Snell v Glatis

Background

1. For the most part, it will be sufficient simply to refer to the appellant, Mr Keith Snell and the first respondent, Mr Christopher Glatis. Mr Glatis' father, who died in 2003, and Mr Snell had from the 1980s operated a group of companies, known as the SMA Group, and including the fourth, fifth, sixth and seventh respondents. This occurred with considerable financial success. In 2016, Mr Glatis and the Glatis Family Limited Partnership commenced an oppression suit under ss 232 and 233 of the Corporations Act 2001 (Cth). For the most part, it is unnecessary to make separate reference to the ways in which members of the Glatis family hold shares in the group.
2. There was no challenge to any of the findings of oppression (which were numerous and extended over many years). The primary judge heard a trial over eight days and produced a large judgment. Her Honour summarised the position at [4] thus: "By the end of an eight-day hearing, the defendants agreed to pay the plaintiffs unpaid dividends dating from 2008, but disputed any obligation to pay interest. The defendants accepted that some, but not most, of the conduct complained of was oppressive. The defendants agreed that the Glatis family and Mr Snell should now both extract their investments in the SMA Group. The corporate defendants proposed to appoint attorneys to sell the assets of the SMA Group together with an order enjoining Mr Snell from interfering with that process. The proposed orders reflected an acceptance on the defendants' part that Mr Snell had dealt with the Glatis family in an uncooperative and obstructive manner. The plaintiffs, however, are not interested in this proposal and want their shares in the SMA Group bought out for $66 million."
3. The limited nature of the appeal enables a considerably abbreviated summary of her Honour's judgment.
4. The first half of the judgment summarises the facts. Paragraphs [186]-[286] deal with her Honour's findings of oppression, under the headings "Failure to provide information", "Refusal to appoint director of SMA Operations", "Unequal treatment in dividends - SMA Victoria", "Adjustments to Mr Snell's loan account with SMA Victoria", "Non-payment of dividends for SMA Operations" and "Other transactions". It will not be necessary for the purposes of this appeal to summarise most of the particular transactions and conduct giving rise to those findings, the general nature of which is revealed by the headings. Exceptionally, more needs to be said concerning the non-payment of dividends for SMA Operations, in order to address grounds 15 and 16, but it will be convenient to defer those factual matters for the present.
5. The portion of the judgment of central importance for the purposes of the principal grounds of this appeal is paragraphs [287]-[296], under the heading "Buyouts". Her Honour commenced by recording, accurately, that: "Although the plaintiffs sought by the Originating Process that the defendants be wound up, this was only sought in the alternative and not pressed at trial. Rather, the plaintiffs wanted a buyout order."
6. Her Honour then reproduced principles taken from the decisions of this and other Australian courts governing the exercise of discretion in oppression cases, including what had been said in Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [44] and Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; 28 ACSR 688 at [742] as to compulsory buy-out orders being ordered only if less drastic remedies were unavailable.
7. The primary judge then made reference at [289]-[291] to two instances of litigation where consideration had been given to making compulsory buy-out orders as opposed to a winding up, in circumstances where there was uncertainty as to whether the defendant could raise funds to comply with a buy-out order.
8. First, her Honour reproduced [1224]-[1226] of Short v Crawley (No 30) [2007] NSWSC 1322, which included the defendants' submission that "An order for the compulsory purchase of shares should be coupled with the reservation of the proceedings for further consideration so that if Mr Crawley did not have the means with which to purchase the shares, a winding-up order could then be made. But it should only be made as a last resort when and if it were established that Mr Crawley could not effect a purchase". That submission was accepted by White J: "I agree with the submission for the defendants that the cross-examination of Mr Crawley did not establish that he would be unable to fund a share purchase in excess of $10,000,000, and that it should not be assumed in advance that he would be unable to do so. I agree with the defendants' submissions that the proceedings could be reserved for further consideration so that a winding-up order could be made if Mr Crawley were unable to effect a purchase."
9. The orders actually made by White J are not in the judgment, nor are they reproduced in the reasons of the Court of Appeal, although they are partially reproduced in Short v Crawley (No 38) [2008] NSWSC 917; 67 ACSR 627 at [1]. Presumably the orders which the parties supplied to White J subsequently reflected those reasons, or alternatively departed from them consensually. In the subsequent appeal, it was noted that it was no longer in dispute that a compulsory purchase order rather than a winding up order was appropriate: Crawley v Short [2009] NSWCA 410; 76 ACSR 286 at 54.
10. Secondly, the primary judge also reproduced passages from litigation in the Supreme Court of Queensland: Allways Resources Holdings Pty Ltd v Samgris Resources Pty Ltd [2017] QSC 74; 121 ACSR 1, appeal dismissed [2018] 3 Qd R 520; [2018] QCA 48. At first instance, Bond J ordered the winding-up of a company, rejecting a buy-out order, in part on the following basis (reproduced by the primary judge): "Further, I have no evidence as to the financial position of APJM. The facts that APJM is owned by the Shaanxi Parties and they are companies of significant substance does not mean that APJM should be so regarded. Accordingly, there is uncertainty whether APJM would be able to comply with any buy-out ordered by the Court and at least the possibility that a buy-out order might still end up with a winding up of Samgris."
