Trust Company Limited v Noosa Venture 1 Pty Limited

Trust Company Limited v Noosa Venture 1 Pty Limited - [2010] NSWSC 1334 - NSWSC 2010 case summary — Zoe

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9 Clause 2.2 of the UHA describes the objectives of the Project. NV1, in the agreement called "the Trustee", was to acquire the Development Site being the hotel site on the exercise of put and call options held by VFML. NV1 purchased the Sheraton Noosa for about $93 million. The purchase was funded by equity contributions from VCML and ACPL, and by a loan from Suncorp. Clause 2.2(a) and (b) of the Unitholders' Agreement describe the objectives of the project and the obligations of the unitholders as follows: "2.2 Carrying out the Project - Objectives (a) The Unitholders shall procure that the Trustee shall cause the Project to be carried out upon the exercise of the put option or the call option under the Put and Call Option Agreement, which shall principally involve: (i) the purchase of the Development Site by the Trustee; (ii) the obtaining of all necessary approvals to enable the development of the Development Site by the construction of the Works thereon; (iii) the construction of the Works on the Development Site; (iv) the carrying on of Operations; (v) the sale of the Development Site as and when the Works have been completed; and (vi) such other acts or activities as are incidental to effect the carrying out of the foregoing activities or as are agreed upon by the Unitholders." (b) From the date of this Agreement the First Unitholder and Second Unitholder must (and must use all reasonable endeavours to procure its employees, consultants and contractors (except Cornerstone Noosa Pty Limited) to): (i) co-operate with the other Parties in relation to the performance of its and the other Parties', and the exercise of its and the other Parties' rights, under this Agreement; and (ii) act in good faith towards each other in relation to all matters under this Agreement and unless the contrary intention appears, this obligation to act in good faith does not require the First Unitholder or the Second Unitholder to act materially contrary to its commercial objectives or in any way waives diminishes or prejudices any rights a non-defaulting Unitholder would otherwise have but for this clause under this Agreement as a result of a Unitholder Default: and (iii) promptly disclose to the other, any material information regarding the Project which comes into the possession of one but not both of them; and (iv) take all reasonable steps (including execution of documents) and do everything reasonably required to give effect to the transactions contemplated by this Agreement. 10 The Unitholders' Agreement defined many terms. Those significant for the purposes of this judgment are the following:- "Compulsory Transfer Event" in relation to any Unitholder, means that:

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(b) In recognition that VFML and/or the First Unitholder have funded the Trustee for 100% of certain Project Expenses, the parties acknowledge and agree that: (i) the Second Unitholder will at such times agreed by the Unitholders pay to the Trustee by way of equity contributions 50% of those Project Expenses funded by VFML or the First Unitholder (including the costs described in clause 3.3(d)) to enable the Trustee to repay that amount to VFML or the First Unitholder; and (ii) on VFML or the First Unitholder receiving the payment described in clause 3.2(b)(i) the First Unitholder will be treated as having paid 50% of those Project Expenses to the Trustee towards it equity contribution specified in clause 3.2(a) 3.4 Additional funding by Unitholders Subject to clause 3.6, in the event further equity contributions in excess of the amounts required in clauses 3.2 and 3.3 are required to fund the Project, whether in one or several transactions: (a) both Unitholders may elect to provide such further equity contributions in equal proportions; and (b) in the event that a Unitholder elects not to provide such further equity contributions, any shortfall may be provided to the Trustee by the other Unitholder (or by VFML in lieu of the First Unitholder) ( "Additional Funder" ) who shall have the sole and absolute election to elect either one of the following: (i) that such shortfall be provided by the Additional Funder as a loan to the other to enable the Unitholder to make such further equity contributions to the Trustee; or (ii) that such shortfall be provided by the Additional Funder directly to the Trustee: provided always that: (iii) the Additional Funder shall in each case be entitled to the repayment of such loan (provided that where the Additional Funder is the Second Unitholder, the Second Unitholder has already paid all of the Fee (or such part of the Fee as VFML requires at that time) to VFML) in priority to the repayment of any equity or Project profits payable to the Unitholders; … (viii) if a Unitholder elects not to make such further equity contributions under this clause 3.4 it will not be in default under this Agreement and subject to clause 3.4(b)(iii), its election not to do so does not in any way affect its Interest. PROJECT CONTROL GROUP

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(a) If there is a deadlock between the Directors of the Board in relation to any decision of the Board that decision shall be immediately referred to the Chairman of each Unitholder for resolution. (b) If the Chairman of each Unitholder are not able to agree on the relevant proposed decision within 10 Business Days of its referral to each of those Chairmans, either Unitholder will be entitled: (i) in relation to a dispute where the matter the subject of that dispute is material to the Project, refer the dispute for resolution under the provisions of clause 22; and (ii) in relation to any dispute to which clause 5.10(b)(i) does not apply, the Unitholders agree that the provision of clause 23.2(e), (f) and (g), 23.3, 23.4 and 23.5 apply to that dispute." 6.1 Project Plan (a) (Preparation) : The Board must review, and if considered appropriate, approve a Project Plan for the first Financial Year. (b) ( Review) : The Board must review the Project Plan on an annual basis at the same time as the Project Budget. 6.2 Project budget (a) ( Adoption ): The Board must review and adopt a Project Budget for the first financial year following the Commencement Date of this Agreement and a Project Budget for each Financial Year under this clause 6.2. (b) ( Draft ): The Board must submit to the Board a draft Project Budget at least 3 months before the commencement of each Financial Year. (c) ( Approval ): The Board must review and seek to approve the Project Budget, with or without amendment before the commencement of the Financial Year. (d) ( Existing budget ): The Project Budget from the previous Financial Year continues to apply until the Board adopts a new Project Budget, in the event that the Board fails to adopt a Project Budget before the commencement of any Financial Year. (e) ( Submission to Board ): Any draft Project Budget not approved by the Board shall be submitted to the Board for its deliberation. 20 Termination 20.1 Termination events This Agreement terminates immediately upon the occurrence of: (a) ( Agreement ): any agreement in writing by all Parties to that effect; (b) ( Interest transfer ): in relation to any Unitholder, the transfer by that Unitholder of its Interest in compliance with this Agreement; and (c) ( Liquidation ): the winding up or dissolution of the Trustee and the termination of the Trust. 20.2 Termination effect Termination of this Agreement releases any Party from any further performance of any liability under this Agreement but does not: (a) ( Continuing liability ): affect any provision of this Agreement expressed to operate or have effect after termination; or (b) ( Accrued rights ): have any prejudicial effect on any accrued rights of any Party in relation to any breach or default under this Agreement by any other Party occurring before termination. 22. Dispute Resolution - Deadlock

