Wilson v Meudon

The extension approvals 6 As amended in December 1973, art 6 of Meudon's articles of association gave the holder of each group of shares the exclusive right to use and enjoy a home unit delineated on a plan. The article provided: "The owner or owners for the time being of each group of shares whose serial numbers appear in the third column hereunder shall be entitled to the exclusive right subject to these Articles to use and enjoy the home unit the number of which appears opposite such serial numbers respectively in the fourth column hereunder and such home unit shall be available subject to these Articles for his or her or their exclusive use and enjoyment within the area shown by such number on the plan hereunto attached … in the building known as "Meudon"…" 7 There followed a description of the land upon which the building was erected, the right to use common property and a table identifying the serial numbers of each group of shares and the home unit to which they were pertinent. 12,500 shares were appointed to the penthouse. 25,000 shares were appointed to home unit numbered 17. 8 With respect to the roof, the attached plan showed the penthouse in the north west corner. Common property, including a stair and lift well, was shown to its south. To the east, the plan identified the roof over the Wilsons' home unit as: "roof garden for penthouse". 9 With respect to the 7th floor, the plan showed home unit numbered 16 to the west and home unit numbered 17 to the east. There was no portion of the penthouse above home unit numbered 17. It was directly below the roof garden identified on the plan of the roof. In addition, home unit numbered 17 at its south west extremity was below a small portion of the common property on the roof. 10 It was submitted on behalf of the Wilsons that any construction on the roof above their home unit constituted a variation to their right to the use and enjoyment of their home unit. It was submitted that if construction on the roof went ahead, rather than being on the top floor of Meudon, home unit 17 and the plan forming part of the articles of association would be changed in a significant respect and, accordingly, the rights of the Wilsons as the owners of their group of shares and the rights conferred by article 6 would be varied, the subject matter of the rights would be varied and so would the rights themselves. 11 I reject that submission. An extension to the penthouse would constitute a variation in the rights attributable to the penthouse shares. But that would not constitute a variation in the rights attributable to the Wilsons' shares. They would continue to hold that group of shares that granted the exclusive right to the use and enjoyment of home unit numbered 17. 12 There was nothing in the constitution of Meudon that excluded the possibility of a structure being erected on the roof above the Wilsons' home unit. There was no overt provision that gave the Wilsons the exclusive right to use and enjoy a home unit "above which there is no dwelling or structure". And there was no justification to imply such a right in terms of BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. 13 It was argued on behalf of the Wilsons that art 6 of Meudon's constitution conferred a lease on the Wilsons. That is not so. It was held to the contrary by the Court of Appeal in HH Halls Ltd v Lepouris (1964) 82 WN (Pt 2) (NSW) 87. At 93, Sugerman J said that the rights conferred by a provision like art 6 were only personal rights against the company: they were not legal interests, or incident to legal interests in the land, not rights in rem. In Magill v Santina Pty Ltd (1983) 1 NSWLR 517 at 525, Glass JA agreed that such an article did not, by its own force, create a demise from the company to the unit holder. Mahoney JA at 529 said that the article did not itself create a right in the nature of a tenancy. 14 Cases dealing with the right to quiet enjoyment by tenants, that were relied upon by the Wilsons, can be set to one side. 15 But the contractual right to exclusive use and enjoyment of a home unit conferred by the constitution of Meudon is not dissimilar to a tenant's right to quiet enjoyment. If Meudon permitted another shareholder to alter the home unit to which the shares were pertinent to conduct an activity that constituted a nuisance to the Wilsons, Meudon might be in breach of its contractual duty to allow them the exclusive use and enjoyment of their home unit. And there might be situations falling short of actionable nuisance that might render Meudon liable on its contract. 16 For example, in Reid House Pty Ltd v Beneke (1987) 5 ACLC 451 the articles constituting exclusive use and enjoyment of home units in shareholders also required execution of licence agreements. They contained covenants for quiet enjoyment. Under compulsion of a local authority, the company carried out fire safety works that detrimentally affected a number of home units. It was held that the company was liable to damages for breach of contract constituted by the articles and the licence. 17 This is not such a case. For the reasons set out below, the board of directors of Meudon were entitled to form the view that the extension of the penthouse would not unreasonably affect the Wilsons' enjoyment of their home unit. The proposed installation of a flooring system supported above the slab was designed to lessen impact noise from the roof. 18 The articles of association of a home unit company must be construed in context. Their purpose is to grant the owners of stipulated shares the exclusive use and enjoyment of an identified home unit. But exclusive use and enjoyment is not without outside interference in a home unit company that contains more than one unit. People who live in a home unit with home units adjacent horizontally or vertically must expect some degree of interference from the normal activities of the occupants of those units. 19 The exclusive enjoyment of which the articles speak does not give an entitlement to the absolute exclusion of disturbance. As Hutley JA said in his dissenting judgment in Magill at 522, living together involves a measure of give and take and the exclusive rights in such circumstances should not be read down except to the extent necessary to permit living together in a reasonable way. If this were not so, alterations could never be carried out in respect of any home unit. 20 The exclusive right to the use and enjoyment of a home unit in a home unit company does not entitle the shareholder to prevent reasonable alterations to home units surrounding the shareholder's unit. In this case, the exclusive right to the use and enjoyment of a top floor home unit did not entitle the owners of the shares to exclude reasonable development on the roof. 21 In my judgment, as a matter of construction of the articles of association of Meudon, the Wilsons were not entitled to restrict Mr Baker to the use and enjoyment of the roof above their home unit only as a roof garden. Nor did the Wilsons have any right to prevent Meudon, if it wished, to issue new shares to Mr Baker with respect to any development on the roof. 22 Article 50 provided that Meudon, in general meeting, by special resolution, might from time to time increase its capital by the creation of new shares and art 51 provided that the new shares should be issued upon such terms and conditions and with such rights and privileges annexed thereto as the general meeting resolved. 23 Since the allotment of new shares would not, in my view, constitute a variation of any rights held by the Wilsons, they were not entitled, as a matter of construction of the articles of Meudon, to prevent a general meeting of Meudon considering and, if thought fit, resolving to allot new shares to Mr Baker upon such terms as the general meeting determined. 24 It was argued on behalf of the Wilsons that each group of shares in Meudon constituted a different class because the rights to the use and enjoyment of one home unit differed from the rights to the use and enjoyment of another. 