Dr Leo Shanahan v Jatese Pty Ltd

1. [1]

   HIS HONOUR: Section 232 of the Corporations Act 2001 (Cth) (the Act) gives the Court power to make an order under s 233 if the conduct of a company’s affairs is contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.

2. [2]

   References to sections are references to the Act.

3. [3]

   Under s 233 the Court can make any order that it considers appropriate in relation to the company, including requiring a person to do a specific act.

4. [4]

   An application under s 233 in relation to a company may be made by a person who has ceased to be a member of the company if the application relates to the circumstances in which they ceased to be a member. [1]

5. [5]

   Dr Leo Shanahan and Dr Stuart Saunders, the first and fourth plaintiffs (the minority), are ophthalmologists. The second, third and fifth plaintiffs are associated with them.

6. [6]

   Dr Iain Dunlop, Dr Martin Duncan and Dr Gagan Khannah, the fourth, fifth and sixth defendants (the majority), are also ophthalmologists. They are cataract specialists. The first, second and third defendants are respectively associated with them.

7. [7]

   Where I refer to the minority or the majority, I include those plaintiffs or defendants respectively associated with them.

8. [8]

   The minority and the majority were, until 11 June 2015 when the majority bought out the minority, shareholders in, and members of, Canberra Eye Hospital Pty Ltd (CEH or the Company), which operated an ophthalmic medical facility.

9. [9]

   The minority complain that the conduct of CEH’s affairs was contrary to the interests of the members as a whole or oppressive to, unfairly prejudicial to, or unfairly discriminatory against them.

10. [10]

    They say that this conduct induced them to sell their shares in CEH to the majority for less than what they were worth.

11. [11]

    They move the Court for an order that the majority compensate them for the difference between what they their shares were worth and what the majority paid for them.

12. [12]

    This dispute arises out of a complex course of dealings over a number of years. The crux of it can, however, be briefly stated.

13. [13]

    The minority and the majority together owned a company which operated an eye hospital. The minority held 43% and the majority 57% of the shares. The most profitable activity for the hospital was cataract surgery. At some point, the minority stopped doing cataract surgery and then retired from practice altogether, so that they ceased to contribute to the revenue of the hospital.

14. [14]

    The majority continued on doing surgery, mostly cataract. The minority continued to hold their shares and consequently earn revenue (described as a passive income) from the exertions of the majority.

15. [15]

    The majority resented this situation. They wanted a succession plan, under which the minority’s shares would be transmitted to them or to other active surgeons who might come to work at the hospital.

16. [16]

    The minority opposed any such plan, taking the position that they were entitled to keep their shares and to earn the attendant revenue.

17. [17]

    The majority decided to do their surgery elsewhere. They established their own hospital. CEH was, as a result, put under financial strain.

18. [18]

    The majority procured the appointment, as supposedly independent directors, of Mr Phillip Chynoweth and Ms Susanne (Susi) Tegen. Mr Chynoweth was Dr Dunlop’s erstwhile brother-in-law. Dr Dunlop was in a sexual relationship with Ms Tegen. Dr Saunders was the third director.

19. [19]

    The only way forward for CEH to be profitable was to find new surgeons to work there. Dr Saunders identified Dr Kim Frumar as such a candidate. Remarkably, Dr Frumar (and Dr Saunders who was a keen supporter) encountered significant resistance over a period of nine months in trying to achieve Dr Frumar’s accreditation at the hospital.

20. [20]

    Dr Frumar finally achieved accreditation on 29 October 2014. He planned to start operating at the hospital on 31 January 2015 or 7 February 2015.

21. [21]

    On 27 January 2015, that is just before Dr Frumar was to start and at a time when CEH was clearly not insolvent, Mr Chynoweth and Ms Tegen used their power as directors to pass a resolution placing CEH into voluntary administration.

22. [22]

    Dr Frumar passed away unexpectedly and apparently tragically on 10 April 2016.

23. [23]

    The minority complain that the conduct of CEH’s affairs was contrary to the interests of the members as a whole or oppressive to them because:

24. [24]

    For the reasons which I follow, I find that:

25. [25]

    The trial occupied eleven hearing days.

26. [26]

    Mr I. Jackman SC and Mr S. Goodman SC appeared for the minority. Mr M. Ashhurst SC together with Mr D. Villa of counsel appeared for the majority.

27. [27]

    The Court Book of evidentiary material comprises 19 volumes containing over 5,000 documents. The Court was taken to a significant amount of evidentiary material. The affidavits approach 700 pages.

28. [28]

    There was significant cross-examination, especially of the majority, Ms Tegen and Mr Chynoweth.

29. [29]

    The Court received written and oral submissions.

30. [30]

    I have had regard to all the arguments, but have not re-stated them.

31. [31]

    The case is fact heavy.

32. [32]

    I have of course had regard to all of the evidence. I observed the witnesses under cross-examination. I have recounted only those facts which I consider necessary to facilitate an understanding of why I have made the findings I have made.

33. [33]

    I have ordered the facts into two chronologies. The first chronology deals with the general history of the matter, excluding the detailed history of the accreditation of Dr Frumar and other doctors. The accreditation history is more readily understood in a discreet chronology, rather than interspersed with the general history. The general history is of course the context in which the Dr Frumar issue played out. I have included in the general history a few important events relevant to the Dr Frumar issue to assist in relating the two.

THE EARLY TIMES

1. [34]

   In about 1974, Dr Shanahan and Dr Saunders started practising in association with one another in Canberra, Australian Capital Territory. In about 1985, they established a day surgery. From about 1988, they worked from a house at 13 Theodore Street, Curtin, which Dr Shanahan owned. They had consulting practices and performed ocular surgery.

2. [35]

   In about 1990, Dr Dunlop started assisting them in their consulting practices and later with surgery. In about 1992, Dr Dunlop was invited to join them. Dr Saunders and Dr Dunlop each bought a one third interest in the Theodore Street house from Dr Shanahan.

3. [36]

   In 1996, the day surgery was accredited by the Australian Council on Healthcare Standards. By all accounts, Dr Dunlop’s efforts in achieving this were significant.

4. [37]

   In 1999, it was decided that the day surgery should be incorporated and named Canberra Eye Hospital. The establishment of a separate corporate entity facilitated contracts with private health funds.

5. [38]

   To this end, the Company was formed in May 1999. Each doctor became a director and was issued one share.

6. [39]

   In about 2001, Dr Shanahan stopped performing surgery. He continued to consult until about 2005.

7. [40]

   In December 2001, Dr Saunders stopped performing surgery. He continued to consult until December 2015, when he too retired from practice.

8. [41]

   In about 2002, with the assistance of builders and a real estate agent, Drs Shanahan, Saunders and Dunlop started developing a block of land at 14 Wormald Street, North Symonston, Canberra, as an eye surgery hospital and consulting rooms.

9. [42]

   At about this time, Dr Duncan and Dr Khannah started working at the existing day surgery. They were studying for their higher medical degrees. They assisted Drs Shanahan, Saunders and Dunlop with surgical operations.

10. [43]

    On 30 October 2002, Dr Khannah bought 19% of CEH. On 1 July 2003, Dr Duncan bought 19% of CEH. Each paid $285,000.

11. [44]

    In 2003, a shelf company, Canberra Eye Hospital Management (CEHM), was acquired to be CEH’s management company.

12. [45]

    In May 2003, Dr Shanahan’s son Michael Shanahan (who rendered accountancy services for the benefit of CEH) and Dr Khannah were appointed directors of CEH.

13. [46]

    In October 2003, the building of the hospital at the North Symonston premises began.

14. [47]

    On 1 July 2004, the shareholding structure of CEH was altered so as to consist of an issued share capital of 300 shares, held as follows:

15. [48]

    Shares were apparently issued to Michael Shanahan in recognition of the accounting services he provided without being remunerated.