11. An appeal was dismissed, with McMurdo JA (with whom Gotterson JA and Jackson J agreed) approving that passage and continuing (at [70]-[72]): "In my view, the critical considerations are that not only would the valuation of the respondents' shareholding be an extensive, expensive and time consuming process, but there is also a real uncertainty as to whether the appellant would be willing and able to pay the price which is ultimately determined. … The Shaanxi Parties are not parties to this litigation. They have not undertaken to cause the appellant to comply with the share buy-out order, if it is made. The appellant's counsel candidly told this court that the possibility that the assessed value would be too high a price to be afforded could not be excluded. … Consequently, the appeal must be decided upon the premise, as discussed by the trial judge, that the performance of a buy-out order is uncertain and that the ultimate outcome might still have to be a winding up because the appellant would not comply with the order. Ultimately, the appellant urges this Court to make an order which, it candidly admits, it might not perform. The areas of uncertainty about its performance are largely matters within its own knowledge. It has offered no evidence of the preparedness of the Shaanxi Parties to support its compliance with the order which it seeks."
12. The primary judge then recorded the plaintiffs' submissions that: 1. the defendants had not produced any evidence that a buy-out order would not be a viable option by reason of the financial capacity of Mr Snell or otherwise, such that there was no reason not to make a buy-out order on any such grounds, by reference to In the matter of OTS (Australia) Pty Ltd [2017] NSWSC 175 at [64]; 2. compulsory buy-out orders were in the nature of compensation for a wrong, rather than an adjustment of the rights of equally meritorious parties; and 3. thus "difficulty in complying with the order, whether through lack of funds or other cause, is no reason why judgment in the form of a purchase order should not be made", citing Re Hollen Australia Pty Ltd [2009] VSC 95; 27 ACLC 199 at [88] and Re a Company (1986) 2 BCC 99,453 at 99,483.
13. The primary judge recorded the defendants' submissions that: 1. the members should recover the value of their interests in the group, but that they should be given an opportunity to "frame an appropriate mechanism as to how this could occur"; and 2. no buy-out should be ordered as the valuation evidence was said to be wholly inadequate to enable any valuation of the interests of the parties in the SMA Group, but rather there should be a voluntary sell-down of the corporate assets.
14. The dispositive reasoning on remedy was at [294]-[296]: "There was no evidence that a buyout would impose any hardship on Mr Snell. Instead, the defendants submitted it was not possible to determine whether Mr Snell could pay for a buyout as there was no valuation evidence as to what the Glatis family's interests were. I understood this submission to be an oblique reference to the fact that the plaintiffs' shares in SMA Operations were "dividend only" shares. The plaintiffs submitted that the fact that the shares ultimately allotted by SMA Operations to Mr Glatis (and to Mr Snell and Mr Culley) in 2014 were "dividend only" did not justify any discount being applied to the value of the shares. Both experts valued the shares on the basis that the SMA Operations is a going concern. The hypothetical purchaser of shares in a company which is a going concern is looking, not to a winding up, but to the profits which will ensue from the company continuing to trade: see Tomanovic v One Australia Pty Ltd (2015) 104 ACSR 596; [2015] NSWCA 11 at [179]-[189] per Bathurst CJ. In circumstances where both experts agreed that the value of the shares of SMA Operations should be determined using the same, conventionally accepted, methodology, and Mr Gwynne did not suggest that the value of the Glatis family's shares in SMA Operations should be discounted by reference to being "dividend only", I do not propose to approach the matter other than how the experts agreed was the appropriate way to value the shares. The plaintiffs having succeeded after a long and arduous legal proceedings and lengthy trial should have, it seems to me, their preferred remedy, there being no good reason put forward by the defendants, supported by evidence, that it should not be granted. Even assuming that Mr Snell is a man of considerable means, finding the sums sought by the plaintiffs to buyout their shares may well not be easy. There was some evidence in the contemporaneous documents that Mr Snell had a great appetite for funds, and at one point Mr Skyring mused whether Mr Snell was short of money. I do not know whether Mr Snell's conduct was motivated by financial need, an unwillingness to incur losses himself when he could 'sheet' them home to the SMA Group, an inability to delineate between his personal transactions and the SMA Group, a sense of entitlement or the desire to get as much money out of the SMA Group as he could while he was still in charge. I cannot speculate as to which of these potential factors explain his behaviour. The question is what order will ensure that there is no further oppression going forward while being least intrusive to the management of the affairs of the company. In circumstances where Mr Snell is Governing Director of SMA Victoria and Group Managing Director under the Shareholders Agreement, and where, as the plaintiffs submit, I have no basis for thinking that he recognises that his conduct was wrong or that he will conduct himself differently going forward, it seems to me that nothing short of a buyout order will suffice to prevent further unfairness. A buyout order is appropriate relief to cease the oppression going forward."
15. It will be seen that the primary judge relied on the absence of any evidence of hardship and the fact that compulsory buy-out was the plaintiffs' preferred remedy. Her Honour expressly appreciated that "finding the sums sought by the plaintiffs to buyout their shares may well not be easy", but nonetheless ordered a compulsory buy-out on the basis that it was the appropriate relief in order to prevent oppression in the future.
16. The primary judge then gave reasons at [297]-[336] for valuing the companies, and further reasons at [337]-[350] as to interest on unpaid dividends.

