Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 256 | Case summary

Judgment 1CAMPBELL JA: The Court delivered judgment in this matter on 4 May 2011: Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104 (" the Principal Judgment "). That judgment decided that the Sayer Interests should purchase the shares of the Tomanovic Interests in Argyle HQ and GMEC, at prices ascertained by reference to the value of those companies as at 30 June 2010. 2The only orders that were made were for the parties to confer about the orders that were appropriate to give effect to the reasons for judgment, submit agreed draft orders if agreement was possible, and make submissions about appropriate draft orders if agreement was not possible. 3As it eventuated, agreement on draft orders was not possible, and the process of making submissions concerning appropriate orders has proved protracted. 4The submissions revealed numerous differences between the parties concerning the draft orders. I will deal with them seriatim. This judgment will use the same terminology as the Principal Judgment. Wind Up Argyle HQ Rather than Make Buyout Order Concerning It? 5As the Principal Judgment records at [295], "the relief claimed by the Originating Process in each of the Equity Proceedings was an order that the shares of the Tomanovic Interests in GMEC and Argyle HQ be purchased by the Sayer Interests at their fair value ..." . The appeal was conducted on the basis that that was still the order claimed. As recorded in the Principal Judgment at [293], "both sides in the appeal submit that, if the Court is faced with a choice between a compulsory buyout order and winding up on the just and equitable grounds, the compulsory buyout order would be preferable." The decision, at [294] was that "a compulsory buyout order should be made" . It was quite clear that that meant a compulsory buyout order concerning both GMEC and Argyle HQ. 6Notwithstanding that, and the fact that the submissions invited from the parties concerned "orders that are appropriate to give effect to these reasons for judgment" the submissions of the Tomanovic Interests sought an order for the winding up of Argyle HQ. 7The usual principle on which this Court operates is that if the Court grants leave for further submissions to be made after a judgment has been delivered, those submissions may be made only within the scope of the leave that has been granted. If submissions are made which extend beyond any such leave, they are, to that extent, ignored: Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 at 267 [147]; Van Cuong Nguyen v R [2008] NSWCCA 322 at [28]-[29]; Bull v Lee (No 2) [2009] NSWCA 362 at [8]; McCrohon v Harith [2010] NSWCA 67 at [135]-[137]. 8The submission about there being an order for winding up of Argyle HQ instead of a buyout order was outside the leave granted, and will not be entertained. 9However, the Sayer Interests proffered a concession, namely, "If the Tomanovic Parties may not wish to sell their shares in Argyle HQ for the determined market price of those shares, the Sayer Parties submit that the appropriate course is for any order for buy-out to be made subject to the Tomanovic Parties' election to sell at the determined price." The Tomanovic Interests have accepted that concession. When the parties agree, I see no reason why it should not be incorporated in the orders. 10In accordance with that concession, it would be open for the Tomanovic Interests to make an election not to have their shares in Argyle HQ purchased even before the value of the Argyle HQ shares was determined. Date of Valuation 11The Principal Judgment decided that the valuation should take place as at 30 June 2010: [298]. Notwithstanding that, the submissions of the Tomanovic Interests argued that the date of valuation should be December 2004. 12Submissions in support of that conclusion were outside the scope of the leave granted, and will not be entertained. Identification of Multiown Companies and Trusts 13The draft order proposed by the Tomanovic Interests identified only Multiown companies. The draft order of the Sayer Interests identified, in addition, what it contended were the relevant Multiown trusts. Submissions in reply of the Tomanovic Interests did not contest that listing. I shall adopt the list provided by the Sayer Interests. Additional Guidelines for Valuation? 14The Sayer Interests proposed that the draft orders be supplemented by a provision that the valuations be: "i. undertaken by reference to the market value of the whole share capital in Argyle HQ and GMEC, respectively; ii. undertaken subject to an adjustment with respect to any net liabilities of Argyle HQ and GMEC (respectively) or their subsidiaries, to any of Kenneth Sayer, One Australia, Zoltan Tomanovic, or AFSC; and iii. not subject to any adjustment with respect to oppressive conduct." Limit Lack of Adjustment to Oppressive Conduct Alleged in Proceedings? 15The Tomanovic Interests do not oppose (i) and (ii) of the draft addition, but submit that (iii) should be amended to read: "not subject to any adjustment with respect to the oppressive conduct alleged in the proceedings." 16The Sayer Interests oppose that amendment. 17In my view, it is not appropriate to make the amendment. The amendment would leave open the possibility of the Tomanovic Interests contending that there had been Oppressive conduct other than the conduct that had been alleged in the proceedings, that affected the valuation. This would be, in substance, re-opening their case on Oppression and seeking to put it on a wider basis. Add Back Litigation Costs? 18Another proposal of the Tomanovic Interests is that the valuation should be ascertained by adding back to the values of GMEC and Argyle HQ that are found any sums paid by either company or any subsidiary in relation to the defence of these proceedings. The Tomanovic Interests submit that they, as successful appellants, ought not in effect pay for part of the failed defence of the proceedings. This would occur if the value of the shares which they are to sell had been lessened by the Sayer Interests, by causing those companies to pay costs before the date as at which the values of the shares are ascertained, namely 30 June 2010. 