25 Article 54 of Meudon's constitution provided that if the share capital was divided into different classes of shares, the rights attached to any class might be varied with the consent of the holders of 75% of the shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The article went on to provide that the necessary quorum should be two persons holding or representing by proxy one third of the issued shares of the class. 26 It was argued that since the rights attached to the Wilsons' shares were affected, and those shares constituted a separate class, Meudon was not entitled to have approved Mr Baker's predecessor in title's plans to extend the penthouse in the absence of a meeting with respect to the Wilsons' shares and their consent. 27 Since I have concluded that the rights of the Wilsons were not affected by the plans, there was no occasion for art 54 to have been brought into the play. 28 In any event, I take the view that the shares of the Wilsons did not constitute a separate class. In Crumpton v Morrine Hall Pty Ltd (1965) NSWR 240 at 245-246, Jacobs J took the view that groups of shares in a home unit company constituted separate classes. 29 That decision was not followed by Needham J in Reid House 5 ACLC at 458. His Honour noted that the terms of the relevant article were not set out in the report in Crumpton. His Honour pointed out the quorum for a meeting was two persons and that the modification of rights article contemplated a number of holders of the shares of a particular class and its terms were quite inappropriate to the groups of shares in a home unit company. I respectfully agree with that approach. The constitution of a home unit company envisages that the group of shares that give exclusive use and enjoyment to a home unit will be held by an individual, an entity or persons and entities jointly. If jointly held, the shares will be regarded as held by the first-named joint owner. There is no scope for two or more holders of such shares. 30 Furthermore, I am of the view that the rights attached to the groups of shares in the Meudon were essentially the same. Each group gave exclusive use and enjoyment to a home unit. This common characteristic differentiates this case from those authorities relied upon by the Wilsons where different classes of shares with different rights as to dividend or capital were involved. That was the case in Herrman v Simon (1990) 4 ACSR 81 and in Re Old Silkstone Collieries Ld [1954] 1 Ch 169. 31 The Corporations Act (Cth), s 246C(5) provided that if a company with one class of shares issued new shares, the issue was taken to vary the rights attached to the shares already issued if the rights attaching to the new shares were not the same as the rights attached to the shares already issued and those rights were not provided for in the company's constitution or a notice, document or resolution lodged with ASIC. It was argued that this provision would apply to any new shares issued to Mr Baker. 32 In my view, the provision will not operate upon any new allotment of shares to Mr Baker if the rights attached to the new shares are confined to the rights attached to Mr Baker's existing shares. They, like the existing shares, would give exclusive use and enjoyment to Mr Baker to the penthouse. 33 Article 111 of the constitution of Meudon provided that the management of the business of the company should be vested in the directors and the directors might exercise all powers and do all acts and things that were not by the constitution or statute required to be exercised by the company in general meeting. There was nothing in the constitution or in any statute that required alterations to home units or any development on the roof to be approved by the company in general meeting. 34 As a matter of construction of its constitution, I am of the view that the board of directors was the proper organ of Meudon to grant any approvals for the extension of the penthouse and the company in general meeting was the proper organ of Meudon to approve any new allotment of shares to Mr Baker.

Oppression 35 On 22 October 1996, the annual general meeting of Meudon resolved unanimously that the company agreed to support a building application to South Sydney City Council for an extension of the penthouse into the roof area above the Wilsons' home unit for an enclosed sunroom with new timber flooring of 25.92m2. The support was subject to the then owner of the penthouse shares, Bill Blundell, agreeing that in the event of approval by the local authority, the extension was to be carried out within 18 months. On completion, the shareholding was to be increased or an additional levy imposed or some other appropriate financial adjustment made in recognition of the increased residential area. It was to be based upon some equitable criterion such as the percentage increase in the floor area or market value of the unit. The work was to be carried out under such conditions as the board might determine. The new extension, on completion, was to be deemed to be vested in the company. All expenses incurred by the company in processing the application and consequent upon any approval being given were to be borne by the shareholder. 36 The planned sunroom was of a dogleg shape, the eastern extremity running from north to south for about half its length and then running towards the south east parallel to the north eastern wall of the central stair and lift well. 37 The notice of meeting did not state that the resolution was to be a special one, but the minutes recorded it as such. The Wilsons attended the meeting and voted in favour of the resolution. It was complained that this was the first meeting attended by the Wilsons and they were given insufficient information. They asserted that no plans were tabled at the meeting. There was, however, unchallenged evidence from two other attendees that architect's plans were displayed and explained at the meeting. I accept that evidence. 38 It was complained that no notice had been given to the Wilsons prior to the notice of meeting that any extension to the penthouse was to be considered. But the notice of meeting made it plain that the agenda for the meeting included consideration of an extension to the penthouse and the matter was discussed at the meeting. The Wilsons were in a position to object. They did not. To the contrary they voted in favour of the resolution. 39 It was complained that an insufficient description of the works was given by the chairman. Mr Wilson said the extension was described by the chairman as: "Bill Blundell wants to glass in his patio by a few square metres. This is a minimal extension. It's just a sunroom to give Bill a little more space. I think the Company should be sympathetic to the proposal". The chairman's version was: "The purpose of Bill's extension is to provide a sunroom for the penthouse at no cost to the shareholders and the directors are in favour of this". 40 In my view, either version of the chairman's description when coupled with the architect's plans was sufficient to draw to the attention of the Wilsons the nature of the proposed works. The matter was brought to a general meeting because it involved the prospect of the issue of new shares. 41 On 29 April 1997, the board of Meudon approved amended plans which expanded the sunroom to 44.05m2. The extensions increased the area of the proposed sunroom above the Wilsons' home unit. The Wilsons were not informed of the alterations prior to board consent. 42 The variation removed the dogleg from the sunroom. The eastern extremity was to run from north to south intersecting the south eastern point of the original projection. It also added an extra portion by continuing the eastern projection to the south and then to the south west parallel to the south western wall of the stair and the lift well. 43 The October 1996 resolution of the shareholders of Meudon was conditional upon the extension being carried out within 18 months of council approval. That had not happened. On 1 May 2000, the board resolved to grant Mr Blundell an extension until 4 September 2002.