Orders made at first instance

1. Her Honour thereupon made orders declaring that the affairs of the companies had been and were being conducted oppressively (order 1), ordering the payment of unpaid dividends including interest of some $3 million (orders 2-6), and the buy-out of the plaintiffs' minority shareholdings for some $66 million (orders 7-13). Order 15 was a grant of liberty to apply "within 28 days to notify any amendment sought to these orders to correct any errors or omissions", and order 16 was "[l]iberty to apply".
2. Significantly for one of the submissions made in this appeal, the terms of the orders reflected a fundamental difference in their nature. The orders for the payment of unpaid dividends and interest were unqualified in terms of time, and were apt to be executed as a money judgment. The orders for the buy-out of shares imposed an obligation upon Mr Snell to do so within 30 days.
3. The buy-out order has not been complied with. Belatedly, application was made for a stay, which was granted for the reasons given by Basten JA in Snell v Glatis [2020] NSWCA 78. There is presently in place a stay of those compulsory orders until the determination of the appeal, on conditions concerning the non-disposal by Mr Snell of his assets save for ordinary living and reasonable legal and medical expenses.

The application to amend the notice of appeal

1. Mr Snell contended that the appropriate order was that the companies be wound up. At the forefront of Mr Snell's submissions was the fact that it had not been shown that he was able to obtain, in a 30-day period, the $66 million to comply with the order. True it is that he had not adduced evidence of his assets and liabilities. There was in evidence a schedule which suggested that he personally owned a large number of assets, mostly residential and commercial real property, valued at some $41.6 million, and one column on the schedule suggested that those assets might be subject to security of some $12.5 million.
2. The first basis on which this was opposed was procedural. Before the primary judge, it had been the respondent minority contending in the originating process that the companies should be wound up, a course which Mr Snell opposed. The trial occupied some seven days, with a further morning for submissions following the completion of evidence. Shortly prior to that final day, the parties exchanged lengthy submissions. Mr Glatis sought a compulsory buy-out. Mr Snell's position was that there was insufficient evidence to value the companies so as to make a buy-out order, and for that reason it was not necessary for him to adduce evidence of whether any such order would lead to hardship. Hence the interrelationship between the challenge to the exercise of discretion to make a buy-out order and the challenges to the valuation.
3. On the day before the appeal the appellant sought to amend the notice of appeal to invite this Court to appoint liquidators. Six candidates from three firms whose names and consents had been obtained without consultation with the respondent were suggested shortly before the appeal was heard.
4. Mr Kidd SC, who appeared for the Glatis interests in this Court and at trial, understandably objected to the proposed amendment, which had only been notified on the day before the appeal was listed to be heard, unaccompanied by evidence explaining its lateness. In part, that objection was accommodated by the exigencies of the hearing in this Court. The appeal was originally listed only for 25 June 2020, on an estimate which was unduly optimistic. It could not continue the following day. Ultimately, the hearing extended for some 1½ hours in the late afternoon of 15 July 2020. In the intervening period, the respondents had been able to obtain consents from liquidators and respond in detail to the orders which would apply in the event that the companies were ordered to be wound up.
5. More substantively, Mr Kidd submitted that the primary judge had not been asked to consider a winding up order, because Mr Glatis had sought a buy-out order and Mr Snell had contended that a winding up order was not warranted. It was said that this Court should not be asked to make orders which had not been sought at first instance. That submission has force. That said, Mr Snell's written submissions at trial had addressed winding up, relatively briefly, but his preferred position was a "voluntary sell-down of the Group's assets".
6. This Court reserved on the question of the amendment of the notice of appeal.
7. In the event that Mr Snell succeeds in establishing errors which vitiate the exercise of discretion by the primary judge as to remedy, there is no sound reason to confine this Court's discretion to exclude a winding up, in light of the circumstances as they prevail now, in 2020. The parties' attitude at trial is relevant, but does not circumscribe the re-exercise of discretion on appeal to make orders following Mr Snell's oppressive conduct. Those considerations are strengthened by a particular aspect of the facts in the present case. During the hearing, the Court was told without objection that Mr Snell (who was in his eighties) had been hospitalised, and on 4 August, that he had died. Mr Glatis is not a resident of Australia. Those circumstances, coupled with the substantial absence of active trading by the companies powerfully suggest at least consideration of orders winding up the companies, if the appeal be allowed, as a mechanism to secure Mr Glatis' entitlements and to address the oppression found by the primary judge.
8. There should be a grant of leave to extend the relief sought to include orders appointing liquidators to the corporate defendants.