19The Sayer Interests accept that some provision should be made to ensure that the market value that the Tomanovic Interests receive for the shares is not reduced by reason of the companies or their subsidiaries having expended money for conduct of the proceedings. However, they submit that the appropriate way of giving effect to that concern is not by a simple add-back of the amount of costs expended by the companies or their subsidiaries. They submit that whether expenditure of company funds on defence costs will have affected the market value of the share capital will depend on the valuation methodology that is ultimately adopted. They also submit that even if expenditure of company funds for defence costs has affected the market value, it might not necessarily be by an amount that is equal to the amount of defence costs that has been expended. They submit that the appropriate adjustment is of an amount sufficient to ensure that the purchase price is not affected by the expenditure of the defence costs having occurred. 20In my view, that submission of the Sayer Interests is right, and should be implemented. 21The Sayer Interests also contend that the only costs concerning which any such adjustment should be made are those related to the Equity Proceedings and the appeal. That submission is apparently made on the basis that the costs order below in the Common Law Proceedings will remain undisturbed. As appears below, I have decided that that order should be disturbed. Further, even if the costs order in the Common Law Proceedings was not disturbed, it would be wrong in principle for the Sayer Interests to have the benefit of both a costs judgment in those proceedings, and a buyout price ascertained by reference to a value that had been reduced by reason of expenditure of corporate resources on the running of the Common Law Proceedings. For those reasons, the adjustment of the purchase price by reference to legal costs expended should extend to the costs of all the proceedings. Adjustment for Improperly Paid or Incurred Items? 22The Tomanovic Interests propose that the valuation should also be "subject to an adjustment for any items of expenditure and/or liability improperly paid or incurred since the conduct the subject of the proceedings" . They submit that such a provision "does not seek to expand the proceedings but to protect against unknown events since those which were litigated." 23The Sayer Interests oppose such a provision. 24In my view, such a provision should not be made. Regardless of whether such a provision "does not seek to expand the proceedings" , the likelihood is that it would in fact expand the proceedings, possibly to a large extent. A particular aspect of that likelihood is that it has the potential of giving the Tomanovic Interests the opportunity to run a different case on Oppression to that which they chose to run. I have already rejected an amendment which would give rise to that potential and I do so again here. 25As well, the terminology "improperly paid or incurred" is too imprecise to be embodied in a court order, as it leaves open a wide field of argument concerning what is the standard of propriety by reference to which one decides whether a payment or incurring of liability is "improper" . Release of Guarantees 26Both parties agreed that it was appropriate for the orders to include a provision for the Sayer Interests to obtain a release of guarantees or indemnities given by the Tomanovic Interests concerning the obligations of GMEC. The Tomanovic Interests ultimately agreed that a draft order provided by the Sayer Interests was appropriate. It will be adopted. As well, if a release is appropriate, there should also be an indemnity, to cover liabilities arising under the guarantees before the release is obtained, or if (as the parties appear to think is unlikely) it proves unobtainable. Set-Off of Amount Owing Under Common Law Judgment and Purchase Price? 27The Sayer Interests propose an order in the following terms: "The amount owing by: i. Zoltan Tomanovic and AFSC, to the Kenneth Sayer [sic], Ken Sayer Investments and Mortgage House Australia Pty Ltd, pursuant to the judgment (including interest, and excluding costs) in Supreme Court proceedings 2009/002947497; and ii. One Australia, pursuant to the buy-out order in paragraph 4(a), be set off against each other, such that only the net amount after set-off is liable to be paid." 28The Tomanovic Interests accept that an order along those lines is appropriate. Should Interest Accrue on Common Law Judgment? 29However, the Tomanovic Interests submit that there should be one amendment to the order allowing set-off between the judgment sum and the purchase price. They submit that interest should not accrue on the debt that is the subject of the Common Law Proceedings. They submit that it would be unjust to require the Tomanovic Interests to pay, in relation to sums which were originally received with the intention that they would be part of the purchase price, interest for the period up to the date as at which the purchase will finally have been consummated, namely 30 June 2010. They submit that equally it would be unjust to permit the Sayer Interests to receive interest that accrues on that debt after 30 June 2010 until the purchase is actually consummated. 