16. [49]

    In mid-2005, CEH moved from the Theodore Street premises and started functioning as ‘Canberra Eye Hospital’ (the hospital) at the North Symonston premises. The hospital consisted of a day surgery, consulting rooms and a laser centre. The laser centre was formally owned by another entity, CEH Laser.

17. [50]

    On 18 July 2005, CEH (as tenant) took a lease [2] of the hospital (a strata scheme). There was a variation of lease in November 2007. CEH had options to extend the lease, which, if exercised, would have had its tenancy ending not earlier than 2027. About 60% of the leased area of the hospital was taken up by consulting rooms, 30% by the day surgery and 10% by the laser centre. There was also a small one bedroom caretaker’s flat, which was occasionally occupied by Dr Saunders when he needed to stay overnight in Canberra.

18. [51]

    The hospital was officially opened by the Chief Minister of the ACT on 19 August 2005. By this time, Drs Shanahan and Saunders had practiced in Canberra for about 30 years. Dr Shanahan had ceased consulting and Dr Saunders was not consulting every day of the week.

19. [52]

    CEH derived its income from charging patients for services associated with the preparation of patients for surgery, from provision of an operating theatre and nursing and support staff during the surgery, and from providing after surgery care and medications.

20. [53]

    Surgery performed at the hospital fell broadly into three categories:

21. [54]

    In addition to the shareholder doctors, other ophthalmologists used the consulting space and the hospital. Over time, these included Dr Rohan Essex, Dr Phil Larkin, Dr Salim Okera, Dr Christiane Lawin-Bruessel and Dr Andrew Chang.

22. [55]

    CEHM provided rooms, office staff, orthoptists, a practice manager, furniture and some equipment to doctors who consulted and performed surgery at the hospital. CEHM and CEH shared certain costs including internet services, electricity and cleaning.

23. [56]

    CEHM paid rent monthly in arrears to CEH for the use of the consulting rooms under an undocumented arrangement.

THE TROUBLE BEGINS

1. [57]

   When the hospital opened, Dr Shanahan was no longer practising and Dr Saunders was no longer doing surgery and had reduced his consulting times significantly. Although the minority were contributing little to the income of the hospital, their entitlement as shareholders to share in the profits remained unchanged.

2. [58]

   This was a source of discontent for the majority. It is something which has rankled them throughout and has driven their dealings with the minority.

3. [59]

   In September 2006, Drs Dunlop, Duncan and Khannah broached with Dr Saunders and Michael Shanahan the subject of an exit strategy for CEH. They suggested that if shareholders in the hospital did not continue to refer patients to the hospital, their shares should be bought back by CEH or sold to existing or future shareholders in CEH.

4. [60]

   An exit strategy set out in two reports by CEH’s accountant was circulated in late 2006. It did not find favour with Drs Shanahan and Saunders. They took the position that the shareholders were the owners of the business and were entitled to receive a dividend for so long as it was carried on.

5. [61]

   An exit strategy was again proposed by Dr Dunlop in early 2007. It too did not find favour with Drs Shanahan and Saunders.

6. [62]

   Dr Dunlop recounted a conversation with Dr Shanahan, in which Dr Shanahan said he was not obliged to sell his shares, to which Dr Dunlop protested that this would mean that the active shareholders would fund Dr Shanahan indefinitely and when he died would continue to fund his heirs. Dr Shanahan did not demur to the proposition.

THE 2009 PROCEEDINGS

1. [63]

   Drs Dunlop, Duncan and Khannah then purported, by notice, to convene an Extraordinary General Meeting of CEH to be held on 21 February 2008 for the purposes of passing a resolution for a quarterly performance fee be paid to ‘Executive Directors’, who were described in the notice as registered practising specialist ophthalmologists who either performed at least 15 surgical procedures in a financial year or referred at least 30 surgical cases to another Executive Director to be performed at the hospital. Self-evidently, this was intended to benefit the majority.

2. [64]

   The minority engaged lawyers who demanded that the notice be withdrawn. The meeting did not go ahead.

3. [65]

   On 7 August 2008, Dr Dunlop convened an Extraordinary General Meeting for 4 September 2008 to pass resolutions that:

4. [66]

   The meeting was held and the resolutions were passed.

5. [67]

   The directors of CEH were then Drs Saunders, Dunlop, Duncan and Khannah.

6. [68]

   Dr Saunders says that at the meeting Dr Dunlop said:

7. [69]

   On 21 October 2009, the directors of CEH (Dr Saunders abstaining) purported to pass a resolution that directors be paid a quarterly performance fee derived from 50% of the gross income billed by CEH from the surgical activity of the directors, to be divided equally between the directors. This resolution (which was also clearly intended to favour the majority) was apparently not implemented.

8. [70]

   On 19 November 2009, Dr Dunlop purported to convene an Extraordinary General Meeting to pass as ordinary resolutions the following resolutions:

9. [71]

   These resolutions were clearly intended to favour the majority.

10. [72]

    On 10 December 2009, the minority brought proceedings against the majority in the Federal Court of Australia. Amongst others, they sought a declaration that the proposed resolutions required special resolutions and claimed that the resolutions were oppressive to, unfairly prejudicial to, or unfairly discriminatory against them within the meaning of s 232.

11. [73]

    On 15 December 2009, at an Extraordinary General Meeting of CEH the proposed resolutions were purportedly passed as ordinary resolutions.

12. [74]

    Dr Saunders says that sometime in 2010 he discovered that Drs Dunlop and Khannah had sold a refractive laser machine owned by CEH Laser to a new company formed by them and had commenced billing patients through the new entity using the Laser Centre name.

13. [75]

    On 28 September 2010, Dr Dunlop resigned as a director and secretary of CEH.

THE DEED OF SETTLEMENT AND RELEASE, AND SHAREHOLDERS’ AGREEMENT

1. [76]

   On 25 October 2010, after a mediation, the Federal Court proceedings were settled by the parties entering into a Deed of Settlement and Release, and a Shareholders’ Agreement.

2. [77]

   Drs Dunlop and Khannah agreed to pay $90,000.00 to Drs Shanahan and Saunders, in instalments as a settlement in connection with the laser machine.

3. [78]

   The Shareholders’ Agreement contains the following relevant provisions:

ESTABLISHMENT OF CANBERRA MICRO-SURGERY

1. [79]

   The Federal Court litigation had concluded. But the underlying grievance of the majority that profits of the hospital continued to be distributed to the minority remained.

2. [80]

   Dr Dunlop’s view (which was apparently shared by Drs Duncan and Khannah) was that the dispute was intractable and the only way forward was to establish a new hospital where the profits generated by carrying out ophthalmic surgery would be shared amongst those shareholding doctors who generated the work.

3. [81]

   The majority agreed amongst themselves to establish a new hospital. They established Canberra Micro-Surgery Pty Ltd (CMS), of which they became shareholders and directors.

4. [82]

   In early November 2010 Drs Duncan and Khannah resigned as directors of CEH. On 16 February 2011, Michael Shanahan was appointed a director of CEH.

5. [83]

   By the end of 2012, it was anticipated that CMS would be ready to start in July 2013. Dr Dunlop approached CEH’s hospital manager and undoubtedly a valued employee, Ms Gabby Moreland, to come over to CMS.

6. [84]

   On 14 November 2012, the majority made a written offer of employment to Ms Moreland. She accepted with a start date of 4 February 2013. On 25 November 2012 she resigned from CEH with effect from 21 December 2012.

7. [85]

   An issue arising out of Ms Moreland’s moving to CMS arose with respect to her continued access to emails directed to CEH. There was correspondence between lawyers.

8. [86]

   At or about this time, Kate Symon, an accountant working for CEH, also resigned. She too joined CMS.

9. [87]

   On 6 February 2013, the majority gave written notice to CEH that from 1 July 2013 they intended performing the majority of their cataract surgery at CMS and that they expected that their other surgery and intravitreal injections would be performed for the foreseeable future at both CEH and CMS. Cataract surgery was the most profitable for the hospital.