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27.3 Amendments This Agreement may only be varied by a document signed by or on behalf of each of the parties. Service Agreement 12 AMPL was appointed services manager for the project under an agreement called the Service Agreement dated 5 May 2008 between NV1, VFML and AMPL. The purpose was set out in Annexure A to the agreement but in brief the task was to oversee the project management from beginning to end, to attend project group meetings and prepare the project plan for approval by the board. Clauses 2 and 5.2 of the services agreement are as follows: 2.1 Term The Term of this Agreement will commence on the Commencement Date and will continue until completion of the Project unless terminated in accordance with clauses 6.1 or 6.3. 5.2 Services Fee (a) In consideration of the Services Manager performing its obligations under this Agreement, the Owner agrees to pay the Services Manager the Services Fee during the Term. The Services Fee is payable by the Owner to the Services Manager in monthly instalments in arrears with the first on the expiry of one month from the Commencement Date and then each subsequent monthly anniversary thereafter during the Term (for amounts approved by the Board). The total Services Fee paid or payable to the Services Manager must not be more than 75% of 4.25% of the total Project Costs and the Services Fee may at any time be re-adjusted by the Board to ensure that: (i) the Services Manager is only paid 75% of 4.25% of the total Project Costs over the Term; or and (ii) the Services Fee is commensurate with the amount and type of the Services being provided by the Services Manager from time to time. (b) In respect of a period of less than a month, the instalment of the Services Fee for that period payable pursuant to clause 6.2(a) will be a proportionate instalment calculated at a daily rate based on t he number of days in the month in which that period begins. Fee Agreement 13 There is a fee agreement also dated 5 May 2008 between VFML and ACPL. This fee was stated to be a fee of $20 million for the introduction or allowing ACPL into the project payable to VFML five years after completion of the acquisition of the property which, as it turns out, would have been in October 2013. The fee is secured by a deed of mortgage of the same date, namely 5 May 2008 over ACPL's interest in the mortgaged property being the property in the Noosa Trust. Facility Agreement 14 There are two other transaction documents of some relevance. The first is the facility agreement dated 1 July 2008 between NV1 and Suncorp-Metway Limited. It was Suncorp-Metway which sold the hotel to NV1. The loan agreement provides for a loan of up to 70% of the value of the property. In the events which happened the expiry date, being the date for repayment, is 31 October 2011. It was envisaged that by that date development approval would have been obtained and there would have been some pre-sales of part of the proposed development. The assumption was that it would then be possible to obtain a new loan for construction purposes with a higher valuation on the basis of development consent. For present purposes it is not necessary to set out the provisions of the facility agreement apart from the following: that Suncorp could review the facility if there were any change in the management of the borrower; and that after any drawdown under the facility the loan to value ratio (the LVR) was not greater than 70%; that the lender could require a valuation to be carried not more than annually in respect of the mortgaged property; and that termination of the management agreement with Sheraton would be an event of default. Management Agreement 15 The final document of significance is a management agreement dated 14 June 1989 between Suncorp Insurance and Finance and Sheraton Pacific Hotels Limited (now Starwood). This is an agreement under which Sheraton, for a fee, took on the operation management and supervision of the hotel. The original term under the agreement was to 31 December 2005 but the operator, Starwood, had the right to extend the operating term for two successive periods of five years. At the time relevant here the first extension had been exercised so that the management agreement was operative up to 31 December 2010 and there was a right to extend it for a further five years provided that notice was given prior to 1 January 2009, which it was. This right of extension was, however, subject to cancellation, if the owner gave to the operator prior to 31 December 2009 notice that it intended to demolish all buildings comprising the hotel, and stating whether it intended to construct another hotel on the site. If it did so intend then the owner was bound to consult with the operator on the question of entering into a new management agreement and more importantly if the owner had not substantially commenced the demolition of all buildings by the end of three months after the start of the new operating term then the operator had the right to renew the yearly agreement for the balance of the term of five years. MORE FACTS 16 The project control group provided by clause 4 of the UHA was established pursuant to clause 13 of the services agreement which, as I have said, was between NV1, VFML and AMPL. Each of VFML and AMPL is entitled to appoint two persons to be members of the project control group. Its task is to make all decisions in relation to the proposal provided they are within the powers of the project control group. The resolutions of the project control group are required to be the unanimous decision of the members present as in the UHA. 17 The Ashington directors of NV1 as from 1 May 2008 were Messrs. Anderson and Minahan. The two Valad directors were Messrs Day and Locke. The Ashington members of the project control group were Messrs Minahan and Bailey and the Valad members were Messrs. Renauf and Tack. 18 NV1 exercised its call option to purchase the Noosa hotel property on 27 June 2008 and completed the purchase on 28 October 2008. 19 There were meetings of the project control group (PCG) usually each fortnight. The PCG prepared a number of drafts and then a final version of a project plan for the 2008-2009 financial year. This plan noted that under the unitholders' equity was to be contributed at designated times. It included a number of milestones to be achieved, including the following: Milestone Date Resolve planning strategy August 2008 Submit DA December 2009 Achieve DA consent December 2009 Achieve vacant possession of hotel December 2010 Achieve pre-sales December 2010 Commence construction February 2011 Project completion December 2013 20 The Plan dealt with what was called "Starwood Strategy Process" discussing options as to how to deal with Starwood rights under the management agreement. It recommended a development based on what was called Option 2(b) namely a mixed development comprising a smaller hotel, residential apartments and a retail complex. It seems to have been generally accepted that the greater the number of residential apartments which could be incorporated in the building, the greater the profit would be. On the other hand it was accepted that the local government authorities in Noosa were keen to maintain Noosa as a tourist destination where hotel and short term accommodation was available. The project plan set out the equity requirements under the UHA but in the feasibility study which was attached there were set out monthly equity injections of different figures not in accordance with the UHA timetable. The hearing proceeded on the basis the plan was approved by the board of NV1 although the evidence led does not appear to establish this. 21 There was some progress in accordance with the plan up to 27 February 2009 but even then it is clear the timetable had suffered what was described as slippage. One of the somewhat strange things about this matter is that Anderson said that he had never thought that the project plan which he had approved could be met. He said that there was considerable pressure from the Valad representatives particularly Mr Renauf to agree to the timetable and milestones and that he had agreed to them as he did not wish to cause problems in the relationship which the Ashington companies had with the Valad companies. Minahan said much the same. Nevertheless in spite of the slippage there was some progress made obtaining some outline draft plans and there were some discussions with council representatives. 22 On 27 February 2009, the Valad group issued to the share market its results for the half year ended 30 December 2008 which showed a very substantial loss. The statement which was issued with the results stated that Valad aimed to sell down its position in certain ventures including the Noosa development. This gave rise to some concern in the Ashington camp as to whether or not Valad was serious about the project. In the meantime contributions had been made to equity, not in strict accordance with the UHA, but generally as required, particularly for the settlement of the purchase by Ashington so as to bring its payments into line with those made by VCML as the latter had paid considerable sums for project expenses before Ashington was admitted to the venture. 23 Hurley is the managing director of the Valad Property Group. He was appointed a director of NV1 on 25 June 2009. He became involved with the project from February 2009 and received briefings on it from senior Valad employees. Price is general manager property of Valad Capital Services of the Valad Group. He was appointed a director of NV1 on 21 October 2009 and reports to Hurley. He has been the Valad person responsible for the Noosa development since April 2009 when Mr Renauf left the employment of Valad and moved to the Ashington Group. It is the actions of VCFL through Messrs. Hurley and Price that the plaintiffs allege have stultified the joint venture. 24 Both unitholders had been involved in a proposed development at Double Bay for which planning approval was eventually refused. There had been somewhat of a falling out over moneys which were due by Ashington for the final instalment of a fee payable under a facilitation agreement pursuant to which Ashington was introduced to the Double Bay venture. The failure to make a payment for what was a substantial amount resulted in Valad issuing a notice of demand to Ashington in June 2009. Hurley had met Minahan to discuss the Double Bay unpaid instalment. He knew that funds from the Noosa Venture came from a fund called the Ashington No 2 Fund of which Ashington was the responsible entity. He understood the funds for Noosa were drawn from the same trust as for the Double Bay venture and thus was concerned about the ability of Ashington to fund the Noosa venture. He asked Minahan where the money for the equity contribution due on 30 June 2009 was to come from. Minahan said the payment could be made as it was not subject to some particular restriction which applied to funds going to the Double Bay venture. 25 As required by the UHA the PCG produced a project plan update and project budget dated 11 June 2009 for the 2009-2010 financial year. This plan, among other things, put back all the milestones, the most significant changes being: DA consent moved from December 2008 to 10 June 2011 - 2 ½ years