30There is an initial difficulty with this proposal of the Tomanovic Interests, because it is not possible at this stage to order that interest cease to run on the judgment in the Common Law Proceedings. Judgment has already been given for a fixed sum of money in the Common Law Proceedings. Post-judgment interest will accrue on that judgment sum, by operation of law, pursuant to s 101(1) Civil Procedure Act 2005 . While s 101(1) says that interest will be payable on a judgment "unless the court orders otherwise" , that "order otherwise" is an order made at the time of, or pursuant to, the judgment itself. An "order otherwise" made at the time of the judgment, would be an order that interest not run on the judgment at all, or not run at the prescribed rate that would otherwise be applicable under s 101(2), or run from a date different to the date on which the judgment takes effect, which would otherwise be the relevant date pursuant to s 101(2). What I mean by an order that interest not run pursuant to the judgment itself is that it is possible for a court to order, at the time of giving judgment for a sum of money, that interest on that judgment is to run until the first of payment or further order, and to reserve further consideration of whether interest should continue to run. That course was followed, concerning interest on costs, in Lahoud v Lahoud [2006] NSWSC 126. If on such further consideration the Court orders that interest cease to run, that cessation is pursuant to the order made at the time of the judgment itself. However, in the present case the judgment was simply for a sum of money, with no departure from the standard terms that apply under s 101, and no reservation of the possibility of changing the running of interest from the date of a later judgment. 31However, even though interest will continue to run on the judgment in the Common Law Proceedings until that judgment is satisfied either by payment or set-off, it would be possible to achieve the same substantial result as interest on the judgment in the Common Law Proceedings ceasing to run, by appropriate drafting. One way would be for an amount equal to the interest which accrued on the judgment debt during a particular period of time to be added to the purchase price of the Tomanovic Interests' shares in GMEC and Argyle HQ. Making such an addition is comfortably within the power of the Court under s 233 Corporations Act to make "any order under this section that it considers appropriate" . 32However, I do not accept that it is appropriate to make an order that has the effect of relieving the Tomanovic Interests of liability to pay interest on the judgment debt up to 30 June 2010. The original purpose of the payments that made up the capital of the judgment debt in the Common Law Proceedings was as an advance payment of the purchase price that the Tomanovic Interests would receive when, and if, a binding agreement for sale of those shares was made. Nevertheless, a legally binding agreement for purchase was never entered. The buyout that will now take place is pursuant to an order of the court. As well, the Tomanovic Interests have had the benefit of those payments, and have also had their shares in GMEC, at least partly due to their own tenacious approach to negotiation, during the period up to 30 June 2010. 33Concerning the period after 30 June 2010, the Sayer Interests concede that, in commercial effect, interest should cease to accrue on the judgment debt. That is because from that date the Sayer Interests will have, for the first time, the exclusive benefit of any increase in the value of GMEC. 34I propose to give effect to that concession, by adjusting the purchase price by an amount that cancels out the post-judgment interest from 1 July 2010. Direction that GMEC and Argyle HQ Not Incur Costs in the Valuation Process? 35The Sayer Interests submit that there should be an order that the parties "not be at liberty to procure Argyle HQ or GMEC to incur costs relating to the conduct of the valuations" . Oddly, the submissions in reply of the Tomanovic Interests said nothing concerning that proposal. 36However, I would not make an order to that effect. First, "costs" in a court order frequently means legal costs, and any limitation should extend to both costs and expenses. Second, I accept that it would be wrong in principle for the subjects of the valuation in effect to pay for the valuation process, or even to provide for any significant time, the cashflow to fund it. However, when Argyle HQ and GMEC are the subject of the valuations, it is highly likely that they will incur some costs or expenses in making available the books and records that will be necessary for the valuation to proceed. Further, insofar as they might incur expenses in responding to court processes concerning the valuation, the usual operation of the court's processes is that the court makes an order under UCPR 33.11 for a party issuing a subpoena to pay the reasonable expenses incurred in complying with the subpoena only once those expenses are known. Though UCPR 42.33 has as a precondition to the making of such an order that the parties attempt to agree on the amount of costs, any such agreement would likewise usually occur only once the costs had been incurred and were known. Thus, even though the companies the subject of the valuation should not ultimately be out of pocket by reason of the valuations being conducted, it is not practical to order that they incur no costs or expenses at all relating to the conduct of the valuations. Accordingly, in my view, the order should be: "That the parties not be at liberty to procure Argyle HQ or GMEC to incur costs or expenses relating to the conduct of the valuations except costs or expenses: (i) Incurred pursuant to a specific order or direction (including subpoena) of the court other than the order that the valuations occur, and (ii) Unless the court otherwise directs or orders, that the party who causes Argyle HQ or GMEC to incur those costs reimburses to Argyle HQ or GMEC (as the case may be) promptly after the quantum of those costs or expenses is ascertained." 37In the working out of these orders, it may be necessary for the Court, when giving directions concerning the valuation process, to consider whether to order otherwise or to make provision for how the costs and expenses of particular steps in the valuation process are to be borne. For instance, it may be desirable to reserve the costs and expenses of particular steps. Orders Concerning Costs of Valuation Process? 38The Sayer Interests propose an order: "... that no order for costs be made in relation to the valuation process ... subject to the exercise of discretion as to costs: i. in accordance with the ordinary principles regulating the exercise of discretion in relation to offers of compromise or settlement, concerning the outcome of the valuation process; ii. in relation to any finding that a party has acted unreasonably in relation to the valuation process in a manner which unreasonably increases the costs of that process, in which case costs may be ordered in respect of the amount by which the costs of the valuation process have been unreasonably increased." 