Grounds 1-9 - challenge to exercise of discretion to make buy-out orders

1. As the respondents submitted, this Court is confined by the principles in House v The King (1936) 55 CLR 419; [1936] HCA 40 in reviewing the primary judge's exercise of discretion to make orders requiring Mr Snell to buy-out their minority interest. The respondents maintained that no such error was established.
2. It will be clear from the abbreviated summary above that Mr Snell advanced a very different case in this Court, on appeal, than had been put forward before the primary judge, where questions of breach and remedies were the subject of a single judgment. One can well understand the desire on the part of the respondents, who on the unchallenged findings of the primary judge have suffered a series of serious instances of oppressive conduct over very many years, to seek to obtain final orders resolving the litigation sooner rather than later. It is also true that Mr Snell appears to have made a forensic decision not to adduce evidence of his own assets, or the funds readily available to him. However, it is no small thing to order a natural person to make payment of $66 million, there having been no prior indication he would become subject to that obligation at that time. Mr Snell had only 30 days at the end of 2019 to obtain $66 million to comply with the orders (in addition to the $3 million to be paid pursuant to other orders). Mr Kidd readily acknowledged that it would have been open to Mr Snell to return to the primary judge to apply for extra time, but that is no answer to the inference which I consider is available that the orders made as to buy-out reflect a miscarriage of the discretion.
3. It is a noteworthy feature of the SMA group of companies that they were not only solvent but in very large measure non-trading. Their assets substantially comprised real estate (much of which was leased to tenants) and debts (some secured, some unsecured). The purpose which is achieved by a buy-out order is to return to a minority shareholder the value of his, her, or its shareholding. In a case such as the present where the corporate assets were substantially realisable and there was very little active trading, many of the usual considerations tending against ordering winding up did not apply.
4. The critical reasoning of the primary judge relating to relief is found at [296] which is reproduced above. That reasoning does not have regard to the alternative route of a winding up, which may be accompanied by, if appropriate, additional pecuniary orders addressing particular aspects of the oppressive conduct found to have been established. In the present case, where the companies were for the large part not running a business, but rather collecting rents on leased property and repayments of secured and unsecured loans, winding up was a realistic means of securing to the plaintiffs their share of the value of the SMA Group, which would also prevent ongoing oppression.
5. Secondly, the order should only have been made if the primary judge was satisfied that Mr Snell could comply with it and within the timeframe specified. It is significant that the cases on which the plaintiffs had relied in support of the proposition that difficulty in complying with an order was no reason against making it expressly relied on the fact that the company was actively trading. In Re Hollen Australia Pty Ltd, Robson J said at [88]-[89]: "The impecuniosity of the oppressor should not be a relevant factor in ordering the purchase by him of the oppressed party's shares. In Re a Company Vinelott J considered that if the company were wound up the respondent oppressor (who was seeking such an order on the ground that he could not afford to purchase the shares of the oppressed) would be in a position to appropriate substantially the whole of the business of the company for himself, since he had always dealt with the company's suppliers and customers the senior members of staff would follow him and there would be no one to outbid him if he made an offer to the liquidator for the right to use the company's name and logo. Justice Vinelott said: The result, it seems to me, would be far more unfair to Mr Lewis [the oppressed] than a compulsory order for the acquisition of the shares by Mr Bolton [the Oppressor]. It would be unfair that he should be deprived of a share in the "going concern" value of a company in the formation of which he participated and to the establishment of a business of which he made a significant if not indispensable contribution. Accordingly, the following appear to be the relevant principles: (1) Generally, the purpose of granting a remedy under s 232 is to bring an end to the oppression and to fairly compensate the person oppressed. (2) Typically, the oppression can be ended and the oppressee properly compensated by the oppressor being ordered to acquire the oppressee's shares at a fair value. (3) Generally, the order should seek to put the company back on the rails and avoid the causes of conflict and oppression. (4) Winding up is a remedy of last resort. (5) Winding up a profitable and operating company is an extreme step and requires a strong case to be make. (6) In choosing a remedy under s 233 the Court is exercising a discretion. (7) In exercising that discretion, the Court should keep in mind the above principles. (8) Bearing in mind those principles, circumstances may dictate that the most appropriate remedy to bring an end to oppression and to fairly compensate the person oppressed is a winding up." (emphasis added).
6. Neither the passage from the judgment of Vinelott J in Re a Company nor the reasoning of Robson J is readily applicable to a case such as the present where the companies' main assets are tenanted property and loans which may be more or less readily realised by a liquidator.