44 In November 2000, Mr Blundell listed his apartment for auction. The Wilsons attended an open day and saw plans on display showing the altered extension for the sunroom as approved by the board of directors and an area marked out on the roof surface to depict the extent of the sunroom. 45 On 12 November 2000, a board member, Shauna Phillips, wrote to Mr Weeks letting him know that: "Roberta Wilson is on the warpath over the extent of extensions that Bill has mapped out on the roof. She claims the area is larger than voted on at the AGM. Bill claims the board agreed to an increase in the area after the AGM. Roberta, Bill & real estate agent had a heated argument over this in front of prospective buyers at the sat. arvo. inspection! Roberta then phoned me, but those matters occurred before my time on the board" 46 It was submitted that this note evidenced a pattern of conduct among board members to denigrate the Wilsons, to mobilise support against them and to deploy tactics against them in concert with Mr Baker in order to overcome their objections. I fail to see how the note reporting an incident to the chairman could evidence such conduct. 47 On 14 November 2000, Mark Weeks, the chairman of the board, wrote to the other directors asserting that the board had authority to agree to the variation to Mr Blundell's plans. He asserted that it was for the board to determine whether there was a matter of significance that should be put to the shareholders and the board was entitled to form the view that the variations were not sufficiently significant to warrant the convening of a meeting of shareholders. The memorandum noted that it seemed likely that the board would face "significant flak from certain shareholder(s)" in light of the proposed sale of the penthouse, concerning the amendments to the sunroom plan. 48 It was submitted that Mr Weeks demonstrated that he gave no consideration to the merits of the Wilsons' concerns. In cross examination Mr Weeks did not accept that the Wilsons would be significantly affected by noise. He said there was access to the roof which had little insulation and the Wilsons were already affected by noise. He said the board had taken advice and on that basis he did not accept the plaintiffs' sound expert's view that there would be an increase in noise. The proposed new flooring of the sunroom would create a greater insulation of noise above the Wilson unit. 49 A report of an acoustic expert retained by the Wilsons suggested that they would be affected by noise if the penthouse was extended into the area above their unit. A report obtained by Mr Baker suggested that the former report was highly conservative and appeared to be based on a worst case scenario. It was suggested in the latter report that the existing concrete slab deck area surrounding the penthouse provided low control of impact noise generated by footfall noise or any other activity and that the addition of a new trafficable timber decking supported on rubber isolation pads and the addition of the new floor system to the proposed sunroom area consisting of timber floor decking on joists supported on rubber isolation pads would improve the transmission of impact noise and the isolation of airborne sound. 50 Neither expert was cross examined. Mr Weeks referred to a further expert's report commissioned by the board that supported the latter expert's opinion. In my view, the board was entitled to form the view that the extension of the penthouse would not significantly affect the Wilsons' amenity. 51 John Russell Baxter was the chairman of the board of directors from 1995 to 1997 when he left the board. Mr Weeks' memorandum of 14 November 2000 was, however, sent to Mr Baxter as well as the current directors. In cross examination Mr Baxter said he had not informed Mrs Wilson of the variation to the plans for the sunroom. He said he did not wish to communicate with her at all because she was causing problems for the board. But, in my view, a former director's views can have no relevance with respect to a claim that the current directors were treating the Wilsons oppressively. 52 It was submitted that Mr Weeks' memorandum to the board and to Mr Baxter of 14 November 2000 fell into the category of evidence of a pattern of conduct among board members to denigrate the Wilsons, to mobilise support against them and to deploy tactics against them in concert with Mr Baker in order to overcome their objections. I reject that submission. The chairman of the board was entitled to indicate his attitude as to whether the board or the shareholders had the power to vary the plans for the sunroom on the roof. 53 Mr Baxter commented on Mr Weeks' memorandum on 15 November 2000. He suggested the board approach Mrs Wilson along the following lines. The original plan was approved unanimously at the annual general meeting in October 1996. The board did not expect any objections from 7th floor residents, except for short-term noise during construction, because the occupier of home unit 16 regarded those parts of her unit below the penthouse as the most comfortable to live in because the temperature remained more constant than in other areas of her unit and noise was not a problem because there was a floor separated from the roof surface by an air gap. When Mr Blundell's proposed variations came before the board in May 1997 the board satisfied itself that the additional construction would not impede the view of the harbour by occupants of Onslow Gardens, a nearby construction, did not see that any other party would be adversely affected and, therefore, agreed to the variation ensuring direct access to the open roof at the eastern end of the building would be retained for maintenance purposes. The board was advised that the relatively small changes did not require confirmation of an extraordinary general meeting because the articles of association would not be affected and it was decided to save home unit owners the trouble of attending another meeting. If Mrs Wilson wished to put the changes to an extraordinary general meeting, the board was prepared to arrange it. The response concluded with a report of the view of another former board member, Harold Cadell: "I have had a chat with Harold Cadell, who was on the Board in 1997. Like me, he had forgotten that the final plan differed from the one put to 1996 AGM. However, he believes that some approach like the one above is the way to go. If Mrs W then wants an EGM, he feels sure that, after we have explained things quietly to a few people, she is most unlikely to get 4 votes. If she fails to get her 4 votes, she then has no grounds for a Court case. Harold realises that Bill's auction would have to be deferred, but does not see that as a major problem. If it became necessary, we could contribute to the agent's extra costs for modified advertising. Above all, we do not want the cost and worry of a Court case." 54 It was submitted that the response was evidence of oppressive behaviour by board members towards Mrs Wilson. I do not agree. The memorandum provides the views of two former board members and cannot be attributed to the current board members. Secondly, it suggested that if Mrs Wilson wanted an extraordinary general meeting the board should provide it for her. That is hardly the sign of oppression. If a meeting of the shareholders was to be called, there was nothing to prevent ex-board members lobbying other shareholders with a view to supporting the board's authorisation of a variation to Mr Blundell's plans. 