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This update also showed in the Project Budget a requirement for increased equity from $54,635,837 to $59,962,201 but a funding requirement of equity of only $1,350,000 up to 30 June 2010. In addition this updated plan stated that a later time for pre-selling and construction was recommended because there had been a 20% downturn in prices being obtained for apartments in Noosa and it was thought that this loss of value would be recovered during a two year delay in completion of the project. It assumed each unitholder would contribute $29.97 million to equity, notwithstanding that the UHA stated that there was no obligation on either party to put in more than $25 million. Anderson stated in oral evidence that Ashington would not put in more than that. 26 A meeting of the directors of NV1 was held on 25 June 2009. Hurley and Mr Wilkinson were elected as Valad directors. Anderson and Minahan were the Ashington directors. The project plan update was rejected. There is no doubt it was rejected at least partly by Hurley on the basis that it did not provide for the $2.5 million contribution to equity which was required on 30 June 2009 by the UHA, but in any event Anderson said that he did not approve it because as far as he was concerned the timetable was unacceptable. On that basis really there needs to be a little more attention paid to this as the plan could not approved unless by unanimous resolution of the directors. 27 The meeting referred the matter back to management for the preparation of additional materials on the proposed strategy and to revise the project plans and project budget. The strategy referred to was in part to delay the project in the expectation or hope that values would increase over a two year period. 28 The board of NV1 met again on 21 October 2009. At the commencement of the meeting Price was appointed as a director in place of Mr Wilkinson who had resigned. It considered a PCG report of September 2009 which, among other things, amended the forecast of milestone dates put forward in June to include the following: Submit DA February 2010 Obtain DA consent June 2011 Commence construction August 2012 Complete project April 2015

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It retained the equity requirement of $59,362,207 but recognised this had not been approved by the board. 29 The updated plan was not approved. There is in evidence a draft of the minutes which it seems has not been approved but which states the following: The board resolved to hold off formally adopting the proposed resolutions until the following key items had been addressed: 1. A right to terminate Starwood from their hotel management agreement prior to the current expiry of 31 December 2015 had been agreed or otherwise with Starwood. 2. Confirmation on the amount of equity contributions due and payable by each joint venture partner under the UHA has been determined. 30 The proposed resolutions were for adoption of the updated asset strategy and time for delivery, acceptance of the project financials, approval of the budget for the 2009/2010 and approval of an equity contribution of $2 million to be split evenly between the parties to be payable in April and June 2010 or as agreed by the PCG. 31 For some months after this there was correspondence between the parties and discussions about equity contributions. Hurley sought advice on this from Mr Carroll, general counsel for Valad, who had told him that amendment of the funding obligation under clause 3.2 required compliance with clause 27.3 and that the PCG had no power to alter the obligations. Debate continued without resolution, VCML making a formal demand for payment of the two $2.5 million stated to be due on 30 June 2009. 32 There are two other matters of importance which occurred between October 2009 and April 2010. The original Suncorp loan was for $65.1 million but was based on a valuation of the Noosa property of $93 million. Suncorp in November 2009 had notified its intention to exercise its rights to obtain a new valuation of the property and it was expected that this would result in breach of the loan value ratio requirement of the mortgage facility thereby requiring the introduction of equity or funding from other sources to reduce the amount of the Suncorp loan. 33 The other important event was that VCML proposed that the services fee payable to AMPL should be suspended as from 5 January 2010. The stated basis for this proposal was that as the completion date was being extended and the fee was calculated as a monthly fee based on project costs over the venture period, the monthly fee should be reduced, first to take this into account and second, because a lot of the work envisaged revolved about preparing a development application and obtaining approval to it whereas at that time there had been no agreement on the form of the application. A Board meeting of NV1 on 24 February 2010 discussed this without resolution. AMPL then served a default notice on NV1 stated to be pursuant to clause 6.1(b) of the services agreement. 34 VFML was the funds manager and the board of NV1 would not approve further payments. AMPL served a statutory demand for payment on NV1. As the board of NV1 was deadlocked on this matter VCML by separate action obtained leave to bring a derivative action on behalf of NV1 to set aside the statutory demand. In the result the proceedings were settled on 30 April 2010 and the demand withdrawn, but I was told without objection that action to recover the fees had been commenced. 35 On 13 April 2010, before the statutory demand problem was resolved, Katherine Grace, the company secretary of Valad, wrote to the chairmen of both Valad and ACPL as follows: UNITHOLDERS AGREEMENT - REFERRAL OF DEADLOCK FOR RESOLUTION We refer to the Unitholders Agreement dated 5 May 2008 between Valad Funds Management Limited ACN 102 249 294 (VFML), TCL, NV1, VCML and ACL (Unitholders Agreement). Any terms capitalised in this letter and not defined have the same meaning as in the Unitholders Agreement. We note that there is a deadlock between the Directors of the Board in relation to each of the following three proposed decisions: 1. confirmation of the amount of equity contributions due and payable by each joint venture partner under the Unitholders Agreement, including each Unitholder's contribution of $2.5 million (June 09 Equity Contribution) as set out in clause 3.2(a)(iv) of the Unitholders Agreement; 2. renegotiation of the Services Fee payable to Ashington Management Pty Limited (AMPL) under the Services Agreement between NV1, VFML and AMPL dated 5 May 2008 (Services Agreement) and the Asset Management Fee payable to VFML under the Unitholders Agreement; and 3. approving and adopting an updated Project Plan and FY09/10 Budget that addresses the issues arising from the meetings and discussions held since mid-2009. (together Proposed Decisions). By this letter, we now refer each Proposed Decision to the Chairman of VCML and the Chairman of ACL for resolution in accordance with clauses 5.10 and 22 of the Unitholders Agreement. VCML reserves all of its rights, including under the Unitholders Agreement, in relation to the Proposed Decisions and all matters related to them, including, without limitation, all of its rights in relations to the failure of ACL to make its June 09 Equity Contribution. 36 Anderson, on behalf of Ashington, responded on 20 April stating that Ashington did not believe there was a deadlock as the board had not voted on resolutions in relation to any of the three matters set out, but nevertheless Ashington, while reserving its rights, was prepared to enter into the dispute resolution deadlock process. He wrote again on 28 April, reiterating that the time for discussion expired that day, and that he sought a meeting. Ms Grace responded that day saying that Hurley was travelling but would be back in Sydney and could meet on 5 May 2010. 37 On 29 April 2010, Anderson wrote to Hurley and Price stating that as Hurley was not available for a meeting there had been a non-compliance with clause 5.10(b)(i) of the UHA and pursuant to that clause Ashington referred the matters in the letter of 13 April 2010 to "dispute resolution - deadlock process in clause 22 of the UHA". He sought a meeting. Valad responded on 3 May accepting the matter should be dealt with under clause 22. 38 A meeting of unitholders was held on 5 May to discuss the deadlock matters, but there was no resolution although there was some further correspondence about the service fees and the Starwood issues. 39 There followed an action commenced by ACPL on 19 May 2010 for winding up of NV1 on the just and equitable ground. It is not necessary to go into this in any detail. There was a challenge to the standing of ACPL; an application to substitute TCL as a plaintiff, which was ultimately dismissed, and the proceedings dismissed as a result of which the present proceedings were commenced on 1 June 2010. 40 Before these proceedings were commenced and as a result of the expiry of 20 days after reference for resolution under clause 22, VCML on 22 May served a transfer notice pursuant to clause 22.2 offering to purchase the interest of ACPL in the project for $20 million or to sell ACPL its interest in the project for $20 million. There was a further meeting on that date but no agreement was reached. On 8 June 2010, VCML sent a notice requiring ACPL to transfer its interest to VCPL at the transfer price. Under clause 22.7 completion of the transfer was required within 40 business days. Perhaps more important was the requirement under clause 22.8 that the fee of $20 million be paid on the completion date by ACPL to VCFM. 41 As I have said this action was commenced by originating process on 1 June 2010 seeking a winding up order on just and equitable grounds and for winding up or other orders on grounds of oppression. Further orders were sought. On 26 July 2010, Valad undertook to the court that it would not take steps to bring about completion of the transfer of interest without giving three days' notice of intention to do so. 42 The final event relevant here is that the valuation obtained by Suncorp was for a figure of $85 million. The effect of this was to bring about a breach under the loan facility unless $5.6 million was paid in reduction of the principal sum outstanding. Suncorp demanded that this be done by 3 August 2010. Price suggested that each unitholder should contribute $2.8 million. Ashington did not respond. On either 4 or 6 August 2010, Valad paid $5.6 million to Suncorp direct stating that this was a contribution of $ 5 million to NV1 in accordance with its obligations under the UHA and a further provision of $600,000 as additional equity required. Price wrote to Ashington claiming that the failure to make the payments under clause 3.2 was a default under clause 18 of the UHA and requiring that the default be rectified by Ashington making payment NV1 of $2.8 million on the basis that this amount would then be returned by NV1 to Valad. 43 Ashington has disputed the claim under this notice by arguing:

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As I have said 11A was not pursued. See transcript 5 November 2010 page 326 Line 50. I will return to the other claims which raise considerable difficulties. The numbers which have been omitted in the foregoing paragraph numbers relate to claims which were not pursued. 47 The claim is pleaded now under a further amended statement claim filed in court after the opening of Mr Fagan, Senior Counsel for the plaintiff. The further amendment was occasioned by the need to plead facts giving rise to a claim of dishonest conduct on the part of Valad through Hurley and Price directed towards bringing about a situation in which VCML could take the whole project for itself. 48 Prior to this last amendment the claim of the plaintiff was that from the time Valad reported its half yearly results on 27 February 2009, it had omitted or refused to progress the project by (a) not taking proper steps to advance it (b) by wishing to sell the project without the redevelopment being completed; (c) by refusing to approve the project plan and budget; (d) by not engaging in community consultation; (e) by not taking any or adequate steps to deal with Starwood and in refusing to sign a memorandum of understanding put forward by Ashington to deal with Starwood; and (f) by refusing to approve payment to AFML of the services fee since 5 January 2010. It is claimed that these matters complained of constituted breaches and repudiatory breaches by the Valad parties of clause 2.2(a)(b); clause 2.6 and clause 2.7 and clauses 6.1 and 6.2 of the Unitholders Agreement. 49 There are further or alternative claims that VCML in seeking to take advantage of the deadlock provisions is seeking to take advantage of its own wrongs; that the matters which it relied on in its dispute notice arose out of its own breaches and further that in breach of clause 22.1 Valad did not negotiate to resolve the dispute and/or did not negotiate to resolve it in good faith thereby precluding it from taking advantage of its own wrong in exercising rights under that clause. 50 The amendment made after the hearing commenced introduced new paragraphs 24A to 24I alleging:

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Inconsistencies in the plaintiffs' claim 57 I may need to return to this but it is important to deal with this in some measure now. The principal claim of the plaintiffs is for damages for breach of contract being damages for loss of bargain through repudiatory breach of contract by the defendants as a result of which pursuant to the transfer notice the share and the unit of ACPL in the joint venture has been lost to Valad. This accepts the share and unit have been lost. There has been no acceptance of the claimed repudiation and no termination for breach. The alternative claim of the plaintiff is that the contract remains on foot, that there have been breaches for which damages may be sought but principally that the alleged breaches amount to oppressive conduct in circumstances where the appropriate order is one that VCML buy out the ACPL interests. 58 Mr Fagan at one stage submitted that a buy out price would be the same figure as for loss of a bargain, but in reality the figure would be the value of the shares and the units at the date determined for fixing the value. Mr Fagan did accept that insofar as there might be separate claims for damages involved for breach in bringing the deadlock procedure into play that could and should be dealt with by determining the proper date for valuation which on that basis would be the date of or prior to the deadlock letter of 13 April 2010. 59 It will be seen immediately that there is a problem with this approach. To claim loss of bargain damages it is necessary for the contract to be terminated; the plaintiffs have not accepted the repudiation and terminated but in spite of this wish to proceed on the basis that the transfer notice has taken effect. Although that is the preferred claim the plaintiff as an alternative wants a buy out order which assumes that there is something to buy out. Conduct claimed to result in breaches of contract and equity contributions 60 The first matter for decision is whether there has been an agreement to vary the contributions required by clause 3.2 of the UHA. Mr Sullivan QC, Senior Counsel for the defendants, argued that any amendment must be in accordance with clause 27.3 which I set out again: 27.4 Amendments This Agreement may only be varied by a document signed by or on behalf of each of the parties. 61 There is no such document. That does not in my opinion carry the day although Hurley was advised that it did. Clause 3.2 itself provided a mechanism for variation of the scheduled payments. This could be done "by the agreement of the unitholders". No amendment of the UHA was required to bring about such a variation. The words "to ensure that project expenses are funded in equal proportion by the unitholders as they fall due for payment" relate to scheduled contributions or amended contributions and do not restrict the power to amend. 62 Amendment pursuant to clause 3.2 required agreement of the unitholders, namely ACPL and VCML. The argument of the plaintiffs is that it was agreed that the schedule of payments should be amended so that equity contributions would be made as required. Insofar as this may have been agreed by the PCG there was no authority. Its members were stated to be nominees of the VFML and AMFL and not the unitholders. Any agreement made by the PCG members would not amend the UHA. 63 The project plan for 2008/09 included a financial summary with a forecast of financial outcomes based on option 2(b) - the base case. This forecast equity contributions by each of Valad and Ashington of $27.32 million. Included in the plan is the statement: The Unitholders Agreement provides for equity to be contributed at designated times (refer to Schedule 9 for more detail).