7. The respondents submitted that if the order could not be complied with, either Mr Snell could apply for it to be varied or alternatively the Glatis interests could apply to obtain a judgment in the amount of $66 million and proceed to execute that in the usual way - presumably proffering their shares no differently from any other vendor seeking to enforce a contract for the sale of land which is the subject of an order for specific performance.
8. There are four aspects of those submissions which I do not accept.
9. First, as noted above, given the substantial absence of active trading by the companies, decisions which suggest that impecuniosity is not relevant are of much lesser weight.
10. Secondly, as it happens, there is apt to have been particular hardship occasioned by the orders made, in that there were only some 17 Court days available preceding Christmas for application to be made to vary them. The law term in 2019 ended on Friday 20 December 2019. As it happens, there was no compliance, either by 26 December 2019, or indeed by April 2020 when, belatedly, a stay was sought and obtained by Mr Snell.
11. Thirdly, the course proposed by the Glatis interests could easily lead to injustice and delay. They contend that in the event that Mr Snell cannot, or does not, comply, then they can obtain execution of the obligation to pay $66 million. (I shall pass over the details underlying that contention, which as presently advised I regard as not free from complexity.) It was not made clear whether they would oppose Mr Snell advancing a defence of hardship to their application to enforce the orders. If such a defence were available and made out, then the resolution of the remedy for years of oppression is not advanced. If such a defence were not available, then the ultimate result is that by executing the judgment upon Mr Snell's assets, including his shares in the companies, the Glatis interests will obtain in liquid form the benefit of their minority share in the companies' assets, but at a price reflecting the assessment in 2019 following a trial. It is quite possible that the values of the assets will have, in the very different economic circumstances of 2020, materially altered. Many parcels of real property may be worth materially less in 2020 than they were in 2019. It is also quite possible that the $66 million proves to be an unduly generous valuation of the Glatis interests. If the practical reality is that in order to meet the obligation to pay $66 million, Mr Snell will have to realise all or some of the value in the companies, then there is much to be said in support of a liquidator doing so independently of the parties and their sharing the price actually realised.
12. Fourthly, although her Honour cited the reasons of White J in Short v Crawley (No 30) concerning coupling an order for the compulsory purchase of shares with "the reservation of the proceedings for further consideration … when and if it were established that Mr Crawley could not effect a purchase", that was not the course adopted.
13. It seems clear that neither order 15 nor order 16 extended to permitting the parties to be heard further as to Mr Snell's ability to pay $66 million, with a view to ordering winding-up. Liberty to apply in the case of an order for specific performance of a purchase contract or compulsory buy-out is regularly granted in order to deal with difficulties which arise in the working out of the orders. Liberty to apply, whether granted in general terms, or confined to correction of errors or omissions, does not extend to setting aside the substantive orders made and replacing them with different relief. In Australian Hardboards Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201; [2007] NSWCA 104 Campbell JA explained that liberty to apply is directed to the working out of the order, and "cannot be used to alter the substance of an order already made": at [50]-[57]. This has been confirmed more recently: see (without being exhaustive) Ross v Lane Cove Council (2014) 86 NSWLR 34; [2014] NSWCA 50 at [70]; Boateng v Dharamdas [2019] NSWCA 233 at [21]. Ultimately, as Powell J observed in Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 at 559, this goes back to chancery practice. Daniell explains that the effect of a decree with liberty to apply reserved remained a final decree, and that "the effect of the reservation is to permit persons having an interest under it to apply to the Court touching such interest, in a summary way, without the necessity of again setting the cause down": E Daniell, The Practice of the High Court of Chancery (5th ed 1871), Vol 1 p 857. W Parker, The Practice in Equity (The Law Book Co of Australasia Ltd, 1930) at 220 cites the decision of Haviland v McLeary (1894) 15 NSW Eq 22, where Owen CJ in Eq expressed the limitations as follows: "If the parties could apply now there would be no reason, as Mr. Rich points out, why they should not do so fifteen years hence, and a trustee might then be brought before the Court on motion in an old suit instituted for a different purpose, and one which had years ago been attained."
14. It follows that the orders made by her Honour, no doubt reflecting the parties' forensic decisions, did not contemplate an application to set aside orders 7-13 and in their place order that the companies be wound up.
15. True it is that within the 14 days provided by UCPR r 36.16 application could be made to vary the orders. That would have enabled Mr Snell, now knowing that the Court had found that the cost of buying out Mr Glatis was $66 million with payment to be effected within 30 days, to make submissions on the impossibility or hardship telling against that order. That did not occur. But the fact that Mr Snell did not avail himself of that option does not stand in the way of a conclusion that by ordering Mr Snell to pay $66 million in 30 days, without considering the alternative of winding up the companies, and without reserving an ability to the parties to be heard further as to winding up, involved the failure to have regard to a material fact. This was a case where, notwithstanding the parties' stances, winding up should have been considered.
16. That amounts to House v The King error sufficient to vitiate the exercise of discretion.