39The Sayer Interests acknowledge that in the ordinary course the valuation process is regarded as an adjunct to the Oppression proceedings, such that the usual order for costs is that the "Oppressor" is liable for the costs of the valuation process: Rhodes v Fletcher [2002] NSWSC 637 at [44]. However, the Sayer Interests submit that they should not be required to bear the costs of the valuation process, because: "(a) in the ordinary case, the "oppressed" party is not a voluntary seller, and is only exposed to participation in the valuation process because that process has been effectively necessitated by the need to remedy the oppression for which the oppressor is responsible. The costs of the valuation would not have been incurred but for the oppression; (b) the facts of this case are fundamentally different in 3 respects; (c) Firstly, Mr Tomanovic was a voluntary seller before the oppression. Indeed, the foundation for the oppression case is his desire to divest his shares; (d) Secondly, this is not a case in which the valuation process was necessitated only by the need to remedy the oppressive conduct found by the Court. In view of the breakdown of negotiations in relation to the Heads of Agreement, it was reasonably foreseeable that the consummation of the separation of interests would necessitate some form of mutually agreed valuation process (in respect of which costs would reasonably be shared by the parties); (e) Thirdly, this is not a case in which the "oppressor" was responsible (exclusively or primarily) for the circumstances giving rise to the oppression. The oppression is grounded primarily on the fact that the Tomanovic Parties are "locked in" following the breakdown of negotiations for the separation of interests. There is no finding that the Sayer Parties acted in bad faith or improperly in failing to reach agreement on the separation of interests. The Tomanovic Parties are bound by a concession that the Sayer Parties made a reasonable offer to give effect to the separation of interests: [255]. There is a finding that the conduct of Mr Tomanovic "was often not calculated to bring the negotiations to an end": [257]. There is no evidence that the Tomanovic parties offered terms of separation prior to the hearing, which were reasonable relative to the proposed orders for buy-out (which the Sayer Parties unreasonably refused)." 40They submit that for these reasons it is appropriate that the parties should bear their own costs in the valuation process, subject to the adjustments proposed in paras (i) and (ii) of the draft set out above for the purpose of encouraging reasonable conduct in the conduct of the valuation process. 41I do not accept those submissions. The valuation is a consequence of the success of the Tomanovic Interests in the appeal. That Mr Tomanovic was once a voluntary seller, and that if the parties had reached agreement they would probably have both borne some expenses connected with valuation, do not relate to the present situation, where the valuation is taking place pursuant to court orders. That there was a concession from the Tomanovic Interests that there was a fair offer on the table in September 2007, is of little significance, when that offer in practice became unavailable in early October 2007. That Mr Tomanovic's conduct is part of the reason for him finding himself in the situation that amounts to Oppression, does not alter the fact that it has been necessary to bring proceedings to extricate himself from that Oppression. The Sayer Interests did not offer terms of separation prior to the hearing which were reasonable relative to the proposed orders for buyout. To my mind, that is far more significant than the fact that there was no such offer from the Tomanovic Interests. 42There is a further reason why the proposal of the Sayer Interests should not be adopted. In my view, it is not appropriate to pre-empt the judge who hears or has control of the valuation process from ultimately making such order as seems to that judge appropriate concerning the costs of the valuation process. The valuation process is an adjunct of the appeal and, as appears below, I have concluded that the Sayer Interests should bear the costs of the appeal. As also appears below, I have concluded that the Sayer Interests should not bear the whole of the costs of the trial, for reasons connected with the multiplicity of issues involved in the trial and the failure of the Tomanovic Interests concerning some of them. However, those reasons for denying the Tomanovic Interests the full costs of the trial seem unlikely to have any bearing on what costs are incurred, and why, in the valuation process. All these matters may well mean that the starting point for the judge deciding how the costs of the valuation process should be borne would be that, if the valuation process were to go smoothly and efficiently, with both parties operating reasonably, and no offers of compromise or Calderbank letters entering into the question, it would be the Sayer Interests who should bear the costs of the valuation process. However, it is not possible to forecast now, and embody in an order, all the contingencies that might ultimately affect the appropriate order concerning the costs of the valuation, and result in that starting point being departed from. Further, it is not possible to be confident that no event will arise that makes what now seems to be a likely starting point for consideration of the costs of the valuation process to become inappropriate. Terms of Any Reservation of Liberty to Apply or Further Consideration? 43In the Principal Judgment, Macfarlan JA and I both agreed with the proposal of Young JA, at [337], that: "[T]here should be liberty to apply to an Associate Justice in the Equity Division with respect to the valuation of the Tomanovic shares and generally, and there should also be liberty to apply to seek an order to wind up the company should the valuation process be unduly delayed or prove to be impracticable." 