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Schedule 9 is probably a mistake for Schedule 10 which deals with feasibility and funding. This sets out the clause 3.2 contributions and under that states: "the Unitholders Agreement also states that the partners will act commercially and provide equity as agreed from time to time". The feasibility model which is annexure 5 to the project plan shows tables of projected cash flows which include monthly injections of equity usually of around $532,000 but with a larger figure of $13,726,000 in October 2008 which was the date when the purchase was to be settled. 64 The PCG report of 15 December 2008 deals with discussions about requirements to achieve equity parity. Under the financial summary there is a statement that: "A processes and procedure manual has been signed off by both parties for the structure around the monthly financial processes that is to be followed to ensure smooth operation of account payments, etc." It referred to a statement that equity drawdowns/equality issue is still not resolved between the parties" which probably applied to unequal contributions made to that date. The processes and procedure manual introduction states that it has been prepared by the partners to the investment in the Sheraton Noosa to outline the process to be adopted and adhered to with regard to the financial operation of the joint venture. It then sets out the elements for which the process and procedure has been established including "Equity Contributions". Under this heading the following appears: Equity Contributions • Equity is to be contributed quarterly into the Noosa Venture 1 P/L account on the first day of the month. • Forecast equity is to be reported to the PCG monthly in the PCG Report. • An "Equity Requirement" notice for the payment of equity is to be provided to the PCG members by the Services Manager (Ashington) one month before the equity is due for payment. This notice is to be served on the PCG members at the PCG meeting. It is the responsibility of the PCG members to provide the notice to their respective finance departments for action. • The Asset Manager, through the Project Accountant is to provide the Services Manager with documentary evidence that the equity has been contributed by both parties so it can be incorporated into the cost report model. • Equity is to be provided and maintained in equal shares between the parties. 65 This is probably the best evidence as to variation, but the fact is there is no document to show that it was adopted nor was it relied on by the Ashington interests when asked to identify any agreement to vary contributions. There are some internal Valad emails querying whether there was a requirement for equity contribution for cash flow reporting in May 2009. Mr Tack said that the budgeting cash flow for the 2010 year was being prepared and it would supersede the Unitholders Agreement. In August 2009 Mr Bear a development executive in the Valad Group prepared a model to support an impaired value for Valad equity in the Noosa project. This model does pre-suppose equity injections as being contributions being made monthly. 66 There is no doubt that equity contributions were not made as required by clause 3.2 of the UHA but this is not an estoppel case. Had there been an agreement between the unitholders to vary the contributions this must have been in writing or by words. When the question arose neither party was able to show any agreement for variation. Hurley made it quite clear from at least June 2009 that he considered there was a requirement to make the payment of $2.5 million on 30 June 2009. In the conversation he had with Minahan this was not disputed. I have not overlooked the evidence in paragraph 35 of the affidavit of Anderson of 1 June 2010. There he deposes to a conversation during the first board meeting of NV1 as follows: 35. On 26 September 2008, I attended the first board meeting of NV1 with Craig Minahan and Jeffrey Locke. Sam Renauf, chief operating officers - residential for VCML, Jeremy Stevenson, general counsel of VCML and Joe Tack, development executive of VCML were also in attendance. At this meeting Jeffrey Locke spoke of the debt facility which he had negotiated with Suncorp to the following effect: Jeffrey Locke: "The quantum of debt raised means that the joint venture partners will be required to make lesser equity contributions than proposed in the Unitholders Agreement". Me: "Ashington are agreeable to contributing less equity based on the debt raised from Suncorp".