10. [88]

    From about this time, Dr Saunders started trying to find new doctors to perform cataract surgery at the hospital. He spoke to Drs David Tridgell, David Dickson and Kate Reid but they declined. He also spoke to Dr Maciek Kuzniarz who was working at the Calvary Clinic in the ACT. Ultimately, Dr Kuzniarz did operations at CMS. Dr Saunders spoke to Dr Kerrie Meades, but this went no further. He had conversations with Drs Okera, Lawin-Bruessel, Larkin and Essex, all of whom ultimately moved to CMS or Calvary hospital.

11. [89]

    On 16 May 2013, Denise Nichols, CEH’s Director of Nursing, resigned. She too went over to CMS.

12. [90]

    On 3 June 2013, CEH appointed Ms Fiona Carruthers as hospital manager.

THE APPOINTMENT OF TEGEN AND CHYNOWETH AS DIRECTORS

1. [91]

   Dr Dunlop says that towards the end of June 2013, he formed the view that the then current directors of CEH were unable to bring an independent mind to the best interests of CEH and that the shareholders were conflicted by their own self-interest and were incapable of putting the past history of disputes between shareholders behind them. He believed that the long-term interests of CEH and its shareholders meant it was necessary to appoint independent directors to the CEH board.

2. [92]

   He therefore proposed the appointment of Ms Tegen and Mr Chynoweth to the CEH board.

3. [93]

   Ms Tegen and Mr Chynoweth were, however, anything but independent. I do not accept Dr Dunlop’s evidence that he thought they were. He is far too intelligent a man to have thought so. To the contrary, in my view, his true motivation for selecting them was that he anticipated they would favour the interests of the majority over the minority. I also do not believe that he was motivated by CEH’s long term interests.

4. [94]

   Dr Dunlop had been the President of the Royal Australian and New Zealand College of Ophthalmologists. In that capacity, he had interviewed Ms Tegen for the position of CEO of that organisation, a position to which she was appointed. In his lengthy principal affidavit, [4] Dr Dunlop explained why he thought Ms Tegen was appropriate to be appointed a director of CEH. His affidavit, however, did not disclose that they were then in a sexual relationship. In his evidence, Dr Dunlop described their relationship as ‘romantic.’ Ms Tegen described it as a ‘nice distraction.’ She ‘slept with him a few times’, she found him ‘interesting and nice’ but would only see him ‘now and then’ and she was not interested in any long-term relationship. Either way, these are not the hallmarks of independence. Ms Tegen gave unconvincing evidence that she never discussed CEH business affairs with Dr Dunlop.

5. [95]

   Dr Dunlop and Mr Chynoweth had known each other since the early 1980s. They would see each other socially and occasionally played golf together. Mr Chynoweth’s wife was the sister of Dr Dunlop’s ex-wife.

6. [96]

   Dr Dunlop says that he explained to Ms Tegen, amongst others, that she would not be remunerated and that he gave a similar explanation to Mr Chynoweth.

7. [97]

   It should be observed that there was no legal requirement for them to be independent. They could never properly be said to have been independent because they had associations with Dr Dunlop. I take Dr Dunlop, in his use of the term ‘independent’, to have meant impartial.

8. [98]

   Their duty was to act in the interests, and for the benefit, of CEH. What they did, however, was to take sides with the majority against the minority rather than act in the interests of CEH.

9. [99]

   As appears below, Mr Chynoweth ultimately asked the majority for money and was, without the minority ever being told, paid a not insignificant sum by the majority. This is a hallmark of partiality.

10. [100]

    On 28 June 2013, Dr Dunlop convened an Extraordinary General Meeting of CEH to be held on 24 July 2013 at the offices of Snedden Hall & Gallop, the solicitors who have, in these proceedings, acted for the majority. The Notice of Meeting identified the following as proposed resolutions:

11. [101]

    The financial statements for CEH as at 30 June 2013 [5] show that for the year the hospital earned income of $5,489,418 and incurred expenses of $3,743,603 resulting in an operating profit of $1,745,815. It had retained profits at the end of that year of $1,650,145 and net assets of $1,650,742.

12. [102]

    Between 5 July and 24 July 2013, the majority and the minority corresponded through their respective lawyers about the validity of the proposed resolution removing Dr Saunders.

13. [103]

    The meeting took place as scheduled. On the votes of the majority, resolutions were passed removing Dr Saunders and Michael Shanahan as directors of CEH and appointing Ms Tegen and Mr Chynoweth.

14. [104]

    Under clause 4.1 of the Shareholders’ Agreement, the minority (as Founders) had the right to appoint a director.

15. [105]

    On 25 July 2013, the minority, through their solicitors, gave notice that Dr Saunders was appointed as a director and that he appointed Michael Shanahan as his alternative. It is difficult to discern a rational or legitimate reason for the removal of Dr Saunders.

TEGEN AND CHYNOWETH TAKE CHARGE

1. [106]

   From the outset, Ms Tegen and Mr Chynoweth deliberately excluded Dr Saunders and his alternate from participation as a director in the affairs of CEH. They purported to act as the Board of CEH, without his participation or that of his alternate. Where I refer to Dr Saunders not being included (or being excluded) this includes Michael Shanahan as his alternate unless otherwise stated.

2. [107]

   An early example of this is that on 8 August 2013 they directed a letter to the solicitor then acting for CEH, Mr Werksman of Holding Redlich, purportedly on behalf of the Board of CEH, in the following terms:

3. [108]

   Dr Saunders was away at the time. On his return, he wrote to Ms Tegen complaining that he had not been informed of any resolution to send the letter and had not been consulted about it. He added that he was looking forward to working with her in the interests of all the shareholders.

4. [109]

   The letter purports to be under the hand of the board of directors, but Michael Shanahan was not shown a copy of it before it was sent. He says if it had been shown to him, he would have disagreed with the statement that the issues were unfounded or of no relevance to the future of CEH.

5. [110]

   Other examples of exclusion are described later.

6. [111]

   The approach to Ms Moreland reflects the partiality of Ms Tegen and Mr Chynoweth to the interests of the majority. There is no evidence that Ms Tegen or Mr Chynoweth sought to obtain from Mr Werksman the results of his investigations concerning Ms Moreland.

7. [112]

   On 13 December 2013, Mr Werksman wrote to the majority copied to Ms Tegen and Mr Chynoweth, amongst others, that the minority had email correspondence in which it was clear that during Ms Moreland’s employment with CMS she diverted potential employees of CEH to the service of CMS.

8. [113]

   In my view, Ms Tegen and Mr Chynoweth’s desire was to exonerate Ms Moreland, irrespective of the merits of the complaint, for the benefit and convenience of the majority as the owners of CMS. Ms Moreland was clearly a valued employee first of CEH and then of CMS.

9. [114]

   In August 2013, Drs Dunlop, Duncan and Khannah ceased cataract surgery at CEH. At the same time Drs Okera, Lawin-Bruessel, Larkin and Essex also stopped surgery at the hospital and started doing it at CMS or Calvary Clinic.

10. [115]

    In early September, Ms Tegen and Mr Chynoweth, without the participation of Dr Saunders (and clearly without his knowledge), retained a solicitor, Mr Della Marta of Aitken Lawyers, to advise them and CEH on various matters. This included advising CEH in relation to obligations owed by directors and in relation to legal and commercial aspects as they arose.

11. [116]

    Mr Della Marta provided a six-page advice addressed to them as directors of CEH on 9 September 2013. There is no suggestion that Dr Saunders was ever made privy to it or given the benefit of it.

12. [117]

    An informal meeting of shareholders was planned for 10 September 2013, but had to be cancelled because of fog in Canberra. Nevertheless, Ms Tegen and Mr Chynoweth had an impromptu meeting with Dr Duncan during which, amongst others, they gave him an overview of what had been going on over the past few months. Dr Saunders was never favoured with any such overview.

13. [118]

    CMS officially opened on 20 September 2013.