44The Tomanovic Interests proposed the following order: "Reserve for further consideration, the question of further or other relief and grant leave to the parties to apply to a Judge of the Equity Division for an order that GMEC be wound up in the event that either: a) the values referred to in order 4 are not determined within 6 months of the making of these orders; or b) One Australia does not complete the purchase referred to in order 4 within 6 weeks of the determination of values referred to therein." 45In proposing that there be a reservation for further consideration on the question of further or other relief, this draft order went wider than the judgment had contemplated. Reservation of further consideration is in substance adjourning a case part-heard after some issues have been decided: Australian Hardboards Ltd v Hudson Investment Group Ltd [2007] NSWCA 104; (2007) 70 NSWLR 201 at [72]-[76]. I see no need in the present case to reserve consideration of further or other relief. 46By contrast, liberty to apply enables further orders to be made which are necessary for the purpose of implementing and giving effect to principal relief that has already been pronounced: ibid at [50]-[56]. The decisions made pursuant to liberty to apply are often referred to as "working out the order" . 47When a court orders a buyout at a valuation in an Oppression suit, the valuation process is part of the working out of that order. It is desirable to identify topics that are specifically envisaged as being problems that may well arise in working out the order, and specifically grant liberty to apply concerning those topics, to put it beyond argument that those topics were ones that were intended to be within the scope of the liberty that is reserved. 48Just as liberty to apply under an order for specific performance enables the court to order substitute relief if it turns out that an order for specific performance cannot be complied with, so it is possible, in a suit seeking a buyout, to reserve liberty to apply for a winding up order if the buyout proves impractical. Here, there is a foreseeable possibility that the buyout might prove impractical, so it is appropriate specifically to reserve liberty to apply concerning that possibility. The reservation of liberty to apply with respect to the valuation of the shares identifies another topic concerning which it is foreseeable that decisions or directions from the court may well be needed. 49As well, however, it is desirable to reserve liberty to apply generally, to cover events not presently foreseen. Whether any particular problem that henceforth arises falls within that liberty can be decided by the general principles applicable concerning the types of subject matter or activities that are involved in working out an order. 50The type of order that Young JA proposed was carefully considered and well adapted to the circumstances of this particular case. Its substance should not be departed from. 51As well as the deletion of the reservation for further consideration of the question of further or other relief, the Sayer Interests propose some extension to the times nominated in the Tomanovic Interests' draft, so that nine months is allowed for the determination of the values, and twelve weeks from the determination of the values for completion of the purchase. Those longer times should be allowed. 52The Sayer Interests also propose a limitation on the circumstances in which there can be liberty to apply for winding up. They submit that such an application should be possible only if the values are not determined within nine months by reason of unreasonable conduct by the Tomanovic Interests in relation to the conduct of the valuations. 53In my view, it is not necessary or desirable to limit the liberty to apply in that way. If it were to happen that the values had not been determined within nine months, and the substantial reason for that happening was unreasonable conduct by the Tomanovic Interests, that may well be a good reason for the judge hearing an application for a winding up order to decline to make the order, at least at that stage. It should be remembered that liberty to apply is nothing more than permission to approach a judge for certain types of orders. It does not constrain the judge's decision about whether actually to grant the orders requested. In my view it is in principle desirable to keep the liberty to apply that is reserved, framed in broad terms. 54One addition of detail that I would make to the parties' draft is to grant liberty to apply to either a Judge or an Associate Judge on all these topics. That will enable the Equity Division to arrange its business in the most appropriate way. Costs of the Appeal 55The Tomanovic Interests seek the costs of the appeal. 56The Sayer Interests propose that the Tomanovic Interests should receive only 75% of their costs. They recognise that the Tomanovic Interests were the overall successful parties and thereby prima facie entitled to a general costs order. However, they propose that that default position should be altered because 15 grounds of appeal were raised, not all of which succeeded. 57They correctly point out that three grounds were abandoned. However, that abandonment occurred when an Amended Notice of Appeal was filed on 3 May 2010. The original Notice of Appeal had been filed on 20 April 2010. The Appellants' written submissions did not appear until 26 July 2010. The costs relating to the abandoned issues are likely to be nil or trifling. 58Concerning the remaining grounds of appeal, producing a score sheet of grounds upheld and dismissed is not helpful in the present case. Some of the grounds that failed (1, 3(a) and 3(c)) were not upheld "in their terms" ([184]) because they were cast in the unhelpful language of "legitimate expectation" , but nonetheless they made complaint about facts that were a contributor to the Oppression that was found to have occurred. Others (4, 5 and 6) were not upheld because they presupposed that the judge had made a factual finding that he had not made, but nonetheless they made complaint about matters of fact that were found to be contributors to the Oppression. Other grounds that failed (3(b), 10 and 14) were inextricably tied up with an understanding and characterisation of the course of conduct of Mr Tomanovic and Mr Sayer over the years of their association. Another ground that failed (13), relating to the allegation of unjustified taking of cash deposits, was quite minor in its overall significance in the appeal. The part of ground 2 that failed also involved a matter that was inextricably tied up with understanding the course of conduct that was found to amount to Oppression. 