Shirim Pty Ltd & Anor v Fesena Pty Ltd & Ors

COUNSEL : Mr N Cotman SC with Mr E Finnane for the Appellants Mr G Lindsay SC with Ms M Painter for the Respondents SOLICITORS : McCabe Terrill Lawyers for the Appellants Thompson Eslick Solicitors for the Respondents CATCHWORDS : Minutes of Order - no question of principle Borthwick v The Elderslie Steamship Company Ltd (No.2) [1905] 2 KB 516 Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409 CASES CITED : L Shaddock & Associates Pty Ltd v Council of the City of Parramatta (1982) 151 CLR 590 Nicol v Allyacht Spars Pty Ltd (1988) 165 CLR 306 Shirim v Fesena [2002] NSWSC 10 Whitaker v Commissioner of Taxation (1998) 82 FCR 261 DECISION : See paragraph 17 of the judgment.

• 6 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4086 / 94 Shirim Pty Ltd & Anor v Fesena Pty Ltd & Ors Judgment 1 His Honour: Reasons for judgment were handed down on 25 January 2002 (Shirim v Fesena [2002] NSWSC 10). I ordered that counsel bring in short minutes of the orders proposed. There are three particular areas of dispute between counsel as to the form of the orders which should be made. 2 On 14 March 1996, Master McLaughlin ordered by consent that certain shares and units held by Dr Smith's company, Shirim Pty Ltd, be transferred to companies in the Macquarie Hospital group. The Master ordered that an inquiry be held as to the value at which the shares and units should be so transferred. On 6 February 2001 the Master held that the value of the shares and units to be transferred should be certified as "nil". In my reasons for judgment delivered on 25 January 2002 I determined that the value to be fixed for the shares and units should provide relief against oppression and that, in the circumstances of the case, a fair value was $375,000, of which one half would be attributed to the shares held in Fesena Pty Ltd and one half to the units in the Netherleigh unit trust, the shares in Eastern Suburbs Private Hospital Pty Ltd being attributed with only a nil or nominal value. 3 In arriving at the figure of $375,000, I placed substantial weight upon the state of affairs as they stood at 30 June 1996, much of the evidence having directed its attention to that date. I considered that a figure of $250,000 would have been an appropriate figure to fix as at 30 June 1996, and, on that footing, I fixed a present value at $375,000. The crux of my calculation was set out in the following paragraph (at [73]): "In the circumstances of the case, I can do no more than assess a figure which is fair to all parties. I consider that a figure of $250,000 would be an appropriate figure to fix as the value at which the shares and units should have been transferred, if transferred at 30 June 1996. Taking into account the passage of time and the rates of interest as reflected in Schedule J to the Supreme Court Rules , but without making any precise calculation, I assess the present value at $375,000. I would attribute one-half of that sum to the shares in Fesena, and the balance to the units in the Netherleigh Unit Trust. The shares in ESPH, a trustee company, should have a nil or nominal value." 4 Mr G Lindsay SC, with him Ms M Painter, who appeared for the companies in the Macquarie Hospital group, submitted that, as the proceedings before the Court were an appeal from orders made by the Master, the order should speak as from the date of the Master's order and should operate by way of variation thereof. Mr Lindsay submitted, moreover, that it was inappropriate to take into account interest as from 30 June 1996, as the shares and units were still held by Shirim Pty Ltd. Mr N Cotman SC, with him Mr N Finnane of counsel, who appeared for Shirim Pty Ltd and Dr Smith, submitted that the form of order as adumbrated in my reasons for judgment was appropriate. 5 Mr Lindsay's submission was made without reference to authority and without analysis, a course which I would strongly discourage. Section 75A of the Supreme Court Act 1970 applies to appeals in proceedings in the Court. The present proceedings are an appeal in proceedings in the Court. Section 75A(5) provides that "Where the decision or other matter under appeal has been given after a hearing, the appeal shall be by way of rehearing."