14. [119]

    On 24 September 2013, after speaking with Dr Saunders, Mr Chynoweth wrote to Ms Tegen including the following:

15. [120]

    She responded, on the same day, including the following:

16. [121]

    On 15 October 2013, Ms Tegen and Mr Chynoweth had a telephone conference with Mr Della Marta during which they discussed the financial position of CEH and possible options to be set out in a briefing document for shareholders. Dr Saunders was not included.

17. [122]

    On 17 October 2013, Mr Della Marta had a telephone conversation with an insolvency specialist, Mr Jamieson Louttit. They discussed aspects of a members’ voluntary liquidation and voluntary administration. In this context, Mr Della Marta obtained from Mr Chynoweth or Ms Tegen a copy of CEH’s lease of the hospital.

18. [123]

    Mr Della Marta rendered his account to CEH for the attention of Ms Tegen and Mr Chynoweth. Dr Saunders was not included in these dealings.

19. [124]

    A shareholders’ meeting was scheduled for 13 November 2013.

20. [125]

    On 2 November 2013, Mr Chynoweth wrote to Ms Tegen (but not to Dr Saunders) providing ‘an outline for our report for the shareholders (sic) meeting’. The headings included Financial Position and Outlook, Hospital Accreditation, Governance and Human Resources. Under Governance, the following item appeared:

21. [126]

    On 7 November 2013, Dr Saunders wrote to the majority, Ms Tegen and Mr Chynoweth setting out matters which the minority wished to discuss at the meeting with a view to obtaining agreement between all the shareholders as to the future direction of CEH. The subjects were entirely appropriate for a shareholder and director to raise and the tenor of the letter was unobjectionable. The subjects included what Dr Saunders considered might be done to ensure that the business carried on in a profitable manner to the benefit of all shareholders. He remarked that the new directors did not appear to have made any serious attempt to identify new surgeons who would be willing to conduct their practices at CEH. He asked whether the majority were prepared to return to operating at CEH.

22. [127]

    Ms Tegen’s reaction was swift. It is difficult to justify as befitting a director in her position. She wrote to Mr Della Marta that she could no longer work with Dr Saunders on the board and that there was a clear breach in governance. It emerged during her evidence that she took offence that Dr Saunders appeared to have written the letter with legal help. This was despite the fact that she and Mr Chynoweth were throughout taking advice from a lawyer without Dr Saunders’ knowledge.

23. [128]

    There was a board meeting on 13 November 2013. Before this meeting, Ms Tegen and Mr Chynoweth obtained written advice on a series of issues from Mr Della Marta. No doubt on their instructions, he produced an Executive Summary for the shareholders’ meeting. The advice runs to nine pages, the Executive Summary to ten pages. The Executive Summary deals in some detail with the financial position of CEH, fundamental issues facing it, and possible ways forward. It also deals with governance issues and a revised strategic direction for the hospital. These instruments were brought into existence without the participation or knowledge of Dr Saunders. They were presented to him at the directors’ meeting. The benefit of his input was not obtained. Dr Saunders says that Mr Chynoweth read quickly through the points contained in the Executive Summary and he did not have an opportunity to read the documents during the directors’ meeting.

24. [129]

    The shareholders’ meeting took place immediately after the directors’ meeting. There was a professional note-taker apparently arranged by Ms Tegen and Mr Chynoweth. The notes taken were sub-standard.

25. [130]

    As at 22 November 2013, CEH’s Medical Advisory Credential Committee (MAC) consisted of Dr Dunlop, Dr Duncan, Ms Carruthers and Dr Thomas Lo (Dr Lo became ill and was unavailable for the credentialing committee meeting on 4 September 2014 referred to later. He subsequently passed away).

26. [131]

    On about 29 November 2013, Dr Benjamin Burt, an ophthalmologist based in Bendigo, Victoria, specialising in ocular plastic surgery, applied to CEH for accreditation. Dr Burt did have experience in cataract surgery but proposed to practice predominately in extraocular surgery at CEH. Dr Burt was identified by Dr Saunders.

27. [132]

    On 3 December 2013, Mr Chynoweth wrote to Ms Tegen (but not to Dr Saunders):

28. [133]

    On 3 December 2013, Mr Chynoweth wrote to Ms Tegen (but not to Dr Saunders):

29. [134]

    On 9 December 2013, Ms Tegen wrote to Mr Chynoweth (but not to Dr Saunders) relevantly:

30. [135]

    On 10 December 2013, Dr Dunlop circulated comments on draft minutes for the 13 November 2013 meeting amongst the majority.

31. [136]

    On 11 December 2013, Ms Tegen wrote to the majority and Mr Chynoweth (but not the minority):

32. [137]

    On 14 December 2013, Mr Chynoweth wrote to Dr Dunlop, copied to Ms Tegen (but not to the minority):

33. [138]

    In late 2013, Mr Chynoweth asked the majority to compensate him for his time and effort as a director of CEH. He approached Dr Dunlop who talked to Drs Duncan and Khannah. Drs Dunlop, Duncan and Khannah agreed to pay Mr Chynoweth and bear that burden equally. Details of the payments are set out below.

34. [139]

    None of this was disclosed to the minority. Mr Chynoweth and the majority did not disclose it in their affidavit evidence.

35. [140]

    More than this, cl 4.2 of the Shareholders’ Agreement is an agreement between the minority and the majority that directors of CEH were to receive no remuneration for acting in that capacity.

36. [141]

    The payments were made through Canberra Eye Laser Eye Services Pty Ltd, which is owned by the majority, to Mr Chynoweth’s company Kizmet Consulting Group Pty Ltd (Kizmet). The evidentiary material concerning these payments is incomplete. Revealingly, it includes tax invoices rendered by Kizmet for consulting services ‘for Canberra Micro-Surgery.’

37. [142]

    At least $84,000 was paid by the majority for Kizmet as follows:

38. [143]

    These circumstances, on their own, warrant a finding of oppressive conduct. Mr Chynoweth used his position as a director of CEH to ask for and obtain, secretly, money from one faction contrary to the Shareholders’ Agreement governing the relationship between the two factions. It was symptomatic of his conscious alignment with the majority and his lack of integrity when it came to dealing fairly with the minority. The making of the payments by the majority displaces any suggestion on their part that they believed that Mr Chynoweth was independent or that he would act in any way other than to benefit their interests.

39. [144]

    On 1 February 2014, Dr Frumar submitted his accreditation application to CEH for appointment as a Visiting Medical Officer (VMO).

40. [145]

    The MAC (Dr Duncan, Dr Lo and Ms Carruthers – there were apologies from Dr Dunlop) met on 5 February 2014. They accepted Dr Burt’s credentials, but requested additional information and clarification from Dr Frumar.

41. [146]

    Dr Burt’s appointment was confirmed in writing on 6 February 2014.

42. [147]

    On or about 21 February 2014, Dr Angelo Tsirbas applied to CEH for accreditation as a VMO. Dr Tsirbas is not a cataract surgeon. His predominant interest is ocular plastic surgery.

43. [148]

    The financial statements of CEH for the year ended 30 June 2014 disclose that its total income was $1,167,802 [12] and its total expenses $1,356,625 [13] resulting in an operating loss of $188,823. [14] Its retained profits at the end of the financial year were $978,974. [15]

44. [149]

    On 18 August 2014, the majority gave notice to CEH of their intention to re-locate their intravitreal injection procedures to CMS with effect from 20 October 2014.

45. [150]

    On 25 August 2014, without the knowledge of Dr Saunders, Mr Chynoweth and Mr Della Marta met with Mr Louttit. Mr Louttit’s file note shows that, amongst others, voluntary administration was discussed.

46. [151]

    On 26 August 2014, Ms Tegen and Mr Chynoweth had a telephone conference with Mr Della Marta and Mr Louttit. Dr Saunders was not included.