59The Sayer Interests also support their contention by an analysis of the number of paragraphs of the written submissions on each side that dealt with submissions that were upheld. In my view, that is a highly unpersuasive way of arguing concerning a decision on costs. How long a writer chooses to make a paragraph is as much a matter of style as substance. More importantly, for the reasons I have already given, the fact that the Court did not uphold a particular ground does not mean that the factual basis for the complaint it made did not contribute to the overall finding of Oppression, or that it was a separable issue. 60The Sayer Interests also submit that the basis upon which the Tomanovic Interests ultimately succeeded in the Oppression case on appeal differed materially from the primary basis upon which they presented their Oppression case. They submit that the primary thrust of the Tomanovic Interests submissions was that Mr Tomanovic had a legitimate expectation either to be bought out along the lines of the Heads of Agreement, or be reinstated to management. It submits that the basis upon which this Court found there to be Oppression differed materially from that. 61One particular aspect of their submission on this topic is that absence from management was not part of the basis upon which this Court held that Oppression was established. I do not agree. One of the factors I listed as a contributor to the commercial unfairness of the situation, in 205, was that resumption of the former basis on which the two men co-operated is no longer possible. That is referring to Mr Tomanovic's absence from the previous role he had concerning the management of the companies, and the impossibility of him resuming it. In [211] I said that the circumstances in which he ceased to be a director, and the circumstances in which, from 19 February 2008 his requests to resume his position as a director, were rebuffed, were relevant matters to take into account in deciding whether there had been Oppression. 62More generally, while I was of the view that "legitimate expectation" is not a useful analytical tool in Oppression cases, the substance of the matters of which the Tomanovic Interests complained was consistent with the reasons for the decision. 63In my view, the Sayer Interests should pay the Tomanovic Interests' costs of the appeal. Costs of the Trial - General Considerations 64Separate costs orders were made on 5 March 2010 in each of the three proceedings that the primary judge heard. In both of the Equity Proceedings the order was that: "Plaintiffs to pay Defendants' costs as agreed or assessed" . In the Common Law Proceedings the order was: "Defendants/Cross-Claimants to pay the Plaintiffs'/Cross-Defendants' costs as agreed or assessed" . 65The Sayer Interests offer to forego the judgment for costs that they obtained in the Common Law Proceedings if this Court grants them a costs order of two-thirds or more of their costs in what they refer to as the "consolidated proceedings" . They submit that the proper global costs order would be that the Tomanovic Interests pay 75% of the Sayer Interests' overall costs of the "consolidated proceedings" . In the absence of such a global costs order being made in the "consolidated proceedings" - ie if this Court would not order two-thirds or more of the costs of the "consolidated proceedings" and thus the consent of the Sayer Interests is not given to setting aside the costs judgment in the Common Law Proceedings - the Sayer Interests submit that they will retain their order for costs in the Common Law Proceedings. They submit that in that situation the appropriate costs order in the Equity Proceedings is that the Tomanovic Interests pay two-thirds of the Sayer Interests' costs in the Equity Proceedings. 66The Sayer Interests refer to the hearing in the court below as a hearing of "consolidated proceedings" . That is inaccurate. UCPR 28.5 provides: "If several proceedings are pending in the court and it appears to the court: (a) that they involve a common question, or (b) that the rights to relief claimed in them are in respect of, or arise out of, the same transaction or series of transactions, or (c) that for some other reason it is desirable to make an order under this rule, the court may order those proceedings to be consolidated, or to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them." 67An order that multiple proceedings be consolidated is different to an order that multiple proceedings be tried at the same time. When proceedings are consolidated, they thenceforth become a single proceeding. When they are heard at the same time, they remain separate proceedings. In the present case, no order for consolidation was made. Thus, at the end of the case the judge was procedurally correct in making separate orders in each of the three proceedings. 68The Tomanovic Interests accept that they ought not receive all of their costs in the court below. They submit that, overall, the appropriate result is that the Sayer Interests should pay two-thirds of the Tomanovic Interests' costs of the trial in relation to all three proceedings. Is there an Appeal in the Common Law Proceedings? 69A preliminary matter that must be decided is whether it is open to this Court to alter the costs order that was made in the Common Law Proceedings other than with the consent of the Sayer Interests. 70In my view, an appeal is on foot in the Common Law Proceedings, which would provide the jurisdiction for this Court to alter the costs order in the Common Law Proceedings. 