55 It was submitted that by enlisting shareholders unaffected by the proposal against the Wilsons' opposition, the board acted to the detriment of the company as a whole and the Wilsons in particular. I do not see how the actions contemplated in Mr Baxter's response might constitute board action to the detriment of Meudon. And the suggestion that such action was to the detriment of the plaintiffs, assumed that they would be adversely affected by the proposed variation. But there was acoustic evidence, subsequently received, that supported the notion that the Wilsons would not be adversely affected and the experience of the occupant of home unit numbered 16 would apply to the Wilsons. The evidence was that the occupant of unit 16 suffered the onset of dementia in about 2000. That did not, however, deprive her earlier experience of significance. 56 On 22 December 2000, Mr Blundell entered into an agreement for the sale of his shares to Mr Baker. Special condition 24 provided that on completion Mr Blundell should transfer to Mr Baker all his right, interest and title in all plans, diagrams, drawings, applications or any other document in respect of the proposed alterations and all renovations to the property that had been lodged with South Sydney Council. 57 Mr Weeks invited the Wilsons to provide him with their comments and objections to the development on the roof. They did so by letter of 12 December 2000. They raised the question of adequate insulation against noise, weight and extension of the slab, the problem of leakage, opposition to the placement of any bathroom or flushing toilet or new plumbing over their living area and the general outline adding bulk to the appearance of the structure. While appreciating the power and authority of the board to take certain decisions, the Wilsons suggested that, apart from minor renovations to apartment interiors, whenever any alteration was proposed to any home unit, all shareholders should be notified and given the opportunity and right to comment, criticise, object or approve. 58 Mr Wilson was not then a member of the board, but he was invited to attend a board meeting as an observer when the directors were to approve the transfer of shares from Mr Blundell to Mr Baker. That is hardly indicative of a concerted pattern of conduct by board members to deploy tactics against the Wilsons in concert, as was submitted on their behalf. 59 In March 2001, Mr Baker and an architect visited the Wilsons with new drawings for an extension of the penthouse extending further to the east with a U-shaped outline and a U-shaped deck projecting further to the east. What was proposed on the interior was a kitchen, living room and dinning area. The kitchen was positioned directly above the Wilsons' bedroom. 60 D M Scott had been the managing agents of Meudon before Harvie Strata Management Pty Ltd was appointed. The Wilsons had searched the files of D M Scott looking for documents authorising the construction on the roof. They subsequently met with John Midford Little, the sole director of Harvie. The Wilsons maintained that Mr Little told them that there was nothing or little that they could do once the board had made a decision. Mr little denied this conversation. He said it was his invariable practice and the policy of Harvie not to provide an opinion or advice to any person inspecting documents or records of a company or strata scheme under its management. In cross examination, Mr Little said it was possible that he had said words to that effect but it sounded unlikely because he did not believe it. He said he had a practice that he stuck to and he made sure his staff stuck to of not providing any commentary but providing the documentation and leaving the parties searching the documents to make up their own minds. He said it did not sound like the sort of thing he would say. Asked if it was possible, he said he did not think so, given his approach and his extreme hesitancy to say anything. 61 I accept the evidence of Mr Little. He was an impressive witness who conceded the possibility but, in the end, said it was unlikely because of his rigorous approach to not giving advice. 62 Mr Wilson was invited to attend board meetings at which the penthouse extensions were to be discussed. He attended a meeting of the board on 27 March 2001 at which it was resolved to reject Mr Baker's proposed extension of the penthouse. 63 Mr Wilson became a director on 8 May 2001. He was consulted by the chairman as to the terms of a letter addressed to the solicitors for Meudon seeking advice as to whether the board had power to withhold approval of any plans at variance with the approval previously given and advice as to how the company should obtain reasonable benefit if it were to approve a proposal and issue shares in the company. 64 These were not the actions of a board or its chairman refusing to countenance that the Wilsons had a legitimate concern over the penthouse extensions, as was submitted on their behalf. 65 Mr Wilson attended a board meeting on 25 July 2001 at which the extended plans of Mr Baker were discussed. Mr Wilson was requested to obtain advice from real estate agents as to potential valuations of the penthouse according to the existing approvals and under the development proposed by Mr Baker. The board should then determine two appropriate levies as one-off contributions to a sinking fund depending on which approval was determined by the board. If the matter was to proceed, a specially convened meeting of shareholders was proposed. Mr Wilson was consulted on the terms of a letter forwarded to Mr Baker after the board meeting. 66 Mr Wilson obtained two short expressions of opinion from real estate agents. One put a value of $1.2 million on the smaller extension to the penthouse and $2 million on Mr Baker's proposal. The other put a range of $1.1 million to $1.2 million on the Blundell extensions and a range of $1.2 million to $1.4 million on the larger extension. It was on the basis of these figures the amounts of $100,000 and $300,000 respectively were put to Mr Baker 67 Mr Wilson was overseas and his alternate attended board meetings in September and November 2001. Mr Wilson said that while he was overseas Mr Weeks kept him informed of what was happening with the penthouse. On 8 November 2001, Mr Baker gave notice that he intended to commence work on the extended plans of Mr Blundell, approved by the board in April 1997. 