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This conversation could not amount to an agreement to vary clause 3.2 contributions. In fact more not less equity was required. 67 I find that there was no binding agreement for variation. I will return later to consider whether even if there had been an agreement, it was reasonable for Hurley to require the contribution which Valad demanded. Starwood 68 The conduct alleged to be a breach of clause 2.2 in relation to Starwood is that pleaded in paragraphs 24(e) and 24C of the further amended statement of claim as follows: 24. From about that date, VCML by itself and by its appointees to the Project Control Group from time to time and the board of directors of NV1 from time to time, including Price from 1 October 2009 and Hurley from 25 June 2009, have omitted and refused to progress the Project. Particulars … e. It has taken no or no adequate steps to pursue negotiations with Starwood and has since about May 2010 omitted or refused to support a memorandum of understanding for an agreement between NV1 and Starwood; 24C VCML by its directors and appointee directors to NV1 Hurley and Price has since about 21 October 2009, and in particular at the board meeting on that date, contended that the 2009/2010 Project Plan and Project Budget as drafted could not proceed without resolution with Starwood of terminating its occupancy of the Site prior to 31 December 2015 when: a. to their knowledge this was not correct; b. this was in furtherance of a purpose of creating a deadlock in relation thereto entitling VCML to invoke the deadlock provisions under the Unitholders Agreement in turn entitling to terminate ACPL's involvement and interests in the joint venture and the Project and take control and ownership thereof itself; and c. this was in furtherance of a purpose of justifying a position that AMPL should not be paid service fees under the Services Agreement. Particulars The resolution of the position with Starwood was consequent upon, rather than dependent on, the 2009/10 Project Plan and Project Budget. Further, resolution by the serving of a demolition notice remained open until 31 December 2009 and resolution by negotiation and agreement with Starwood remained open and indeed was progressed by ACML to the point of a draft memorandum of understanding by 12 May 2010. 69 On 14 July 2009, Starwood had given notice of intention to exercise its option to extend the management agreement for a further period of five years after the expiration of the then current term on 31 December 2010. This meant that NV1 had to decide whether to serve a demolition notice prior to 31 December 2009. 70 Various options were put forward as to how to deal with Starwood. The reason for this was that income from the hotel was the source of funds to pay interest on the Suncorp mortgage. If a demolition notice were given and Starwood vacated immediately that would result in loss of income. On the other hand if the notice were not given it would be necessary to come to some agreement with Starwood to vacate prior to 31 December 2015 if redevelopment were to commence. 71 Various plans were put forward as to how to deal with this. Mr Knight in a memo of 1 September 2009 suggested a way forward which involved negotiating with Starwood prior to 31 December 2009 but probably serving a demolition notice if no agreement was reached. This was considered by Price who responded in a reasonable way. One question he raised was who would deal with Starwood. Mr Knight's response was that this should be decided by the PCG but that Messrs Renauf and Minahan would be the most appropriate people with a Valad representative if required. This appears to have been accepted by the PCG at the end of October 2009. The PCG report of 20 November 2009 states that meetings had been held without result and recommended the joint venture issue a demolition notice. It was then decided to get advice from Clayton Utz as to whether the issue of a demolition notice would bear upon the rights of Suncorp under the facility agreement. The advice obtained was that the issue of a demolition notice without consent of Suncorp for the vacation by Starwood of the hotel might constitute a "material adverse effect" which would be an event of default. The result of this advice was not no demolition notice was issued which meant for the project to proceed it would be necessary to come to some arrangement with Starwood. 72 The PCG report of 19 January 2010 reported that Starwood negotiations were continuing but unresolved. In February 2010, Mr Bailey sent an email to Price saying that progress was being made, he expected agreement in principal in about six weeks and suggested that community consultation which was on hold pending resolution should commence. Price responded that he thought that an NV1 board meeting was necessary to determine the project strategy and later by email said: Matt, do you want to catch up tomorrow? The Board is yet to approve the project strategy as it is dependent on both timing (Starwood break clause) and funding (project equity requirements have increased in latest proposal yet sources of equity may have decreased). Until these issues are resolved it makes no commercial sense to keep incurring costs based on the original strategy which may be unviable. Talk soon, Gareth 73 At a meeting on 25 February 2010 between Bailey and Minahan for Ashington and three representatives of Starwood there was positive discussion as to two options for the site. On option was for a full residential development with a development approval being obtained in the next few years, development to take place after Starwood vacated at the end of its new term. The other option was for a combined hotel/residential building with Starwood as the hotel operator. This was really in line with option 2(b). However, when Mr Bailey wrote to Mr Hunt one of the Starwood representatives at the meeting setting out what he thought was being achieved Mr Simpson of Starwood replied saying that nothing had been agreed but Starwood could look at any commercial scheme put before it. 74 The PCG report of 27 April 2010 reported further good discussions with Mr Simpson as a result of which a draft memorandum of understanding was prepared and is dated 12 May 2010. By this stage Valad internal correspondence began to indicate a wish to take over the negotiations as an asset management function but this would not necessarily amount to failure to co-operate. It was Mr Bailey of Ashington who prepared the memorandum of understanding and who sent it to Price for consideration. Price responded on 17 May 2010. The Valad view was that as no demolition notice had been issued it was premature to negotiate with Starwood as that might give Starwood some strategy benefit. The Valad view was that what should be done was to assess the changed Noosa market, to determine what was then the highest and best use of the site and agree that a development application should be made on that basis and then to negotiate with Starwood. In other words the view expressed by Price was that there needed to be agreement as to what development was now to be carried out before there was any purpose in attempting to negotiate with Starwood. While there might have been different views I do not consider this to be in breach of the contractual obligations of VCML. 75 It was put that VCML adopted different stances before and after 31 December 2009 as to the important of dealing with Starwood. That is so because before 31 December a decision needed to be made about the demolition notice whereas, after that date as Hurley said the Starwood problem was just another matter to be resolved once the desired project outcome was determined. AMPL Service Fees 76 This is the claim under paragraph 24(f) of the further amended statement of claim set out in paragraph 48. 77 Leaving aside for the moment the question of whether the stopping of payment was a deliberate action to force Ashington out of the project I consider there was a reasonable basis for Valad to claim that the fees should be readjusted. The monthly fee had been calculated over the original term. It was now proposed by PCG at least that the term be extended and further as no development application had been lodged and it had been envisaged that a lot of the work to be carried out under the service agreement would be attributable to that, the adjustment was reasonable under clause 5.2(a)(ii) of the services agreement. To seek such readjustment would not be a breach. VFML had accepted that its own fee should be adjusted in the same way. Other breaches 78 So far as the other breaches referred to in paragraph 48 of this judgment are concerned, namely refusal to progress the project by not taking proper steps to advance it, by wishing to sell the project without the redevelopment being completed, by refusing to approve the project plan and budget, and by not engaging in community consultation, once again leaving aside the last important matter to which I will come shortly I do not consider that the breaches alleged have been established. It is clear that the parties accepted there has been a serious downturn in the Noosa market. It was for that reason that extended time for the completion of the project had been recommended by the PCG. It was not only Valad which put forward the proposal of obtaining relevant consent and then selling the project: this was something which was considered by the Ashington interests as well. The refusal to approve the project plan and budget which envisaged the same return over a longer period and which required equity contributions of $9 million over those in respect of which there was a contractual obligation under clause 3.2 of the UHA, could not be said to be unreasonable. Community consultation while important was the responsibility of AMPL but there was at least a basis for saying there was little purpose in pursuing this too far until the unitholders agreed on the type of development which they wished to pursue.

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The Deadlock notice 79 It follows from the previous paragraph that I do not consider deadlock in respect of the three matters claimed namely, equity contributions, renegotiation of the services agreement fee, and approving and adopting an updated project plan and budget were matters where VCML was seeking to take advantage of its own wrong (see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 441) because I do not consider the breaches claimed have been made out. Nor do I consider the Valad actions to be in breach of the good faith obligation. In any event, although paragraph 26 of the further amended statement of claim pleads that VCML referred those matters for resolution pursuant to clause 22 of the UHA that is not correct. The matters were referred by ACPL in a letter from Anderson. VCML had taken no steps to refer the matter for resolution pursuant to clause 22 of the UHA and the plaintiffs had taken no steps to restrain them from doing so. It was the activating the deadlock provisions of clause 22 which resulted in the transfer notice. ACPL was responsible for this and its referral at the least must indicate acceptance of the validity of the deadlock notice. Claims of dishonest conduct 80 Paragraphs 24A to 24I allege conduct by VCML directed toward taking the project for itself by actions or contentions without foundation for the purpose of enabling the deadlock provisions to be invoked to the advantage of VCML. 81 I have already found that Hurley and Price were not aware of any agreement to make equity payments as required. In addition I find there were proper reasons for Hurley to insist on the UHA contributions being made. He had reasons for concern about the ability of ACPL to meet its obligations. It had been necessary to take action to obtain final payment for the Double Bay venture; Ashington had asked for a loan of a modest amount of $90,000 to enable it to make some GST or BAS payments and there was genuine concern about equity contributions which were thought to be required in the near future after the expected Suncorp revaluation took place. Later on in February 2010 an application to wind up ACPL had been made by a creditor. This would have brought about a default under the Suncorp agreement. Finally Hurley had been advised by Mr Carroll, then general counsel for the Valad Group, that the contributions under clause 3.2 were required and he could find no evidence that the agreement was varied. 82 So far as the Starwood and services fee matters are concerned I have already dealt with them. The question is whether the actions of VCML were not as a result of genuine concern or genuine considerations but for a purpose inimical to the obligations of good faith under clause 2.2(6)(ii) of the UHA and the obligation under clause 2.2(6)(iv) of the UHA. 83 The evidence which would support the plaintiffs' claim here comes from internal documents of Valad obtained on discovery. Ashington did have concerns about Valad's statement about selling down Noosa. Hurley said that what he meant by this was that Valad would transfer its interest to a trust managed by it but he did not tell Anderson or Minahan that. Ashington was itself in June 2009 considering the possibility of obtaining a new partner to take Valad out. 84 On the Valad side, Price was by July 2009 considering the terms of the UHA as to performance default which would trigger a compulsory event. He was doing this under instructions from Hurley. 85 The following matters are relevant to this issue:

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C. In October 2009, the Australian newspaper carried a report that investors in the Ashington No 2 Trust had called in insolvency advisers. This caused Hurley concern and brought about an internal Valad email from Price stating among other things the property team was working on a strategic asset plan to take Ashington out. There are a number of further strategic asset plans which were updated each month and which generally refer to events of default and obtaining 100% control. Hurley suggested in November 2009 that consideration should be given to refusal to pay the project management fees to Ashington and a few days later Mr Timmins, in a revised asset plan, spoke of making a demand for the $2.5 million due on 30June 2009 thereby triggering a performance default. 86 This type of internal communication was carried on, particularly after Ashington had been removed as the responsible entity of the Ashington No 2 Trust and a company known as Parissen put in its place. There was some comment about Parissen taking out the position of Ashington as responsible entity in the Noosa Trust. An email dated 25 January 2010 from Price to Dianne Cassidy, who seems to have been a member of a senior leadership team, said: Team. I would also like to discuss the Noosa project as part of the property section. It is the project team's view that we should be contributing our $2.5 million and then calling a default on Ashington - this is the most practicable method for gaining 100% control of the project - our prime objective. The downside is the cash outflow of $2.5 million and the fact this will form part of Suncorp's security pool. The issue needs to be debated in this forum. 87 In February 2010 various emails refer again to the aim to get 100% control and then if possible to get the investors in the ADF No 2 Fund under its new responsible entity to contribute equity to the project. While all this was going on Valad was considering options such as selling the project immediately or obtaining a development approval and then selling. It does seem that by March 2010 both sides had come to the conclusion that it was unlikely that the project as envisaged could be completed. 88 Most of the material referred to goes towards the question of an event of default which could trigger a mechanism under clause 18 of the UHA which I have not dealt with as it is not relevant here. It would be relevant under the later demand made in respect of the contribution required for the Suncorp payment. 89 All the material to which I have referred to is documentary and therefore there is no dispute about it. The response of Hurley and Price is that they each had serious concerns at least from the time the Double Bay venture came to an end as to the ability of Ashington to fund its required contributions to the project and I think clear that they had a proper reason for this concern. It was they said, in those circumstances, they thought it proper to consider taking control of the whole of the venture to protect Valad's asset and to consider the method by which that would be done. They were very concerned that if ACPL was wound up Suncorp would take control of the whole venture and they were equally concerned about the dispute that ACPL appeared to be having with the investors in the fund from which its funds or equity contributions were to come. In all those circumstances Hurley and Price considered that it was in the best interests of Valad to obtain 100% control although if Ashington did put up the $2.5 million sought in the letter of demand. They said the project could have continued under the joint venture arrangements. Thus the contention is the Valad parties were entitled to bear in mind their fair commercial objectives and when considering the requirement to act in good faith the risk of losing the project was something properly to take into account. I found this evidence, particularly that of Price, to be quite persuasive and acceptable. Price was a member of the PCG and had a closer relationship with Anderson and Minahan than did Hurley. Hurley was more interested in Valad than the joint venture: he was running a company with severe problems due to the financial crisis. By the time he became closely involved with the project its successful outcome was to say the least doubtful. It was not wrong of him to seek to protect the Valad interest. 90 This part of the claim is a difficult question. Hurley did instruct Price to move towards 100% control and as I said he was more concerned with the welfare of Valad than with that of the joint venture. Nevertheless I have come to the conclusion that the plaintiffs' claim so far as it relates to claimed improper conduct of VCML directed to taking control of the venture to itself fails. The uncertain economic future and the proper doubts about the ability of ACPL to contribute funds to the project justified the desire to control the project. It follows that I find the deadlock notice claims did not arise through VCML taking advantage of its own wrongdoing so as to make its issue a breach of contract. I also find there was no breach of clause 22.1 of the deadlock provisions. Hurley had a basis to argue that the $2.5 million contribution must be made and a proper basis for refusing to support the project plan placed before the board of NV1. Finding on contract claims 91 For the reasons set out in paragraphs 60 to 90 the claims fail. Claim for damages for breach of contract 92 It is necessary to deal with this in case my decision on breach is wrong. The plaintiffs have not accepted what they claim to be the repudiation of the contract by VCFL and have not terminated the contract. On that basis I consider the law to be clear and there can be no damages for loss of the bargain which is the plaintiffs' preferred result: Peter Turnbull & Co v Mundus Trading Co Australasia (1954) 90 CLR 235; Sunbird Plaza Pty Limited v Maloney (1988) 166 CLR 245. Senior Counsel for the plaintiffs was unable to mount any convincing argument against that proposition. 93 There is, in addition, another hurdle in the plaintiffs' path so far as any claim for damages for breach of contract is concerned. That is because while put to proof the plaintiffs have not established that they were ready, willing and able to perform the contract. Evidence of their ability to make the necessary contributions of equity would have been required but there was no such evidence. Whether or not the claim was for loss of a bargain albeit without termination or for some other breach of a contract which remained on foot it would be necessary to prove that "but for the breach the plaintiffs could have done what was required of them to become entitled to benefit under the contract". It is a condition precedent to the cause of action: Hensley v Reschke (1914) 18 CLR 452 at 460 and 467; Foran v Wight (1989) 168 CLR 385 per Mason CJ at 402 to 403 and per Dawson J at 451; Macquarie International Health Clinic Pty Limited v Sydney South West Area Health Service [2010] NSWCA 268 at [161]. If it were claimed the failure to pay service fees brought about an inability to perform evidence would be needed of that. In submissions Mr Fagan argued that readiness and ability to perform was something to be decided in assessing damages: this is incorrect. Ability and willingness to perform is a requirement for a cause of action. Foran v Wight (1989) 168 CLR 385. 94 It follows that for these reasons, namely failure to terminate and failure to prove that willingness and ability to perform the contract the plaintiffs' claim for damages for breach of contract must fail in any event. It would therefore have been easier to determine contract claims on that basis but in view of the detailed and difficult nature of this claim and the existence of the oppression claim I thought it proper to decide the contractual claims on a factual basis in any event. Claim against VFML for inducing breach of contract. 95 As the claims for breach of contract fail this claim under paragraph 39 of the further amended statement of claim must fail. Inconsistent claims 96 Because I consider that the contract claims fail it does not seem to me to be necessary to embark upon the somewhat difficult question of pleading inconsistent claims when each relies on different facts. In other words the case is not one where there are pleaded alternative rights based upon the same facts but alternative rights based upon differing facts the first claim for loss of the bargain relying upon the share having been lost and the second claim for a compulsory buy out order being based on the fact there is something to buy. It is possible the failure to accept the claimed repudiation was to enable the oppression claim to be kept alive but I proceed on the basis the plaintiffs have not elected against their alternative claim nor waived their right to rely on it. Corporations Act claims