Thus, the appeal proceeded by way of rehearing subject to the limitations enunciated by Cross J in Do Carmo v Ford Excavations Pty Ltd [1981] 1 NSWLR 409 at 419. Section 75A(10) provides that "The Court may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires." Thus, in the appeal, the Court is entitled to make any order which the nature of the case requires. 6 Under such legislative provisions, the substantive order which binds the parties will take effect as from the date of the order in the appeal or from the date of the order below depending upon the nature and content of the order made in the appeal. In Borthwick v The Elderslie Steamship Company Ltd (No.2) [1905] 2 KB 516, Collins MR said at 519: "There can be no doubt that under Order LVIII ., r. 1, an appeal to a Court of Appeal is a rehearing, and though by rule 4 of the same order the Appeal Court has all the powers of the High Court, including the power to give any judgment and make any order which ought to have been made by the Court of first instance, still the judgment of the Court of Appeal is a judgment of the date on which it was given, and it would require the invocation of the powers given by Order XLI., r. 3, if that judgment is to be antedated." 7 At 521, Romer LJ said: "When a plaintiff has failed in the Court below so that his action has been dismissed, if he succeeds on appeal it cannot, I think, be properly said that the judgment of the Court of Appeal must be regarded for all purposes as if it had been the judgment given by the judge in the Court below. The judgment in favour of the plaintiff must be treated as of the date on which it was given in the Court of Appeal, subject to the right of that Court to antedate its judgment." 8 The principle enunciated in Borthwick was applied by Mason ACJ, Wilson and Deane JJ in L Shaddock & Associates Pty Ltd v Council of the City of Parramatta (1982) 151 CLR 590, where their Honours added interest to the amount of damages assessed at first instance in order that the award of damages be appropriate as at the date when the judgment of the High Court was given. 9 The principle was further examined and applied in Nicol v Allyacht Spars Pty Ltd (1988) 165 CLR 306. At 310, Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ cited Borthwick with approval. At 311, their Honours said: "In our view, the words 'may give such judgment as ought to have been given in the first instance' in s.37 of the Judiciary Act do not have the operation for which the appellant contends. Clearly they were not thought to do so in Borthwick v. Elderslie Steamship Company (No. 2) for by its rules of court the Court of Appeal had all the powers of the English High Court, including the power to give any judgment and make any order which ought to have been made by the court of first instance: see Collins M.R. [at 519]. Such a provision speaks to the power of the Court and no doubt a rule such as O.43 r.3 of this Court's Rules is a useful corollary to such a provision. But to empower an appellate court, in the exercise of its appellate jurisdiction, to 'give such judgment as ought to have been given in the first instance' does not, as Romer L.J. pointed out in Borthwick [at p.521] mean that the judgment of the appellate court 'must be regarded for all purposes as if it had been the judgment given by the judge in the Court below'." 10 In the present case, it is essential to make an order which will speak from the date on which the order is made, for the subject of the judgment is the value to be paid on the transfer of the shares and units. That event is still to take place in accordance with the orders of the Court. It would be entirely inappropriate to antedate the value to be paid either to 14 March 1996, when the order was first made by Master McLaughlin that the shares and units be transferred, or to 6 February 2001, when the Master certified that the value to be paid be "nil". It was always the intent of the earlier orders that the value be paid when the shares were transferred. The amount to be paid having been fixed by my judgment, the effective orders for transfer and payment will have application on and from the date on which I pronounce them. 11 I would further add that my reference to the rates of interest as reflected in Schedule J to the Supreme Court Rules did not reflect a finding that either Shirim Pty Ltd or Dr Smith was entitled to interest on any sum. I did not have in mind to include an amount of interest as such. The reference to interest was simply one of the factors to which regard was had in arriving at an appropriate figure for the value to be paid for the shares and units when transferred. For example, prejudgment interest in an award of damages for personal injury was held by Black CJ, Lockhart and Burchett JJ, in Whitaker v Commissioner of Taxation (1998) 82 FCR 261, not to be assessable income. In the present case, the reference to interest rates occurred simply because there was a good deal of evidence as to the relevant facts as at 30 June 1996, but there was very little evidence as to factors to which regard should be had so as to bring the value of the shares and units up to date. 12 The second issue concerns costs. Mr Lindsay submitted that each party should bear his or its own costs of the proceedings to date, including the costs of the proceedings up to and including the consent order on 14 March 1996, the costs of the proceedings thereafter culminating in the orders of Master McLaughlin on 6 February 2001 and the costs of the proceedings in the appeal. Mr Lindsay submitted that the issue between the parties had not been as to whether or not the shares and units should be transferred but whether any amount should be paid to Shirim Pty Ltd by way of relief against oppression and, if so, what that amount was. Mr Lindsay provided a schedule of settlement offers and related communications between the parties from 3 December 1993 to 30 November 2001. The latter date was during the hearing in the appeal. The schedule shows that, over the period, the companies in the Macquarie Hospital group were reluctant to offer any sum other than the monies payable to Dr Smith under a superannuation fund, which subsequently were paid to him. Shirim Pty Ltd and Dr Smith sought a substantial payment for oppression although, by 28 November 2001, Shirim Pty Ltd and Dr Smith had indicated a preparedness to accept $350,000 including costs. 13 In my opinion, the ordinary rule as to costs should apply. There was oppression of a minority. The institution of the legal proceedings was necessary. The amount that will be recovered will be greater than any sum offered by those responsible for the conduct which I have held to be oppression. 14 Mr Cotman conceded that the costs of the inquiry before the Master should be reduced to 80 per cent, having regard to the manner in which the inquiry was presented on behalf of Shirim Pty Ltd and Dr Smith. I agree that that would be appropriate. I consider the orders as to costs proposed by Mr Cotman are appropriate. 15 The third issue concerns the matter of a stay. Mr Lindsay has sought a stay of the orders pending the hearing and determination of the appeal. In my opinion it is premature to consider that issue. An application for a stay may be made if and when a notice of appeal is filed. 16 I shall however fix 31 May 2002 as the date on which the shares and units be transferred and the value be paid. By that date, the time for appeal will have expired. 17 I accordingly make orders in the form propounded on behalf of Shirim Pty Ltd and Dr Smith, save that in paragraph 7 thereof I substitute the date 31 May 2002. -o0o-

Last Modified: 04/15/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.