68 Mr Baker and his architect attended a board meeting on 12 December 2001 where his new plans were considered. Mr Wilson was present at that meeting. Mr Weeks as chairman told Mr Baker that the penthouse had not been allocated shares to include the roof garden as a living space and that if he wanted to use it as a living space he would have to make a financial contribution to the company as agreed by Mr Blundell and recorded in the minutes of the annual general meeting of 1996. 69 The annual general meeting of Meudon was held on 18 December 2001. The chairman stated that as with Mr Blundell, approval of a development on the roof would need to be accompanied by a consideration payable to the company. 70 Mr Baker had his solicitors draw up a draft deed of indemnity and an agreement to take an additional 12,500 shares at par. Copies of these documents were forwarded to Mr Wilson. Mr Weeks kept him informed of developments and his discussions with Mr Baker including negotiations as to the consideration payable to Meudon. Mr Weeks had proposed $200,000 which Mr Baker regarded as ludicrous and offered $80,000 if the area of existing water tanks to the south of the penthouse and to the west of the stair and lift well was included. There was the suggestion that Mr Baker should be pushed for $120,000 but another director suggested the push should be to $100,000. Mr Wilson expressed his view that $80,000 or even $100,000 was ludicrously low. He questioned whether the board should contemplate any extra building. 71 A meeting of directors was held on 29 January 2002. Mr Weeks reported on the meeting with Mr Baker and the negotiations with respect to the deed of indemnity. Mr Wilson suggested that before anything further be done a valuation should be obtained. It was resolved, over the dissent of Mr Wilson, that negotiations continue over the extension to the penthouse and two directors were authorised to conduct those negotiations and should satisfactory terms be agreed, to accept them on behalf of the board. 72 Mr and Mrs Wilson were overseas in late February and early March 2002. Mr Wilson was provided with a copy of a deed of indemnity signed by Mr Baker in mid March 2002. The deed of indemnity required Mr Baker to take up an additional 12,500 shares at par. 73 Mr Wilson attended a board meeting on 26 March 2002 when Mr Weeks announced that an indemnity had been signed with John Baker who had also provided a bank guarantee. He said that work had commenced on the roof and noted that the development application expired in March 2002 and the building application in September 2002. He suggested that the two directors continue to negotiate with Mr Baker as to additional areas to be covered by the development and suggested a starting price of $150,000 and authorisation to accept $120,000. Mr Wilson disagreed and stated that a proper valuation should be obtained. The board resolved that following negotiations with Mr Baker, proposals for the renovation in relation to the latest plans be communicated to all shareholders. 74 At the meeting of the board of directors on 29 May 2002, the chairman announced that an agreement had been reached with Mr Baker and the deed had been forwarded to his solicitors for execution. The deed provided for payment by Mr Baker of $120,000 for Meudon's consent to additional works referred to in attached plans. 75 The Baker proposal included the water tank area together with an area to the east of the extended Blundell plan with the eastern extremity parallel thereto and the south eastern extremity a continuation of the south eastern extremity of the extended Blundell plan together with the area to the north of the original Blundell plan to the edge of the parapet. 76 Mr Wilson reiterated his view that a proper valuation should be obtained. Mr Wilson said that at least there was a moral obligation to go to the shareholders on such an important topic. It was agreed that upon receipt of the executed agreement, the board would call an informal meeting of shareholders. 77 Reena Van Aalst, an employee of Harvie, took the minutes of the meeting. She sent her draft to Mr Weeks. It recorded Mr Wilson's objection to the consideration of $120,000 on the basis of a lack of a proper valuation. Mr Weeks asked Ms Van Aalst to alter her draft of the objection to read: "Mr Wilson requested that his objection to the amount of the consideration for the additional areas sought by Mr Baker be noted in these Minutes". 78 Mr Wilson forwarded a copy of a facsimile to Mr Weeks to Ms Van Aalst. It stated that Mr Wilson wanted the minutes to reflect his objection to the consideration of the negotiated figure of $120,000 set by the board. He reiterated that a registered valuer should be employed to provide a valuation and report before anything was concluded regarding the penthouse. 79 Ms Van Aalst sent an email to Mr Weeks saying that since receiving Mr Wilson's facsimile she had spoken with him and had been asked to leave the notation that she had drafted in the minutes. 80 Mr Weeks responded to Mr Wilson stating that he had sought an amendment to the minutes because, in his view, they did not accurately reflect the discussion that had taken place and he had conferred with all other directors who agreed with his recollection. A copy of that communication was sent to Ms Van Aalst together with an email stating that the other directors unhesitatingly confirmed that Mr Wilson did not give the absence of a valuation as a reason for his objection to the consideration. 81 Mr Weeks was taken to task in cross examination for his observation to Ms Van Aalst that she had caused very real damage in not observing the standard conventions that applied in the matter of drafting and approving minutes: "The result is that what was a simple misunderstanding on your part may now be regarded by some as a calculated move to misinterpret what occurred." 82 In cross examination, Mr Weeks said that Mr Wilson had said there ought to be a proper valuation and he had said that he wanted his objection to the consideration mentioned but he had not tied the two things together. 83 It was submitted that Mr Weeks and his co-directors had attempted to create a record that falsified the true position. I reject that submission. Mr Weeks had one recollection of events and Mr Wilson another. Mr Weeks perused the draft minutes and requested a number of changes based on his recollection. It was up to the next meeting of the board of directors to approve or to amend the minutes. There is no justification for an inference that Mr Weeks and his co-directors were seeking to falsify the record. 84 It was Mr Weeks' practice to have Harvie employees present at the beginning of the meeting but then to have them leave while other matters were discussed. It was submitted that this practice was only consistent with an intention to eliminate independent witnesses who could verify Mr Wilson's account of the meeting. Mr Weeks' explanation was that they were asked to leave to save costs. It was submitted that that explanation was inherently implausible. I reject that submission. This was not a board of directors of a commercial enterprise. Formal matters might well be followed by less formal discussion. 