Grounds 10-12

1. A deal of the parties' submissions were directed to grounds 10, 11 and 12, which alleged a series of errors in the reasons of the primary judge which determined the value of the Glatis' interests in the companies. Although these grounds were fully argued, I am of the opinion that they should not be determined.
2. First, in light of the conclusions on the principal grounds, the effect of which is to set aside the compulsory buy-out orders, these grounds are not dispositive. As the appellant submitted in introducing the appeal, "if the first issue is resolved in favour of the first appellant, the remedy contended for by the appellant, namely, a winding order, is granted, then the second order falls away".
3. Secondly, it is true that there was, at least potentially, an interrelationship between these grounds and the primary submissions advanced by Mr Snell, insofar as one (albeit relatively minor) reason for challenging the buy-out order was the difficulties and uncertainties in the valuation process. However, for the reasons already given, the present is a clear case for winding up rather than buy-out, to which the points sought to be raised in grounds 10-12 do not materially contribute.
4. Thirdly, it is appropriate that the liquidators charged with realising the assets of these companies have as much flexibility as possible, and that their efforts not be impeded by this Court's reasons and findings. Aside from anything else, the materially changed economic conditions that have obtained since the COVID-19 pandemic commenced earlier this year may cast doubt upon a number of elements in the evidence and reasoning as to value. In particular, insofar as these grounds allege error in the reliance by the primary judge upon the March 2018 estimates of fair value, it would be unhelpful for this Court to express views one way or the other.
5. I note that ground 13 was expressly abandoned and ground 14 was not the subject of any written or oral submissions and must be taken not to have been pressed.

Grounds 15 and 16 - unpaid dividends

1. Mr Snell advanced a discrete challenge to order 4 made by the primary judge, which was to pay the sum of $796,128.80 plus interest of $598,015.85 in respect of dividends payable by SMA Operations to Mr Glatis. Accordingly, I return to the relevant factual background and portions of her Honour's judgment insofar as is relevant to SMA Operations.
2. There was no challenge to the findings of fact that Mr Snell had previously held 20% of the shares of SMA Operations on trust for Mr Glatis Snr and, upon his death, for his estate: at [252] and [253]. The primary judge found as a matter of fact that, contrary to Mr Snell's testimonial evidence, Mr Glatis received no payments reflecting his equitable entitlement to 20% of the dividends declared by SMA Operations during the period 2007-2014: at [254]. At [256], the primary judge recorded that: "In their defence, the defendants contended that the only shareholder of SMA Operations entitled to receive a dividend until 2014 was Mr Snell and denied that he held 20% of the shares on trust for the Estate. The obligation to establish the SMA Management Trust and SMA Employee Trust or to allocate 20% of the A class shares to the Estate was said to have been abandoned for tax reasons by an oral agreement between Mr Snell and Mr Glatis, and Mr Glatis was estopped from insisting on compliance with the Shareholders Agreement in this regard."
3. The heads of agreement confirmed the 20% entitlement to A class shares by the Glatis estate and addressed the payment of dividends in cl 4.7 of Annexure A: "[i]n the interim, until such time as some shares are transferred to others, beneficial interest in the shares remains as stated in the Estate Appraisal Report with KES acting as a fiduciary as to profits benefiting others."
4. Against that background, Mr Snell contended that: "the primary judge either overlooked, or if her Honour did not overlook, failed to give reasons for rejecting, the defence raised by Mr Snell that there was an arrangement reached where, for tax reasons, not only would the shares due to Mr Glatis (i.e. the shares held beneficially by Mr Snell) not be issued to Mr Glatis at that time but that any dividends arising from the shares held beneficially by Mr Snell would be paid through SMA Victoria (on the basis that SMA Operations first paid the dividends to SMA Victoria)."
5. Mr Snell maintained that having found at [47] that an arrangement along those lines existed, it was necessary for her Honour to accept Mr Snell's defence that Mr Glatis had no right to receive a dividend until 2014. Mr Snell complained that there was no explanation of why "for instance, SMA Operations should not be liable to SMA Victoria for failing to pay the dividends to SMA Victoria, or SMA Victoria, if it received the dividends from SMA Operations, should not be liable to Mr Glatis for failing to pass on the dividends". Mr Snell maintained that "in simply finding that the arrangement between the parties had not been carried out, it did not follow that Mr Snell should personally pay the equivalent SMA Operations dividend to Mr Glatis".
6. Mr Glatis' principal answer to these grounds was that no such defence had been pleaded. That answer has some substance, although the defence maintained in Mr Snell's submissions falls within the incompletely particularised defence which had been pleaded, and as to which there was some evidence, as recorded by the primary judge. These grounds are better addressed on their merits.
7. First, no real attempt was made to explain how "for tax reasons" the channelling of dividends paid to the trustee of shares for another company would in some way alter the taxation liability of the beneficiary.
8. Secondly, there is no challenge to the finding that no dividends were, directly or indirectly, remitted to Mr Glatis over the entirety of the period.
9. Thirdly, faced with the difficulties of reconstructing the complex financial affairs within the group, the primary judge said the following at [263]: "The non-payment by Mr Snell of the Glatis family's entitlement to 20% of dividends of SMA Operations was inexplicable having regard to the consistent recognition of the Glatis family's beneficial interest in the company since Mr Skyring first spoke to Mr Snell in 2004, confirmed in the Heads of Agreement in 2006, the Shareholders Agreement in 2009 and numerous contemporaneous documents since. The fact that Mr Snell - for seven years - proceeded to ignore the beneficial interests of other shareholders in SMA Operations, apart from himself and valued employee Mr Culley, was a discriminatory pattern of behaviour directed against the Glatis family. The fact that he was doing this did not become apparent for some time given the accounting treatment it received, as the dividends were supposed to be paid by SMA Victoria and it was not readily apparent from the management accounts of both companies that this was not in fact happening. When it did become apparent, Mr Snell resisted all efforts on the part of the Glatis family to redress matters and, when these proceedings were commenced, denied that the Glatis family was a 20% beneficial shareholder. Mr Snell proved evasive in respect of Mr Skyring and Mr Glatis' efforts to obtain confirmation that the SMA Operations Management Trust and Employee Trust had in fact been established and what amounts were actually being paid to these trusts. The conduct engaged in by Mr Snell was unconscientious, unfair, unsupported by any commercial reason and oppressive."
10. In those circumstances, there was no error in her Honour concluding that the appropriate remedy for this aspect of Mr Snell's oppression was requiring him to pay the 20% of the dividends which had in fact been found to have been declared by SMA Operations and which had in fact been found not to have been remitted to Mr Glatis. These grounds are not established.