47. [152]

    On the same day, Mr Louttit sent Mr Della Marta a letter addressed to Ms Tegan, Mr Chynoweth and Dr Saunders enclosing documents for the appointment of an administrator. The evidence suggests that this was on-sent by Mr Della Marta to Ms Tegen and Mr Chynoweth but not to Dr Saunders.

48. [153]

    On 29 August 2014, Mr Della Marta spoke to Mr Louttit on the phone. Mr Della Marta’s fee note records that Mr Louttit advised that ‘[there] probably should not be appointment of administrator just yet, perhaps orderly winding up of the business.’

49. [154]

    A meeting between Ms Tegen, Mr Chynoweth and the majority was arranged for 2 September 2014. The minority were not invited.

50. [155]

    On that day, Ms Tegen wrote at length to the majority and Mr Chynoweth (but not the minority) about the options which they ‘as Directors’ (apparently to the exclusion of Dr Saunders) believed they had for the majority to consider. The letter included the following:

51. [156]

    On 3 September 2014, Dr Duncan wrote to Ms Tegen, Mr Chynoweth and the majority:

52. [157]

    There is no evidence that Ms Tegen and Mr Chynoweth gave the benefit of their counsel to the minority, as they apparently did to the majority, as recorded by Dr Duncan.

53. [158]

    There was a directors’ meeting on 3 September 2014 attended by Ms Tegen, Mr Chynoweth and Michael Shanahan. Ms Carruthers was also in attendance. At the meeting, Ms Tegen and Mr Chynoweth presented to Michael Shanahan a document entitled ‘Following are points outlining the situation and options we have available to us as directors.’ The document, it seems, was an extract of the document which Ms Tegen had sent to the majority (but not the minority) on 2 September 2014. Michael Shanahan was not shown the document before the meeting and did not have the opportunity to read it until after the meeting.

54. [159]

    According to Michael Shanahan’s notes, a significant part of the meeting was devoted to the issue of credentialing and Dr Frumar. The minutes of the meeting do not reflect this.

55. [160]

    Michael Shanahan’s notes, but not the minutes, record that Mr Chynoweth said that if an administrator was appointed the Shareholders’ Agreement was not applicable.

56. [161]

    It will be observed that both in Ms Tegen’s 2 September 2014 letter and Dr Duncan’s 3 September 2014 letter, there is reference to the transfer of the Head Lease from CEH to CEHM. This is clearly a matter which was the subject of discussion between Ms Tegen, Mr Chynoweth and the majority before the 3 September 2014 directors’ meeting.

57. [162]

    After the meeting, Michael Shanahan was presented with minutes which falsely record that there had been a decision to move the Head Lease from CEH to CEHM. According to Michael Shanahan (whose evidence I believe), there was no discussion of this subject at the meeting. He wrote saying this and objecting to any assignment of the Head Lease. [16] It is clear that there was no agreement to it from the minority side. This was understood by Ms Carruthers, who was at the meeting. On 4 September 2014, she wrote to Ms Tegen and Mr Chynoweth:

58. [163]

    On 4 September 2014, Ms Tegen wrote to the majority (but not the minority):

59. [164]

    On 5 September 2014, Mr Chynoweth responded to Ms Carruthers’ 4 September 2014 email:

60. [165]

    There was no agreement between the directors of CEH. The reference to the ‘other side’ is apparently to the minority. It is one more reflection of Mr Chynoweth’s partiality.

61. [166]

    On 5 September 2014, Ms Tegen wrote to Mr Chynoweth and Ms Carruthers (but not the minority) relevantly:

62. [167]

    On 5 September 2014, Dr Tsirbas received his accreditation for CEH.

63. [168]

    On 12 September 2014, Mr Chynoweth wrote to Dr Saunders and Michael Shanahan (Ms Tegen and Ms Carruthers were also copied into the email):

64. [169]

    On 16 September 2014, Michael Shanahan responded re-iterating that there had been no resolution passed to move the Head Lease and pointing out that under the Shareholders’ Agreement CEH could not dispose of a substantial part of its assets without a supermajority resolution and that the Head Lease was the major asset of CEH.

65. [170]

    On 18 September 2014, Holding Redlich, on behalf of the minority, wrote to Ms Tegen and Chynoweth objecting to any transfer of the Head Lease. They drew attention to the provisions of the Shareholders’ Agreement and asserted that the conduct of Ms Tegan and Mr Chynoweth appeared to be deliberately designed to prefer the interests of the majority by attempting to transfer the major asset of CEH to a company controlled by the majority. An application for an injunction was foreshadowed.

66. [171]

    That day, Mr Chynoweth met with Mr Della Marta. Ms Tegen wrote to each of them, relevantly:

67. [172]

    There was an exchange of correspondence on the subject between Mr Della Marta, who asserted that he was acting for CEH and two of its directors Ms Tegen and Mr Chynoweth, and Holding Redlich. Ultimately, the transfer did not take place.

68. [173]

    In my view, the proposed transfer of the lease was intended to benefit the majority by protecting their tenure of the consulting room space against voluntary administration.

69. [174]

    On 26 September 2014, Mr Chynoweth wrote to Ms Tegen (but not to Dr Saunders):

70. [175]

    One, but not the only, noteworthy feature of this letter revealing Mr Chynoweth’s lack of independence and predilection to support the majority (but not the minority) is the suggestion of a need to agree with the majority (but not the minority) a ‘significant and make their eyes water’ fee to ‘complete the plan.’

71. [176]

    On 29 September 2014, Dr Dunlop wrote to Ms Tegen that he intended to refer his intravitreal injections to CEH and Dr Khannah would refer 50% of his. Dr Duncan sent his elsewhere. It is difficult to reconcile this with any genuine intention, on the part of the majority, to keep CEH alive long term.

72. [177]

    On 16 October 2014, the MAC wrote to the directors of CEH recommending delaying Dr Frumar’s appointment because of current workforce shortages at the hospital.

73. [178]

    On 19 October 2014, Dr Frumar wrote to Ms Carruthers and the majority requesting his application be dealt with as a matter of urgency.

74. [179]

    On 21 October 2014, Dr Saunders wrote to Ms Tegen and Mr Chynoweth calling for an immediate meeting of the board to approve the credentialing of Dr Frumar.

75. [180]

    On 28 October 2014, the minority commenced these proceedings.

76. [181]

    There was a board meeting on 29 October 2014. The minutes record that Dr Frumar proposed to come to CEH two days per week as a medium term plan.

77. [182]

    On 30 October 2014, Dr Frumar was informed that he had been appointed a VMO to CEH.

78. [183]

    On 31 October 2014, Ms Tegen and Mr Chynoweth (but not Dr Saunders) spoke with Mr Della Marta concerning the appointment of a voluntary administrator to CEH. Mr Della Marta also spoke with Mr Louttit, who provided him with appointment documents. They were not shown to Dr Saunders.

79. [184]

    On 4 November 2014, Ms Tegen wrote to Ms Carruthers that she would be proposing that Dr Frumar’s credentialing be taken away.

80. [185]

    Meetings of the directors and shareholders of CEH were to take place on 5 November 2014, but were cancelled due to the closure of Canberra airport on account of poor weather.

81. [186]

    On 11 November 2014, Dr Saunders, on behalf of the minority, wrote to Ms Tegen and Mr Chynoweth indicating that the minority were willing to provide CEH with funds to enable it to continue operations until it became profitable again. He also stated that he was strongly opposed to the assignment of the Head Lease.

82. [187]

    On 20 November 2014, Dr Saunders wrote Ms Tegen and Mr Chynoweth asking whether they had pursued the minority’s suggestion of additional funding and asking what the reaction of the majority was to it.

83. [188]

    On 27 November 2014, Mr Chynoweth provided Ms Tegen and Dr Saunders with a draft letter to be sent out to all shareholders requesting funding support.

84. [189]

    On 2 December 2014, Dr Saunders responded to Mr Chynoweth with comments on the draft letter.