85 On 12 June 2002, Mr Weeks sent a notice to all shareholders indicating that whilst Mr Blundell's plans remained the "bottom line," a series of negotiations had been conducted with Mr Baker to increase the overall size of the penthouse development to which the board had now reached agreement in principle. He invited the shareholders to attend an informal meeting on 19 June 2002. Mr Weeks forwarded a copy of a revised deed of agreement between the company and Mr Baker to Mr Wilson prior to that meeting. 86 On 14 June 2002, the Wilsons retained solicitors who wrote to the solicitors for Meudon stating they had advised their clients to commence proceedings against the company should it continue with the proposal to extend the penthouse. 87 Mr Wilson said that he and Mrs Wilson raised questions of Mr Weeks during the informal meeting on 19 June 2002 that went unanswered. Mr Wilson had said that the company's articles were not being followed. By this stage, the personal relationship between Mr Wilson and his co-directors had become strained. But that did not establish oppression. The Wilsons had threatened legal proceedings. The appropriate response to Mr Wilson's allegation that the company's articles had not been followed was to say, as Mr Weeks did, that there was nothing further they could do until they had spoken to their lawyers. 88 It was submitted that the conduct of the board in isolating Mr Wilson in his attempts to obtain proper, independent, expert advice spoke only of profound antipathy towards Mr and Mrs Wilson. It was submitted that it also evinced the board's reckless disregard for the interests of the members as a whole. This is an extreme view of the facts that I reject. It was Mr Wilson who obtained the expressions of opinion from two real estate agents that were remarkably close. To act upon them and to reject Mr Wilson's request for a formal valuation was a matter within the competence of the board. That Mr Wilson disagreed with this course, did not mean that the other board members had to agree with him. Their disagreement did not constitute oppressive behaviour. 89 On 9 July 2002, Mr Wilson attended a board meeting at which it was resolved to affix the common seal to the deed of indemnity. Mr Wilson left the meeting when the board was to consider their legal advice in response to his solicitor's correspondence. 90 Mr Weeks sent an email to Mr Baker on 12 July 2002 before he went overseas saying he would like to talk to Mr Baker: "As there are one or two tactics which I think would serve both parties well". Mr Weeks was cross examined on this issue. He said he could not remember what tactics he had in mind. He wanted to have the matter of the penthouse resolved. I do not regard Mr Weeks' conduct as oppressive. The board had approved a development on the roof. It was opposed by the Wilsons who had retained solicitors who argued that the board should not proceed with the development. The board was entitled to discuss the matter with Mr Baker and, indeed, to develop legitimate tactics to resist the Wilsons' claim. 91 The board obtained a full valuation in August 2002 from LandMark White Pty Ltd. It was submitted on behalf of the Wilsons, however, that the valuation was flawed because in briefing the valuer he was told that the figure of $120,000 had been arrived at by the board by extrapolating Mr Baker's purchase price. 92 The valuer arrived at a figure of $117,500. The valuation was criticised because it put a value of $10,000 per m2 on the water tank area which had no view and $1,915 per m2 on the areas of the roof that did have views. However, the valuer argued that the water tank area was common property whereas Mr Baker had the right of exclusive use of the roof garden area adjacent to the penthouse. While it was clearly preferable that the board not disclose the figure they were seeking to justify, they were entitled to act upon the expert's advice. 93 At the suggestion of other board members that Meudon's solicitors' advice was to be discussed, Mr Wilson did not attend a number of board meetings. He did attend the board meeting of 2 September 2002 where he was provided with a copy of the LandMark White valuation. 94 Notice of an extraordinary general meeting of Meudon to be held on 11 October 2002 was given. The meeting was to consider as a special resolution: "A That the approval by the directors on 29th April 1997 of extended plans for the Penthouse identified in the attached Plan and coloured BLUE be and it is hereby ratified by the Shareholders. B That the granting by the Directors on 1st May 2000 of an extension of time for the Penthouse works to be carried out, in line with a similar extension granted by the South Sydney Council, be and it is hereby ratified by the Shareholders. C That the directors be and they are hereby authorised to negotiate final details and execute under Seal an Agreement with Mr Baker, granting Mr Baker approval to extend the Penthouse development further as identified in the attached Plan and coloured GREEN, in consideration for which Mr Baker will pay the company the sum of $120,000, under the terms and conditions generally outlined in the attached schedule." 95 Attached was a schedule containing background information, a plan illustrating the penthouse development approvals, a schedule of terms and conditions to be included in the agreement with Mr Baker and the brief to and the valuation of LandMark White. 96 The material was criticised because, it was said, it wrongly presented the agreement with Mr Blundell as the issue of 12,500 shares of the power. It failed to disclose that Mr Baker had no existing right to develop the roof garden area. It did not include any reference to Mr Wilson's concerns about the lack of a proper valuation. It annexed what was said to be a wholly inadequate LandMark White report. No explanation was given as to why shareholders were being asked to ratify the earlier resolutions of the board. No information was put to shareholders which would allow them to determine for themselves the relative merits and demerits of the proposed resolution. 97 The fiduciary rule of directors not to mislead shareholders does not require a legalistic approach to be taken to information to be considered at a general meeting. The question is whether the notice was reasonable. As it was put by Young J in Devereaux Holdings Pty Ltd v Pelsart Resources N L (N0 2) (1985) 9 ACLR 956 at 958 one asks whether the information fully and fairly informs and instructs the shareholder about the matter upon which he or she will have to vote. 98 The LandMark White valuation considered the impact of the proposed works on the home units below and had concluded that there were no possible negative impacts. This was referred to in the explanatory schedule. In any event, Mr Wilson circulated shareholders on 10 October 2002 putting forward his views. The resolution was carried by the general meeting. 