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Claims against Hurley and Price 97 The claim is that Hurley and Price breached their duties as directors under s 181(1) and s 182(1) of the Corporations Act. For the reasons given I find they did not. A declaration is sought that they did but unless this led to anything I would not make such a declaration particularly as no injunction is sought. Further, the claim for damages is made under s 1324(10) of the Act. In the present case there has been no claim for an injunction. In those circumstances the question is whether the power to award damages is engaged. In Permanent Trustee Australia Limited v Perpetual Trustee Company Limited (1994) 15 ACSR 722, Cohen J held that under substantially similar provisions of s 574 of the Companies (NSW) Code damages could be awarded whether or not injunctive relief was sought. He came to the conclusion that although the wording of s 574(8) was similar to the provisions of Lord Cairns' Act (s 68 of the Supreme Court Act) the intention of s 574 of the Code was to widen the scope of persons who could seek relief from contraventions of the Companies Code and that the Code should be interpreted unaffected by the principles applied under Lord Cairns' Act and its successors. The question was considered by Perry J in Executors and Trustee Australia Limited v Deloitte Haskins Sells (1996) 22 ACSR 270. In that case, Perry J disagreed with the decision of Cohen J. 98 Without any reference to authority I raised this question during the final submissions and neither counsel referred me to either of these two authorities. My preliminary view at that stage without the benefit of any authority was that there was no general power to award damages unless some injunctive order was sought. After careful consideration of the two decisions I consider that of Perry J to be more persuasive for the reasons he gave and intend to follow it. In those circumstances the claims against Hurley and Price must be dismissed. For the same reasons the claims against the VCML and VFML for aiding and abetting etc must be dismissed. Application for a winding up order 99 It is admitted that the shareholders are deadlocked. In those circumstances, if there were no deadlock provision and no question of oppression justifying other relief it would be proper to make an order for the winding up of NV1. If that were done in an ordinary case the liquidator appointed to wind up the company would probably sell the project for the best price which could be obtained and distribute the proceeds of sale to the shareholders in equal shares. In the present case, however, the deadlocked company is a trustee company holding the project on trust for the two unitholders as beneficiaries under the trust. Any liquidator would be bound to act in conformity with the trust and would be likely to appoint a new trustee who would only continue with the project if properly funded. The appointment of a liquidator would constitute an event of default under the Suncorp facility in which event it is almost certain that Suncorp would exercise its rights as mortgagee and call up the loan. Winding up is the least preferred outcome of the plaintiff companies and would I consider only be ordered if there were no other way of resolving the impasse. It is a last resort for the plaintiffs and in this case for the court. The grounds pleaded in the cross-claim would not prevent an order for winding up in such a case. The property subject to mortgage to secure the Valad entitlements would remain subject to the charge. Relief against oppression s 233 of the Corporations Act (the Act) 100 The court can make an order under s 233 of the Act if the conduct of the affairs of a company is oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member. Pursuant to s 53 of the Act the affairs of a company include transactions and dealings as trustee and property held as trustee. 101 The conduct complained of here is the same as that alleged in respect of the contract claims from a corporate point of view claimed to be wrongful exercise of power to stultify the project as a result of the requirement for board decisions to be unanimous and thereafter for VCML to take the project for itself. For the reasons given on the contract claims I conclude that there are no grounds under s 232 of the Act for an order to be made under s 233 of the Act. 102 To hold otherwise would require me to find that it was oppressive conduct on the part of the VCML to give the deadlock notice and to exercise its rights pursuant to clause 22, the dispute having been referred to the deadlock provisions under that section by ACPL. There can be a deadlock even if a position taken is incorrect although not I think if it is dishonest. The purpose of the deadlock provision is to resolve deadlocks. There is no evidence that the offer figure of $20 million is not and was not a reasonable figure for the value of the interests of TCL and ACPL in NV1 and the unit trust. I accept that the result of the fee agreement is that for ACPL to fund a purchase for $20 million the Ashington companies would have to put up the sum of $40 million which on the evidence they would not be able to do; and of course the fee agreement also means that by selling their interest in the project for $20 million when the liability to pay the $20 million under the fee agreement is taken into account, there would be no return on the sale for the Ashington companies. On the other hand there is nothing to suggest that the interest of Ashington in the project is worth more than $20 million and on that basis itself it seems to me there is no reason to find any oppression in serving the transfer notice or in requiring the transfer notice to take effect. If there was no oppressive conduct in serving the s 5.10 notice or the transfer notice then the contract terms should be allowed to take their course in preference to a winding up on the just and equitable ground. 103 I should add that what is sought is not only an order that VCML purchase the shares of ACPL in NV1 as could be made under s 233(i)(d) of the Act but an order that VCML purchase the units in the trust held by ACPL. The shares would of course have no real value as NV1 does not own any assets beneficially. The order sought in respect of the units could only be made if it were permitted under s 233(1)(j) of the Act or if some other order were appropriate under s 233(1). In either case to comply with s 233 any order would have to be an order "in relation to the company", the company being NV1. I hesitate to embark on this enquiry but do so in case I am incorrect about oppressive conduct. I should add that counsel for the defendants has very fairly stated that in light of conflicting authority the better view is that there is power to make the buy out order sought. 104 Until the decision of Davies J in Vigliaroni v CPS Investment (2009) 74 ACSR 281 cases dealing with s 232 and s 233 powers relating to trustee companies have held that the powers are not available or in some cases should not be used to deal with oppression in a company which holds all its assets in trust and in particular are not available to make orders in respect of the assets of the trust or the interests in the trust held by the beneficiaries under the trust. See Kizquari Pty Limited v Prestoo Pty Limited (1993) 10 ACSR 606; McEwen v Combined Coast Cranes Pty Limited (2002) 44 ACSR 244 at para 46; Re Polyresins Pty Limited [1999] 1 QdR 599 at 614. In the last decision the discussion was obiter and not necessary to the findings in that case. None of those cases referred to the definition of "affairs of a body corporate" in s 53 of the Act or its predecessor Acts. It was because the earlier cases did not consider s 53 that Davies J in Vigliaroni felt at liberty to depart from those decisions as she did not think they gave effect to legislative intention: Vigliaroni para [69]. In doing so Davies J referred to the statement of the Chief Justice of the High Court in Campbell v Back Office Investments Pty Limited (2009) 238 CLR 304 at paragraph 72 when he said in referring to ss 232 and 233: "the imposition of judge-made limitations on their scope is to be approached with caution". 105 With respect to the decision of Davies J and accepting the requirement for coherence in corporations law I find it difficult to accept that an order "in relation to the company" includes an order in relation to the affairs of the company because if that were the legislative intention it would have been easy enough to insert the words "or the affairs of the company" after the words "the company" in the commencement part of s 233(1) of the Act. It is a question of power not scope. It follows that if it were necessary for me to decide this question I would not have felt bound to follow the decision in Vigliaroni in preference to the earlier decisions though accepting so far as those earlier decisions are concerned that at least their judgments do not appear to have given consideration to s 53 of the Act or its predecessors in earlier Acts. Thus I would not consider it within power to make an order requiring one trust beneficiary to buy out the interest of the other trust beneficiary. Such an order would, I think, be an order in relation to the trust not to the company.

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Judgment (81 paragraphs)

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Cases Cited (8)