71The Tomanovic Interests filed three Notices of Intention to Appeal on 26 March 2010, one Notice of Intention to Appeal for each of the Equity Proceedings, and the Common Law Proceedings. The Notices of Intention to Appeal were allocated separate case numbers in the Court of Appeal. They were 2010/76370 (relating to 282201/2008 in the Equity Division, the Argyle HQ proceedings), 2010/76372 (relating to 282203/2008 in the Equity Division, the GMEC proceedings) and 2009/297497 (relating to the proceedings bearing the same number in the Equity Division, namely the Common Law Proceedings). 72Only one Notice of Appeal was filed, on 20 April 2010. It took the procedurally creative form of having three coversheets. The first of the coversheets on the Notice of Appeal stated it was filed in 76372 of 2010, and that the case number below was 282203/2008 (which was correct). The second coversheet said it related to case number 76370 of 2010, concerning which the case number below was 282203/2008. That is either incorrect or a typographical error. There clearly was an intention expressed in the Notice of Appeal to appeal from the judge's orders in the Argyle HQ proceedings. The possibility of appealing against those orders had been flagged by the Notice of Intention to Appeal in the Argyle HQ proceedings and the second coversheet used the Court of Appeal file number appropriate to an appeal from the Argyle HQ orders. Thus, the misidentification of the file number of the proceedings below should be construed as a typographical error. The third coversheet said it related to case 297497 of 2009 in the Court of Appeal, and identified the case number below as being 297497 of 2009 in the Supreme Court. 73The Notice of Appeal contained only one statement of "details of appeal" , grounds of appeal and orders sought. The "details of appeal" in the Notice of Appeal stated that the appeal was "from the whole of the decision below" . All the grounds of appeal related to issues in the Equity Proceedings. However, the orders sought included: (1) An order that the Appeal be allowed. (2) The orders made 5 March 2010 pursuant to the Judgment of Austin J in the court below be set aside. ... (8) The Respondents pay the Appellants' costs of the appeal and of the proceedings in the Court below. 74The final process filed before the hearing was a Further Amended Notice of Appeal. It was filed pursuant to the Registrar making orders in accordance with Short Minutes of Order signed by the solicitors for the parties. The order consented to was: "That the Appellants be granted leave to file a Further Amended Notice of Appeal in proceedings number 76372 of 2010, 76370 of 2010 and 297497 of 2009 in the form annexed and marked "A"." 75That document also had three coversheets, relating to the three separate case numbers in the Court of Appeal. 76When the appeal books were filed, each of them stated that it related to all three of the case numbers in the Court of Appeal, and separately identified the parties to each such appeal. 77Thus, the present appeal includes an appeal from the Common Law Proceedings. Of course, in light of the grounds of appeal and issues argued, the substantive orders in the Common Law Proceedings could not be altered as a result of the appeal. However, there is an appeal on foot concerning the costs orders made in the Common Law Proceedings. Thus, it is open to this Court on appeal to make such alteration to the costs orders made at first instance in the Common Law Proceedings as is appropriate to give effect to the outcome of the appeal against the substantive orders in the Equity Proceedings. Make an Overall Costs Order? 78In my view, it is highly desirable to make an overall costs order, concerning all three proceedings. Leaving on foot the costs order already made in the Common Law Proceedings and making an order concerning the costs of only the Equity Proceedings, would complicate the process of costs assessment to a considerable extent. Furthermore, it would leave undecided a contentious issue, concerning how costs that were common to the Common Law Proceedings and the Equity Proceedings should be apportioned between them. 79It is not clear whether any interlocutory costs orders were made in either the Equity Proceedings or the Common Law Proceedings. If there were any such orders, the outcome of the Equity Proceedings would provide no occasion for altering them. Thus, the only costs orders that should be set aside to enable an overall costs order concerning all three proceedings to be made, is the order made at the conclusion of the three proceedings. 80An overall costs order should recognise the success that the Sayer Interests had in the Common Law Proceedings, the success that the Tomanovic Interests have now had in the Equity Proceedings, the significant but far less than total overlap between the issues in the Common Law Proceedings and the Equity Proceedings, and to some extent the fate of some particular issues in the Equity Proceedings. Particular Matters Relating to Costs of Trial 81The starting point for consideration of the costs of the trial is that UCPR 42.1 provides: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." 82This suggests that, unless there is reason to do otherwise, the Sayer Interests should receive the whole of the costs of the Common Law Proceedings (concerning which they succeeded on every issue raised), while the Tomanovic Interests should receive the costs of the Equity Proceedings, unless there are facts concerning the Equity Proceedings which make it appropriate to regard "the event" as something distinct from the whole of the Equity Proceedings. 