85. [190]

    On 4 December 2014, according to one of Mr Della Marta’s fee notes, Mr Chynoweth told him on the telephone that a shareholder loan was not attractive to the majority and they were suggesting mediation.

86. [191]

    Nevertheless, on 5 December 2014, Mr Chynoweth responded to Dr Saunders’ letter and provided an updated draft of the letter and Ms Carruthers distributed the proposal for funding CEH by shareholders.

87. [192]

    On 12 December 2014, Holding Redlich wrote to Snedden Hall & Gallop setting out a proposal for the injection of further working capital into CEH. The letter referred to an understanding by the minority that Ms Tegen and Mr Chynoweth had threatened to appoint an administrator in the event that CEH did not obtain further funding from the shareholders.

88. [193]

    Snedden Hall & Gallop replied on 19 December 2014 saying that they had not been provided with any correspondence from Ms Tegen or Mr Chynoweth referring to threatened administration and requesting Holding Redlich to forward any such correspondence. They suggested that the proposal for further funding should be discussed in more detail in the New Year.

89. [194]

    On 19 December 2014, Holding Redlich wrote to Mr Della Marta requesting that if Ms Tegen and Mr Chynoweth proposed to pass any resolution for the appointment of an administrator twenty one days’ notice be given so that an appropriate application could be made to the Court.

90. [195]

    On 13 January 2015, Mr Della Marta responded, relevantly:

91. [196]

    On 20 January 2015, Mr Della Marta and Mr Chynoweth again spoke with Mr Louttit about the appointment of a voluntary administrator. Dr Saunders was not included in the communication. Later that day, Mr Louttit again forwarded appointment documents. They were copies of the documents prepared in October 2014.

92. [197]

    On 22 January 2015, Holding Redlich wrote to Mr Della Marta that they assumed that Ms Tegen and Mr Chynoweth were not taking any steps to place CEH into administration and that they trusted that Ms Tegen and Mr Chynoweth would not take any such steps whilst a response from the majority, in relation to the funding proposal, was outstanding and further that Ms Tegen and Mr Chynoweth would allow the minority adequate time to consider any response if any counter proposal was required to be made.

93. [198]

    Aitken Lawyers responded the following day that their ‘client had made no representation(s) in relation to its rights in respect of the Company's financial viability nor has it agreed to fetter its capacity to take whatever action it considers necessary in relation to the financial viability of the Company and its business.’ They stated that although their ‘client accep[ted] that if a funding arrangement is put in place there may be no need for the Board of the Company to consider appointing an administrator, until that occurs, our client must have regard to the Company's current financial circumstances and act accordingly.’

94. [199]

    On about 23 January 2015, Dr Saunders called a directors’ meeting for 27 January 2015, for the purposes of discussing the replacement of Ms Carruthers and the commencement of surgery by Dr Frumar. The agenda for the meeting is in evidence. It makes no reference to a proposal or resolution for the appointment of a voluntary administrator.

95. [200]

    On 23 January 2015, My Chynoweth wrote to Mr Louttit, copied to Ms Tegen and Mr Della Marta (but not Dr Saunders), relevantly:

96. [201]

    Dr Saunders says that the meeting began by Mr Chynoweth saying words to the effect:

97. [202]

    He says that he was taken completely by surprise by this because he had been given no notice of any proposal that such a decision would be made at the meeting. He was unaware that advice had been taken concerning the appointment of an Administrator or that Ms Tegen and Mr Chynoweth had met with Mr Louttit.

98. [203]

    He says that he said words to the following effect:

99. [204]

    He says that despite his protestations, Ms Tegen and Mr Chynoweth refused to discuss any further matters and that he does not recall any formal vote being taken.

100. [205]

     He says that one or the other of Ms Tegen or Mr Chynoweth said words to the following effect:

101. [206]

     On 30 January 2015, Ms Carruthers ceased to be the hospital manager of CEH.

102. [207]

     On 5 February 2015, Ms Tegen wrote the following illuminating email to Mr Chynoweth:

103. [208]

     She was cross-examined on this email and as to her understanding, at the time, of the difference between voluntary administration and liquidation. She gave somewhat adamant evidence that, notwithstanding what she wrote, she clearly understood the difference. Her explanation for having written the email, which I do not accept, was that she had ‘had a few wines.’

104. [209]

     On 23 February 2015, the Administrator published its Report to Creditors. The Report reveals that CEH had assets of $682,193 and an estimated surplus of $359,625. Its largest creditor was reflected as the landlord of the premises Blackwall Property Trust for $293,384 in respect of future rental payments. The then expiry date of the lease was 31 October 2017. There were no arrears as at the date of the administration. The Administrator indicated that he intended to sell the business as a going concern.

105. [210]

     There then commenced a process whereby the Administrator obtained bids from the majority and the minority respectively for the purchase of the assets of CEH.

106. [211]

     On 29 April 2015, the majority advised that they had purchased the CEH business for $3.55 million, being $50,000 more than the final offer made by the minority.

107. [212]

     Between 7 May 2015 and 11 June 2015 the majority and minority negotiated a sale of shares.

108. [213]

     Dr Saunders says (and I accept) that the minority were essentially forced into this action on the basis that they had received no clarification from either the Administrator or the majority as to how the proceeds of the sale of the assets would be distributed to the shareholders of CEH, there was no certainty that the minority would receive any of the sale proceeds and the minority had an obligation to mitigate their loss.

109. [214]

     On 11 June 2015, the minority entered into a Share Sale Agreement under which they sold their shares in CEH to the majority for $1,776,000 plus 43% of the value of the Stock. [17]

110. [215]

     The Share Sale Agreement records that these proceedings are on foot and that notwithstanding the agreement the minority intend to prosecute the proceedings. It records that nothing in the agreement constitutes an admission or waiver by the minority in respect of these proceedings. It records that any party may tender the agreement in these proceedings and that the majority are not prevented by it from contending that the value of the shares is a fair value or from raising any other argument that they wish to raise arising out of the agreement. [18]

111. [216]

     The Share Sale Agreement was completed on 24 June 2015.

112. [217]

     Dr Saunders resigned as a director of CEH on that date.

113. [218]

     I was informed from the bar table that CEH ceased operations and the lease of the hospital was not extended beyond 31 October 2017.

DR FRUMAR

1. [219]

   Dr Frumar was an eminent and accomplished ophthalmic surgeon.

2. [220]

   At various times he was Chairman of the Departments of Ophthalmology at Royal North Shore Hospital, Sydney Adventist Hospital and Castlecrag Private Hospital. He was a VMO or consultant at various other institutions. When Dr Shanahan needed a cataract operation, Dr Duncan suggested Dr Frumar. One of the references in evidence described Dr Frumar as a ‘highly ethical medical practitioner devoted and dedicated to his patients.’

3. [221]

   Dr Frumar died on 10 April 2016.

4. [222]

   To the extent that it is relevant, and I do not think it is, the evidence indicates that Dr Frumar was not an easy person to deal with. My distinct impression, from their evidence, was that the majority did not have much time for him on a personal level. This, amongst other things, clouded their judgment when it came to his accreditation.

5. [223]

   Dr Frumar directed his application of 1 February 2014 for accreditation at CEH to Dr Saunders.

6. [224]

   Dr Saunders considered him to be a very experienced and well qualified surgeon. Dr Saunders asked Dr Frumar to send the original application to Ms Carruthers so that it could be provided to the credentialing committee for consideration.

7. [225]

   The CEH accreditation application form had space for the insertion of an ‘alternative contact in case of emergency.’ Dr Frumar inserted the name and telephone number of his brother Dr A M Frumar a gynaecologist and an obstetrician.

8. [226]

   On 6 February 2014, Ms Carruthers wrote to Dr Frumar that the emergency contact had to be credentialed at CEH.