Orders

1. Against the possibility that the appeal be allowed and the companies wound up rather than Mr Snell being ordered to buy-out the Glatis interests, the parties exchanged proposed orders and submissions on the points where there was dispute. This was very constructive. There was a deal which was common ground. The disputed points are conveniently addressed seriatim.

Receivables

1. It was common ground (on the assumption that the companies be wound up) that Mr Snell be ordered to make payments reflecting the value of loans caused to be made by him to his associates which had been identified by the primary judge as instances of oppression. Mr Kidd made the point that in circumstances where neither party had sought that the companies be wound up, it was open to him not exhaustively to run a case based on all of the loans made, with the consequence that these amounts reflected not all of the possible instances of oppression. Nonetheless, there is no choice but to confine this accelerated compensation for oppressive conduct to the findings made at first instance.
2. The quantum of these receivables was agreed, save in one respect. Mr Snell disputed that a benefit of $640,000 received by him when the property had been purchased by SMA Systems was a "receivable" under this heading. I agree. That is not to prejudice in any way a liquidator's right to investigate and, if thought appropriate, seek to recover that amount from Mr Snell. It is simply to say that it falls outside the category of oppressive unsecured loans made by Mr Snell which should be the subject of this accelerated regime.
3. (For completeness, I note that there was also a question concerning a repayment of $2,870,378 on 2 May 2018 which was left on the basis that "we could let you know within seven days whether there's an issue about that" and so far as I am aware nothing further was raised thereafter. If that be wrong, the parties may make application within 14 days of the publication of this judgment.)
4. The consequence is that it is agreed that the amounts to be paid to the Glatis Family Limited Partnership and Mr Glatis are $7,797,680.50 and $7,858,893 respectively (both amounts including interest and reflecting the different interests of each).
5. The outstanding issue was whether, as Mr Glatis contended, those amounts should be paid immediately, or, as Mr Snell contended, they should be treated as a first charge from such surplus as was achieved in the winding up of any of the SMA companies. The guiding principle here is what orders are appropriate to redress Mr Snell's oppressive conduct. Had the loans not been entered into, it seems unlikely that liquid amounts would have been retained in the companies. That suggests that the amount should be paid from distributions made by the liquidators. Against the possibility (said to be unlikely if not hypothetical) that the surplus might be insufficient to pay the sum of $17 million, Mr Snell should be required to indemnify Mr Glatis in respect of any shortfall (in accordance with a suggestion made by him). The consequence is that orders 1, 2, 2A and 3 of the document supplied to the Court on 15 July 2020 should in due course be made, substantially in the terms propounded by Mr Snell as refined in argument and reflecting an obligation that the entirety of the amount owing should be treated in effect as a first charge on any of the distributions made by the liquidators to Mr Snell. I shall return below to the costs of the liquidators in realising those receivables.