83The Sayer Interests submit that there are several matters that call for the costs order concerning the Equity Proceedings to depart markedly from the starting point that UCPR 42.1 provides. One is that the Tomanovic Interests "either abandoned or failed in respect of 90% of the myriad of particular allegations of oppression pressed against Mr Sayer in the Equity Proceedings" . This figure of 90% is derived from a detailed analysis that counsel for the Sayer Interests put forward of the evidence, closing submissions, cross-examination and judgment in the court below. That analysis identifies some 22 factual topics, breaks them into categories of "claims of oppression pressed in evidence, but abandoned at commencement of the hearing" , "claims of oppression particularised and lost at trial, and not pressed by appellant on appeal" , "claims of oppression particularised - pressed and lost at both trial and on appeal" , "respondent's claim in Common Law Proceedings debt recovery claim (excluding cross-claim)" and "claims of oppression upheld on appeal" . It then counts the number of paragraphs dealing with affidavit evidence in each category, the number of paragraphs dealing with each such topic in closing submissions, and the number of pages devoted to each such topic in cross-examination, and the number of paragraphs of the trial judgment devoted to each such topic. 84This is a highly artificial way of proceeding and gives a false air of mathematical precision. As has been repeatedly stated, where there is a mixed outcome in proceedings the question of apportionment of costs between issues on which the party who has overall been successful has succeeded, and those on which that party has failed, is very much a matter of discretion, and mathematical precision is illusory: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36]; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272; Roads and Traffic Authority v McGregor (No 2) [2005] NSWCA 453 at [19]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [22]. Further, even the number of topics that are identified and categorised overstate matters to some extent. Even so, there is substance in the submission that the Tomanovic Interests raised many matters on which they did not succeed. 85Until the provision of a document entitled "Summary Particulars of Oppression" in the week preceding the trial the Tomanovic Interests had not particularised the conduct they claimed added up to Oppression. That document made no mention of some topics that had been referred to in the extensive affidavit evidence that had by then been filed, namely:

use of company funds for the purpose of funding "hedging deals" ;
use of company funds for the St Peters development;
alleged unfairness in the exercise of pre-emption provisions in relation to sale by Macquarie and its shareholding, and
conduct in relation to the transfer of the shareholding in Forevision. 86I would accept the contention of the Sayer Interests that the first three of these were matters that had been raised in the affidavit evidence as contributors to Oppression, but were in effect abandoned as having that role from the commencement of the hearing. However, they remained a relevant part of the background for the Oppression allegations that were made. 87One of the "claims of oppression pressed in evidence but abandoned at commencement of the hearing" is said to be " impropriety in relation to the transfer of shareholding in Forevision" . The evidentiary references that the Sayer Interests supply to support their contention that this was an issue that was raised and abandoned do not in my view amount to an allegation of impropriety. The topic first arises in Mr Tomanovic's evidence in reply to Mr Sayer, and amounts to little more than Mr Tomanovic saying that he had some involvement in the activities of Forevision, and did not recall consenting to a transfer of shares in Forevision. 88It was the "Summary Particulars of Oppression" document that was the source of the four categories of Oppression that the judge identified at [34] of his judgment, and by reference to which he went on to organise his judgment. 89The "Summary Particulars of Oppression" alleged five different types of diversion of money and assets from GMEC. Two of them concerned Mr Sayer applying in his own name for registration of trademarks. The others were:
Diversion of funds, when funds provided by two GMEC subsidiaries and by Argyle HQ for on-lending to borrowers are not repaid to the fund providers when settlements occur, but instead are paid to One Australia;
Cash taken from MHA businesses by Mr Sayer;
B class share in GMEC subsidiaries issued to One Australia in October 2003 without Mr Tomanovic's knowledge or consent. 90The judge did not accept any of these matters were relevant contributors to Oppression. Not all of them were supported on the appeal, but neither were any of them found to be relevant contributors to Oppression on the appeal. 91The Oppression that was alleged to exist in relation to Argyle HQ concerned the circumstances of both the increase in the amount of the St George Bank facility, and the ultimate drawdown of that facility. It also included the issue of a B class share in 1 October 2003 without Mr Tomanovic's knowledge or consent. Of these, only the drawdown of the facility was found on appeal to be a matter that contributed to the Oppression. 92Of the particulars provided of "oppressive conduct generally" , there were some that were not mentioned on the appeal, namely:
Failure to maintain books and records in relation to monies provided by group companies for on-lending to borrowers, that were not repaid on settlement to fund providers, but instead paid to One Australia;

Matter 6278 of 2008 and matter 6280 of 2008 be remitted to the Equity Division for ascertainment, in accordance with the direction of a Judge or Associate Judge of that Division, of the values referred to in order 4.
Liberty to apply to a Judge or Associate Judge of the Equity Division: (a) with respect to the valuation of the shares and other rights referred to in orders 4(a), (b) and (c); (b) for an order that GMEC be wound up in the event that either: (i) the values referred to in order 4 are not determined within 9 months of the making of these orders; or (ii) One Australia does not complete the purchase referred to in order 4 within 12 weeks of the determination of values referred to therein. (c) generally. 117MACFARLAN JA : I agree with Campbell JA. 118YOUNG : I agree with Campbell JA.

Tomanovic v Global Mortgage Equity Corporation Pty Ltd

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Judgment (14 paragraphs)

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Cases Cited (20)

Cited By (50)