9. [227]

   There is no doubt that Dr Frumar gave his brother as an emergency contact in the event of Dr Frumar’s own indisposition, not as clinical back-up. Dr Frumar wrote as much to Ms Carruthers on 1 April 2014. The heading above the box for insertion of a contact for a clinical emergency is Alternative Contact in case of Emergency. It would have been obvious to any genuine reader that Dr Frumar would not have nominated a gynaecologist or obstetrician as an alternative for an ophthalmic emergency. This obvious mistake, however, drew irrational ire.

10. [228]

    In his 1 April 2014 letter, Dr Frumar gave as his emergency contacts Drs Kate Reid (Canberra), Dr Peter Macken (Bowral) and Dr Saunders. Dr Saunders, as it happens, was unsurprisingly accredited at CEH.

11. [229]

    Dr Frumar gave as his ophthalmologist referees Dr Bill Glasson and Dr Con Moshegov. Dr Glasson practices in Queensland. He wrote that he understood Dr Frumar to have the respect of his colleagues who work with him and is considered to be a very able ophthalmologist. Dr Moshegov, a Macquarie Street specialist, was contacted and provided his written reference on 24 February 2014. He wrote that he was privileged to be able to act as a referee to Dr Frumar who had at one point been one of Dr Moshegov’s superiors.

12. [230]

    One might have thought that, if the majority were at all interested in the hospital returning to profitability, they would have welcomed someone such as Dr Frumar with open arms. But, this is not what happened. Obstacles, including imaginary ones, were placed in his path. He was treated discourteously for no good reason.

13. [231]

    This was not the case with respect to other applicants, who were not expected to do predominately cataract surgery. It is no coincidence that the majority were cataract surgeons and the most profitable activity at CEH was (and no doubt at CMS is) cataract surgery.

14. [232]

    Dr Burt, who was expected to do mainly ocular plastic surgery, applied for accreditation at CEH on 29 November 2013 and was swiftly accredited on 16 December 2013. The only documentary evidence of his application is a copy of his curriculum vitae.

15. [233]

    Dr Frumar apparently had plans to have some sort of residence in Canberra because his children were proposing to study there. He told Michael Shanahan that he had put down a deposit on an apartment in Canberra. There is a suggestion in the evidence that Dr Frumar had some interest in purchasing Dr Saunders’ practice and his shares in CEH.

16. [234]

    When Ms Carruthers joined CEH, the CEH By-Laws were a March 2012 edition. The By-Laws were updated and revised by Ms Carruthers in September 2013. As part of the update, CEH produced a Policy Statement for the accreditation process.

17. [235]

    Ms Carruthers also amended the MAC’s Terms of Reference.

18. [236]

    The active clinician decision makers on the MAC were Drs Dunlop and Duncan. Ms Carruthers had a secretarial role. But, Dr Dunlop and Dr Duncan did not read the By-Laws. Dr Dunlop also did not read the MAC Terms of Reference.

19. [237]

    The Policy Statement records that:

20. [238]

    Business and profitability aspects do not properly intrude into the process of VMO credentialing. So much was accepted (as it had to be) by Drs Dunlop and Duncan, as well as by Ms Tegen and Mr Chynoweth.

21. [239]

    None of CEH’s instruments required an applicant to nominate two referees with direct experience of the applicant’s professional work.

22. [240]

    The By-Laws provided that a practitioner seeking initial accreditation needed ‘[r]eferences with at least two individuals being within the [p]ractitioner's specialty or a related specialty’, at least one of which was to be ‘from an individual who [could] verify, preferably for at least a 12 month period within the previous three years, the approximate number, type and location of patients, clinical services, procedures or other interventions performed; and diagnoses treated; and provide evaluator comments on the [p]ractitioner's technical performance, communication skills and teamwork’.

23. [241]

    None of CEH’s accreditation instruments current at the time of Dr Frumar’s application imposed a requirement upon an applicant to nominate an emergency back-up. CEH’s accreditation application form, however, does make provision for such information to be supplied. Even less, do those instruments require a nominated emergency contact to be credentialed at CEH or be in Canberra when the surgical operation by the proposed VMO was carried out.

24. [242]

    Despite Dr Frumar’s eminence as a surgeon, there was sought to be imposed on him a requirement that two of his referees have direct experience of his professional work.

25. [243]

    At a MAC meeting on 5 February 2014, it was determined that Dr Frumar needed an emergency back-up credentialed at CEH and that his referees should be contacted. Ms Carruthers was directed to follow this up with Dr Frumar.

26. [244]

    Dr Burt nominated Dr Okera as his emergency contact. Dr Okera withdrew, for personal reasons, as Dr Burt’s emergency contact. No requirement was imposed on Dr Burt to nominate another one.

27. [245]

    More importantly, none of the majority had formally nominated any emergency back-up for himself. For them, collegiate understanding and courtesy sufficed. They were not prepared to extend the equivalent to Dr Frumar.

28. [246]

    Dr Saunders asked Dr Okera whether he would be prepared to be emergency back-up for Dr Frumar. He declined.

29. [247]

    On 23 March 2014, Dr Saunders wrote to Ms Tegen and Mr Chynoweth, amongst others:

30. [248]

    On 30 March 2014, Mr Chynoweth wrote to Dr Saunders:

31. [249]

    Nothing in the evidence reflects Dr Saunders as interfering, unnecessarily or at all, with, or distracting the MAC from, operating. To the contrary, Dr Saunders was the only person making any effort to identify and bring to CEH surgeons who would operate there. His efforts were, however, neither welcomed nor appreciated.

32. [250]

    On 2 April 2014, Ms Carruthers wrote to the MAC stating that all documents for Drs Frumar and Tsirbas had been received.

33. [251]

    On 3 April 2014, Dr Frumar wrote to Ms Carruthers:

34. [252]

    On 8 April 2014, Ms Carruthers provided the further information supporting the application of Dr Frumar she had received to Drs Dunlop, Duncan and Lo, ahead of a MAC meeting on 15 April 2014.

35. [253]

    On 11 April 2014, Dr Saunders wrote to Ms Tegen and Mr Chynoweth pointing out that the credentialing of Dr Frumar had still not occurred and that it was vital that the hospital received fees from the cataract surgery which Dr Frumar intended to perform. Dr Saunders asked them to confirm that they would communicate with the credentialing committee to ensure that Dr Frumar’s application was approved without further delay.

36. [254]

    Mr Chynoweth apparently construed Dr Saunders’ communication as an attempt to interfere with the credentialing process and suggested to Ms Tegen that they send a letter to Dr Saunders with strong wording about interfering with the process.

37. [255]

    On 14 April 2014, Ms Carruthers sent a letter (drafted by Ms Tegen) on behalf of Ms Tegen and Mr Chynoweth to Dr Saunders in which, amongst others, they said:

38. [256]

    On 15 April 2014, Dr Frumar informed Ms Carruthers that post-operative management of patients would be undertaken by both Dr Saunders and himself. The emergency contact issue appeared to be, and for that matter should have been, solved. However, it would later be resurrected.

39. [257]

    The MAC met on 15 April 2014. Dr Frumar’s application was tabled.

40. [258]

    On 16 April 2014, Ms Carruthers conveyed to Dr Frumar that the MAC requested that another referee be nominated because Dr Glasson had not worked with Dr Frumar. She added that once received she could pass it on to the MAC and finalise the ‘credential process.’ Dr Frumar responded that this would be attended to promptly.

41. [259]

    On 16 April 2014, Ms Carruthers reported to the MAC that she had contacted Dr Reid who confirmed that Dr Frumar had contacted her and she had agreed to accept patients for follow up treatment at The Canberra Hospital. Dr Reid had not agreed, however, to be available to respond and assist with an emergency on site at CEH.

42. [260]

    On 17 April 2014, Dr Lisa Belle Cottee, a Lismore ophthalmologist, provided a reference for Dr Frumar. The reference disclosed that she had worked with Dr Frumar. She described Dr Frumar as a highly ethical medical practitioner devoted and dedicated to his patients. Ms Carruthers passed this reference on to the MAC on 30 April 2014. Dr Cottee’s reference was acceptable to Dr Dunlop, who described it as ‘glowing.’ Yet, the MAC still did not credential Dr Frumar.

