called as an expert witness for the respondents, said that the loans were non-recoverable. Marwen Investments had negative shareholders' funds prior to the Marwen Reorganisation in the sum of $6M. Accordingly, to write-off a non-recoverable debt does not affect the asset position of Holdings. Mr George Gilbertson said merely that the deduction was done on advice received that this was the correct methodology. When pressed, he said that it was Mrs Bliss who sought the advice. Mrs Bliss, herself, said that the objective of the analysis was to compare the values of investments in Holdings between the three investors; it was not to determine the net asset position of Marwen Investments. The liabilities, therefore, were not relevant. An examination of the Explanatory Memorandum suggests that this is not correct, or that it is not the whole story which the document tells. I accept the criticisms of the methodology offered by Wayne Richard Lonergan, a chartered accountant and partner in PricewaterhouseCoopers Financial Advisory Services, called as an expert witness by the applicants. Mr Lonergan points out that the omission of these loans affects the value of the Holdings shares and that of the shares in Marwen Investments held by the directors. It cannot be ignored where either of these values is relevant.

418. The deduction of the receivables is of great significance in the third aspect of the analysis criticised by the Salters. This is that the contribution of the directors of Marwen Investments should not be taken as $20.147M as appears in Step 2 above. The net asset position of Marwen Investments prior to the reorganisation was a deficiency of $5.475M according to Mr Lonergan and a deficiency of $6M according to Mr Selak. In any event, it is not possible to base a calculation such as that contained in the Explanatory Memorandum on an assumption that the four directors of Marwen Investments should be credited with over $20M in comparison with the contributions of GRPL and the other investing parties. Mrs Bliss did not seek to justify this. She argued that the relativities between the groups of investors in Marwen Investments should be established by reference to the down-stream Gilbertson group assets. The difficulty with that contention is, first, that the assets contributed by the incoming Marwen Investments shareholders are net after deduction of liabilities and, in any event, as Mr Lonergan points out, it is not legitimate without further consideration to equate values at different levels in the corporate structure.

421. I accept generally the evidence of Mr Lonergan that the Explanatory Memorandum is a flawed document in a number of important respects and that the allotment of Marwen Investments shares to GRPL as explained in that document prejudiced the interests of GRPL and did so in a manner and to an extent that is unfair. I accept that the value of the assets of Holdings and of Marwen Investments should be calculated on the basis that the RJG shares are worth $1.61. This means that the value of Holdings was $36.411M and not $33.577M as appears as Item (3) in the Explanatory Memorandum and in Step 2 above. Accordingly, the value of the 20% shareholding in Holdings held by GRPL was $7.282M and not $6.716M as appears in Item (4) of the document and in Step 2 above, and the value of Marwen Investments, including its liability to Holdings and Marwen Properties, was a negative value of $5.475M. This figure is based on the liabilities as they appear in the June 1996 draft accounts and may require some adjustment to reflect the position as at 15 November 1996. The consequence of this is that the contribution of GRPL to the restructure is understated by $5.031M as appears in paragraph 53 of Mr Lonergan's report. This understatement and that of the contribution of all parties other than the directors is to be contrasted with an overstatement in favour of the directors' contribution by $12.268M.

424. This, then, leaves the manner in which the shares in Marwen Investments were allocated. I must say that I am puzzled about the equity which was said to have been achieved at this stage, even putting to one side the discrepancies in the contributions which I have identified. Mr George Gilbertson said that he would have been uncomfortable if he offered to the Gilbertson family shareholders only $1.61 for their RJG shares, having bought the same shares from the Japanese investors at $3.40. In the Marwen Reorganisation he seems to have perceived no discomfort in issuing Marwen Investments shares to himself and his co-directors at $1, to the Gilbertson family members at $404 and to GRPL and, perhaps, IGPL at $407. Moreover, the number of shares allotted and the price asked for those shares seemed to be driven, not so much by the relative values of the contributions of the incoming investors, rather than by a need to maintain the existing proportions in the shareholdings as between these investors and, in particular, to maintain control of Marwen Investments in the hands of the directors. These matters were not the subject of argument and I prefer to leave them to the next stage of the trial.

427. I am, therefore, satisfied that, in the Marwen Reorganisation, Mr George Gilbertson as a director of GRPL has conducted the affairs of that company in a manner which is unfairly prejudicial to or unfairly discriminatory against the applicant shareholders in that company.

431. I have concluded that the allegations of oppression have been made out with respect to the making of loans to Marwen Investments in breach of the fiduciary duties owed by Mr George Gilbertson to GRPL and which were uncommercial. The consequence of this has been that GRPL has been deprived of interest which it would otherwise have received. I have concluded that the allegations of oppression have been made out with respect to the Marwen Reorganisation with the consequence that GRPL was disadvantaged, again, at the expense of Mr George Gilbertson and his co-directors.

434. The Salters seek orders that their shares in GRPL be purchased by Mr George Gilbertson or the other shareholders and that the price for those shares be adjusted so as to recoup the losses which they have suffered by the oppressive conduct. I am satisfied that, if this is possible, it is the preferable course to follow. This adjustment and the terms of sale must be matters to be dealt with hereafter.

437. It will be apparent from a reading of these reasons that I have on many, if not most, occasions rounded off values and percentages for convenience of exposition. When the adjustments come to be made, the precise figures will be those which must be adopted.

440. I mention in conclusion an argument put on behalf of the respondents based on the failure of the Salters to set in train the buy-out procedures of Article 37. As I indicated to counsel in final addresses, I see no substance in this contention. An essential feature of the claims made in this proceeding is that there must be some adjustment to the value of GRPL shares before any buy-out may be acceptable. I have found that an adjustment is appropriate. Whether it is to be done by an adjusting entry in the books of GRPL or by cash payment or otherwise is a matter upon which the parties will return. None of these adjustments is possible under the Article 37 procedure. The respondents, therefore, can derive no comfort from this submission.

443. I will now stand the matter over for the parties to consider these reasons and to mention at a convenient time for further argument and perhaps evidence on the matters reserved.