99 In February 2003, Mr Weeks forwarded a further plan for an extension of the penthouse to cover the entire area of the roof to its east. 100 A notice to shareholders of an informal general meeting prior to the annual general meeting to examine new proposed development of the roof was sent to the shareholders on 21 May 2003. The meeting took place on 4 June 2003. A notice of the annual general meeting, to take place on 25 June 2003, was sent on 27 May 2003. The notice included motion 3 as special resolutions as follows: "THAT the members of the company specially resolve: 1 That the area of the Penthouse (presently represented by 12,500 shares numbered 1-12,500) for the exclusive use and enjoyment of the shareholder of these shares be altered from that area referred to in the plan which is annexure "A" referred to in Article 6 to that area shown hatched on the replacement plan which is titled "Exhibit 1"and is attached to these Resolutions. 2 That the Company issue an additional 12,500 shares at $1.00 each to Mr Baker upon payment by Mr Baker to the company of $12,500.00 and the Company amend Article 6 of the Company's Articles of Association to include these additional shares. 3 That the Company consent to building works ("Works") proposed to be undertaken by Mr John Baker, the holder of shares 1-12,500 and the additional shares issued in accordance with resolution 2, to the Penthouse generally in accordance with that plan which is titled "Exhibit 2" and is attached to the Resolutions and subject to: (a) all appropriate consents and approvals being obtained from any relevant authority; (b) approval by the Board of plans and specifications in respect of the Works (including but without limitation, building, engineering and sound proofing plans and specifications); (c) compliance with the Company's Renovation Code; (d) Mr John Baker entering into an agreement with the Company ("Agreement") to be negotiated by the Board in respect of the Works incorporating the appropriate indemnities and protection for the Company in respect of the Works. 4 If Mr Baker wishes to undertake additional works over and above the "Works" ("Additional Works") then the Board is authorised to negotiate with Mr Baker, the conditions (including consideration of $120,000.00) of approving the Additional Works subject to the Articles of Association being amended to reflect the changes (if requested). 5 The Board be given authority, subject to keeping the members of the Company informed and complying with the terms of Resolutions 1, 2 and 3, to (a) review and give consent to the plans and specifications in respect of either the Works alone or the Works together with the Additional Works, (b) sign any consents required by an authority in respect with Works and the Additional Works, (c) negotiate and conclude the signing of the Agreement or an agreement which includes the Works and Additional Works, and (d) issue an additional 12,500 shares in the company to Mr John Baker as provided in 2 above." 101 On 19 June 2003 these proceedings were commenced and on 23 June 2003 an undertaking was given by Meudon that it would not, without giving 14 days' written notice to the Wilsons, proceed with or propose or otherwise deal with the above motion, issue any shares to Mr Baker or any associate, or take any fresh step by way of consent to, approval of, or agreement with, any building works proposed by Mr Baker in respect of the penthouse. 102 It was argued that there had been an expropriation of the rights of Mr and Mrs Wilson and that required that it not only be made for a proper purpose, but also that it should be fair in the circumstances (Gambotto v WCP Ltd (1994-1995) 182 CLR 432, Peter's American Delicacy Co Ltd v Heath (1938-1939) 61 CLR 457). 103 The short answer to this proposition is that no rights of the Wilsons were expropriated by Meudon's approval of the extended plans of Mr Blundell, nor by the proposed plans of Mr Baker. 104 The Corporations Act 2001 (Cth), s 232(e) empowered the court to make orders it considered appropriate if the conduct of a company's affairs, or an actual or proposed act or omission, or a resolution or a proposed resolution, was oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members. 105 The Wilsons' arguments in this regard were that the resolutions approving the original and extended Blundell proposals, the conferring of any additional rights on Mr Baker to build above the Wilsons' home unit and the imposition by the board of directors of the levy to pay the costs of these proceedings, fell within this category. 106 I have already indicated that, in my view, the Wilsons had no rights that were adversely affected by the approval of the Blundell plans or by an extension of the penthouse. It would be different if a structure were to be approved that did not constitute a living area and caused undue interference with the amenity of the Wilsons' home unit. 107 The statutory power to grant relief is couched in terms of unfairness in order to free the court from technical considerations of legal rights (O'Neill v Phillips [1999] 1 WLR 1092 at 1098). Thus in situations in which equitable principles would preclude a company from exercising its legal rights, a court may act. 108 There was, however, nothing in the nature of a legitimate expectation on the part of the Wilsons that would make it inappropriate for equity to allow Meudon to grant permission to extend the penthouse (Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at [324], [418] to [423]). 109 In my view, no equitable principle has been established that would justify the court's intervention on the basis that the Wilsons had been unfairly treated by the board's approval of the planned extensions of the penthouse. The Wilsons initially agreed to the extension of the penthouse. When they raised objections, Mr Wilson was invited to attend board meetings even though he was not a director. He was subsequently invited to join the board. Thereafter, he was consulted by the chairman on matters appertaining to the penthouse extensions. The objections of the Wilsons were considered by the board and it had the power to determine the matter under art 111. Nonetheless, at the Wilsons' urging, it put subsequent proposals to general meetings. 110 In a non-commercial company such as Meudon, the test of oppressive or unfairly prejudicial or discriminatory conduct is to be judged from the viewpoint of a reasonable person associated with a home unit company. In Reid House 5 ACLC at 457, Needham J said that the court would not interfere if the evidence showed that the board gave consideration to the proposal in question and rejected it on grounds that could not be said to be such as no reasonable person could adopt. It was not the function of the court to interfere in management decisions of the board of directors. 111 In my view, the Wilsons have failed to establish oppression or a lack of fairness on the part of Meudon in dealing with their objections to the penthouse extensions.