Credits made to Mr Snell's loan account with SMA Victoria

1. Here too, the primary judge found a series of credits made, wrongfully, by Mr Snell, crediting his loan account. There were five instances, three on 30 June 2017, one on 30 June 2016, and one on 30 June 2005. The amounts total some $1.5 million.
2. Mr Glatis submitted that Mr Snell should be ordered to repay those amounts to Glatis Family Ltd Partnership including interest, in the near future. Mr Snell disputed that there should be any accumulation of interest, and said rather that those amounts should be reversed and his resultant indebtedness to SMA Victoria should be established by this Court's judgment, such that it could no longer be an issue with the liquidator.
3. The loan accounts maintained in favour of both Mr Snell and Mr Glatis were interest free. The wrongful crediting of Mr Snell's loan account did not carry interest consequences for the companies. It follows that there is no sound basis for interest to accrue on the reversals. Mr Snell's proposal has the effect of reversing the entries which should never have been made. That accords with the principles underlying the remedies which should issue following the findings of oppressive conduct. Further, the issue is not a receivable from a third party owed to the company, but the outstanding indebtedness of a director to the company. That places it in a different position from the receivables addressed above. The orders should reflect those proposed by Mr Snell.

Identity and remuneration of liquidators

1. Mr Glatis proposed two liquidators based in Sydney from the same firm on the basis that most of the liquidation would involve the realisation of the real property, and most of this, both in value and number, was located in Sydney. Mr Snell proposed four liquidators from two Canberra firms, on the basis that the head office of the companies was in the ACT, that most of the work of liquidation would be going through the company records and that achieving the sales of the real property would be effected by estate agents. He also pointed out that in light of the COVID-19 pandemic, it was highly desirable that Canberra based liquidators with ready access to the corporate offices be appointed. I agree. Further, the remuneration of the Canberra based liquidators was lower than those of the Sydney based liquidators. As between the Canberra firms, the rates of Mr Anthony Graeme Lane and Mr Steven Neville Staatz are marginally lower. They should be appointed.
2. There was an issue as to the remuneration of the liquidators. Mr Glatis proposed orders which would have the effect of Mr Snell bearing the entirety of the liquidator's remuneration (although excluding the expenses for the liquidation - such as real estate agents' commissions). Mr Snell said that this was not only inappropriate but also would give rise to the risk that Mr Glatis, with no interest in keeping the costs of liquidation down, could mischievously cause those costs to increase. Mr Glatis denied this and pointed out that the liquidators were officers of the court. Mr Snell also observed that the reality of the situation was that two elderly men were themselves unable to dissolve these companies, causing the liquidation to become necessary.
3. It is difficult to say with any certainty, but there is every prospect that the steps to be taken by the liquidator to recover the unsecured loans which Mr Snell caused the companies to make will occupy a deal of the time of the liquidators. As raised during submissions, it is appropriate that those costs be borne solely by Mr Snell, noting that the borrowers were in many cases his friends or family members. Otherwise, the costs of the liquidation should be borne by the companies in the usual way.

Costs

1. The costs discretion as exercised at first instance falls to be re-exercised. As Mr Glatis pointed out, in a winding up, it is important to distinguish the obligation by Mr Snell personally to pay costs from the obligation of his companies. That is a matter of indifference in a case of a compulsory buy-out but of real significance if Mr Snell is permitted to shift the majority of the costs burden to companies which are being wound up. It is appropriate that Mr Snell, rather than Mr Snell with the other defendants, be ordered to pay the plaintiff's costs at first instance.
2. There was no opposition to an order that Mr Snell reimburse each of the SMA Group companies such amounts as had been paid for legal costs and expenses in connection with the appeal.
3. Each side has enjoyed some success in this Court. The orders I propose will permit the parties to be heard as to costs of the appeal.
4. I propose the following orders:
5. Grant leave to the appellant to rely on the further amended notice of appeal filed 26 June 2020.
6. Appeal allowed in part.
7. Set aside orders 7-14 made on 27 November 2019.
8. Direct the parties to supply agreed short minutes of order, or, in default of agreement, minutes of the orders each seeks and submissions not exceeding 5 pages in support, within 28 days of today, with submissions in response within 14 days thereafter, with a view to the remaining issues to be determined on the papers including the costs of the appeal (unless otherwise agreed).

Amendments 04 November 2020 - In the Coversheet, under the heading "Parties", "Owen Francis Cully" changed to "Owen Francis Culley" 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. Decision last updated: 04 November 2020