Interests of members as a whole 112 The Corporations Act 2001 (Cth), s 232(d) enabled the court to act if the conduct, act or omission, or resolution in question was contrary to the interests of the members as a whole. 113 The initial approval of Mr Blundell's plans required an allotment of shares, an additional levy, or some other appropriate financial adjustment in recognition of the increased residential area resulting from the building extension. In August 2001, the directors sought $100,000 from Mr Baker if he proceeded with the amended Blundell plans and $300,000 if he proceeded with his then suggested plans. 114 The board subsequently abandoned its demand for $100,000 and, instead, sought $1,500 for the allotment of additional shares at par. The agreement with Mr Blundell did not contemplate allotment at par. As one of the mechanisms for obtaining a suitable financial return for the extension of the penthouse, the issue of shares was mentioned but, clearly, that was to be at a price to give the suitable financial adjustment. 115 There was nothing to prevent the board putting to a general meeting a special resolution to allot Mr Baker 1,500 shares for $100,000. Mr Weeks said the deal was lost. But there appears to have been little negotiation on the board's part. Rather, it appears to have capitulated to Mr Baker's refusal to pay more than $12,500 for the shares. 116 The penthouse was in a state of disrepair. Internally, it had been semi-gutted and piles of masonry littered its floor. No doubt the board was keen to have the penthouse restored. But that does not mean that the directors should have capitulated when the board was aware that the valuable rights were involved. Mr Weeks was aware of the value of the right to develop the roof garden area. 117 A company, whether by a general meeting or by its board of directors must act bona fide for the benefit of the company as a whole (Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 at 671). The statutory requirement in the Corporations Act 2001 (Cth), s 232(d) is no different (New South Wales Rugby League Ltd v Wayde (1985) 1 NSWLR 86 at 96). 118 Notwithstanding the shortcomings of the board in negotiating with Mr Baker, it has not been established, in my view, that the board acted in bad faith in accepting the limited payment of $12,500 from Mr Baker. 119 In those circumstances, it is not the function of the court to review the decisions of the appropriate organs of a company and reverse those decisions if the court disagrees with them. As Brooking J put it in Zephyr Holdings Pty Ltd v Jack Chia (Aust) Ltd (1989) 14 ACLR 30 at 36 in considering the forerunner of the Corporations Act 2001 (Cth), s 232(d): "Where, as in the present case, bad faith is not established and where, as in the present case, the allegation is that the proposed course of action is detrimental to the members as a whole, the court must take care that it does not too readily intervene in the affairs of a company under s 320. Compare Thomas v H W Thomas Ltd (1984) 1 NZLR 686 at 697; Wayde v New South Wales Rugby League Ltd , 61 ALR 225 at 231. It is only stating the obvious to say that, under s 320, the court does not sit as an appellate tribunal to review the decisions of the organs of a company or of a class of its members on the footing that the court will, as it were, automatically reverse the decision if it disagrees with it." 120 In proposing an allotment of shares to Mr Baker for $12,500, Meudon was not proposing to give away any of its property. It retains title to the building including the roof. The proposed extension can only increase the value of what Meudon currently owns. It is in the interests of a home unit company to permit its members to maximise their use and enjoyment of their home units. To the extent to which members engage in extensive renovations that add value to their shareholding, they add value to the asset of the building owner. 121 Additional shares have not been issued to Mr Baker. Nor has he been granted final approval to extend the penthouse. Those were matters to be considered at a general meeting of Meudon before the undertakings were given in consequence of the commencement of these proceedings. 122 Mr Baker said in evidence that he now wished only to proceed with the approved plans of Mr Blundell. That would not, of course, prevent Mr Baker or any successor in title seeking further extensions of the penthouse. 123 In my judgment, the question of the appropriate consideration for any allotment of further shares to Mr Baker should be considered by a general meeting of Meudon. It is up to that meeting to determine whether the shares should be issued for $12,500 or some other amount. In my view, the court should not act under the Corporations Act 2001 (Cth), s 233.

Costs levy 124 With effect from about March 2004, the board of directors of Meudon resolved to make a special levy on all members, including the Wilsons, for the purpose of funding the company's conduct of these proceedings. 125 Article 21(n) of Meudon's constitution provided that the directors might, from time to time, make a levy on the holders of the groups of shares of an amount sufficient to provide for payment in respect of Meudon being any other expenditure properly incurred in the running or conduct of the building as a first class residential unit. 126 It was submitted that the provision was insufficient to entitle the directors to raise the levy. It was said that the running or conduct of the building did not envisage the costs of proceedings such as the present. 127 Article 21 of the constitution contains a list of specific losses and expenses that one might expect a first class residential building company to incur. Article 21(m) included management, secretarial and accountancy charges. In my view, art 21(n) was meant to encompass any other expenditure properly incurred in the running or conduct of the building. In my view, the directors of Meudon were entitled to raise a levy to cover the costs of these proceedings under art 21(n) of the constitution.

Contribution from the Wilsons 128 It was argued that the imposition of the levy on the Wilsons was oppressive or unfairly prejudicial because, at the risk of forfeiture of their shares, they required to partially fund the defence to their proceedings. 129 In my view, the Wilsons have made out a case of oppression or unfair prejudice with respect to the levy. The Wilsons ought not to have been asked to contribute to the cost of the defence to the proceedings brought by them. In my view, the directors ought to have realised that the Wilsons' conduct of the proceedings cast a burden for costs on them and the directors ought to have realised that their burden would be exacerbated by contribution to a fighting fund against them. 130 In my judgment, the directors should not have exercised their power to raise the levy against the Wilsons or they should have waived compliance by the Wilsons with the levy.

Relief 131 I will make an order the effect of which will be to exempt the Wilsons from the levy. The Corporations Act 2001 (Cth), s 233(1) is not exhaustive of the orders the court may make. I will hear the parties on the appropriate terms of such an order. 132 In all other respects, I will dismiss the Wilsons' amended originating process and relieve Meudon from the undertakings it gave to the court. 133 I will grant relief on Mr Baker's cross claim to the effect that he has exclusive use and enjoyment of the roof garden, Meudon is free to erect any structure on the roof that does not unreasonably interfere with any shareholder's exclusive use and enjoyment of a home unit in the building, that the board's power to erect such structures stems from art 111 of Meudon's constitution and that the board duly authorised Mr Blundell to carry out his extended plans.

134 I will hear the parties on costs. I direct the parties to bring in short minutes of orders reflecting these reasons.

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