43. [261]

    Ms Carruthers wrote to the MAC on 1 May 2014, saying that she was still awaiting confirmation as to who would attend in the event Dr Frumar required assistance onsite. It is to be remembered, that Dr Saunders had already agreed to do this.

44. [262]

    On 5 May 2014, Dr Saunders wrote the following email to Ms Tegen and Mr Chynoweth, copied to Ms Carruthers who on sent it to the MAC:

45. [263]

    On 9 May 2014, Dr Dunlop wrote to Ms Carruthers, Dr Duncan and Dr Lo:

46. [264]

    This letter merits a number of observations:

47. [265]

    On 10 May 2014, Dr Duncan wrote to the MAC that they now had the required references but raised the question of emergency clinical back-up.

48. [266]

    On 13 May 2014, Ms Carruthers wrote to Dr Frumar asking for other emergency contacts, because those nominated on 1 April 2014 were not credentialed at CEH.

49. [267]

    On the same day, Dr Frumar replied nominating Drs Tsirbas, Burt, David Tridgell, Meades, Dickson and John Smiles. There was apparently some controversy about what, if any, back-up Drs Tridgell and Dickson had agreed to provide for Dr Frumar. Dr Dickson made reference to a failure of clear communication with Dr Frumar and that he was not prepared to be available to care for patients seen or treated by Dr Frumar in Canberra. He commented that he would have thought that such care would have been provided by Dr Frumar’s colleagues ‘at Symonston.’ Dr Tridgell wrote to Dr Frumar referring to the request and stating that he was always willing to see and treat patients in need of ophthalmic care but was not willing to unreservedly provide support for someone else’s surgery. These circumstances, including a conversation which Dr Duncan had with Dr Dickson directly on 15 May 2014, prompted Dr Duncan to write to the MAC that he thought they ‘need[ed] to seriously consider denying the application of Dr Frumar on the basis of trying to deceive not only our colleagues, but the committee.’ Dr Frumar was clearly not welcome as a member of the Canberra cataract surgery community. On occasion, in the evidence, he was described pejoratively as a ‘fly-in fly-out’ or FIFO surgeon.

50. [268]

    On 14 May 2014, Ms Carruthers responded to Dr Frumar confirming that Dr Burt (Dr Frumar’s back-up nominee) was credentialed.

51. [269]

    On 16 May 2014, Dr Duncan wrote to Ms Carruthers and the MAC captioned ‘on-call cover for Dr Frumar’:

52. [270]

    This letter merits four observations. First, one might have thought that if the majority were keen for cataract surgery to be performed at CEH and if emergency contact was a real issue they would have facilitated Dr Frumar in identifying and providing a back-up rather than stand in his way. Second, and having observed both Drs Duncan and Dunlop, I consider that there was actual, not merely perceived, bias against Dr Frumar on their part. Third, the proposed reference to an outside body did not happen. On the instructions, Ms Carruthers did contact a personal acquaintance, Ms Lyn Davis and took advice. This is referred to later. Fourth, Dr Frumar was not informed of the contents of the letter.

53. [271]

    The MAC met on 16 June 2014, the minutes of which meeting record that Dr Frumar’s credentialing application remained incomplete, with no appropriate emergency contacts nominated. Ms Carruthers was instructed to contact Dr Frumar and request additional nominations of emergency contacts. Ms Carruthers did so.

54. [272]

    On 20 June 2014 Dr Frumar requested Drs Dunlop, Duncan and Khannah to be his emergency backup. He prayed in aid professional courtesy. Each refused. Dr Dunlop’s refusal is illuminating. He wrote:

55. [273]

    Dr Dunlop was cross-examined about this communication. He gave an unconvincing apology for this intemperate response and ascribed it to being irritated by Dr Frumar. He explained his reference to laziness as Dr Frumar’s nomination of his brother as an emergency contact. He explained his reference to deceitful as Dr Frumar’s nomination of Drs Tridgell and Dickson as persons who had agreed to provide back-up. None of this was justified. I consider Dr Dunlop’s conduct to be a regrettable symptom of his plain opposition to Dr Frumar’s credentialing.

56. [274]

    On 27 June 2014, Dr Duncan wrote to Ms Carruthers:

57. [275]

    There was no proper basis for imposition of any requirement that the back-up be present in Canberra when the operations list was performed. Dr Duncan gave the following evidence:

58. [276]

    On about 1 July 2014, Ms Carruthers found in the records of CEH an accreditation letter for Dr Saunders valid until 2016. She wrote to Dr Saunders informing him of this.

59. [277]

    On 4 July 2014, Ms Carruthers wrote to the MAC that she could confirm that Dr Frumar was unaware of her having located an appointment letter for Dr Saunders. She stated that there were no restrictions on Dr Saunders’ appointment letter which would prevent him from assisting in theatre. She sought feedback from the MAC. She apparently did not receive any. Dr Frumar was not notified of the letter.

60. [278]

    On 16 July 2014, Ms Carruthers sent a follow up email seeking feedback from the MAC having received no response.

61. [279]

    On 21 July 2014, Dr Duncan wrote to Ms Carruthers:

62. [280]

    On 4 September 2014, Ms Tegen wrote to Mr Chynoweth and the majority (but not the minority), relevantly:

63. [281]

    This letter is a reflection of how Dr Frumar was differently treated.

64. [282]

    On 10 September 2014, the MAC met. It had not met since 16 June 2014. The evidence of what occurred at the meeting is not completely clear. There are no formal minutes of the meeting. It appears, however, that Dr Frumar’s application was not accepted on the grounds of him not having nominated an emergency back-up credentialed at CEH. Ms Carruthers report to the Board on 2 October 2014 says that she was to have obtained a second opinion on Dr Frumar’s application, which she had done, and was awaiting MAC members’ return from leave. Ms Carruthers had contacted Ms Lyn Davis on 12 September 2014 who apparently advised, relevantly, that Dr Frumar’s practice could not be faulted and there was no reason for the application to be denied. There is an enigmatic email from Ms Davis to Ms Carruthers dated 15 September 2014, which says:

65. [283]

    On 1 October 2014, Ms Tegen and Mr Chynoweth agreed on a letter to be sent to Dr Frumar rejecting his application. However, the letter was not sent after Ms Carruthers noted that Dr Saunders had not been consulted.

66. [284]

    On 3 October 2014, Dr Duncan wrote to Ms Carruthers and the MAC:

67. [285]

    On 13 October 2014, Dr Saunders requested an urgent board meeting to discuss the credentialing of Dr Frumar.

68. [286]

    On 15 October 2014, Mr Chynoweth asked Ms Carruthers to inform him of the MAC’s decision on Dr Frumar.

69. [287]

    On 16 October 2014, Ms Carruthers prepared a letter containing the MAC’s decision that Dr Frumar was suitable but his credentialing should be delayed until workforce shortages had been resolved.

70. [288]

    On 19 October 2014, Dr Frumar wrote to Ms Carruthers and the MAC:

71. [289]

    On 19 October 2014, Dr Duncan wrote to Ms Carruthers, Dr Dunlop and Dr Khannah:

72. [290]

    On 20 October 2014, Ms Carruthers provided the MAC’s 16 October 2014 letter to Ms Tegen and Mr Chynoweth.

73. [291]

    On 21 October 2104, Dr Saunders again requested an urgent board meeting to deal with Dr Frumar’s application.

74. [292]

    On 29 October 2014, the CEH directors met and were told by Ms Carruthers that the MAC considered Dr Frumar approved and acceptable.

75. [293]

    On 30 October 2014, Dr Frumar was notified of his appointment.

76. [294]

    This was at a time when Ms Tegen and Mr Chynoweth were actively considering the imminent appointment of Mr Louttit.

77. [295]

    No sooner had the MAC approved Dr Frumar’s credentialing than Ms Tegen and Mr Chynoweth wanted to take it away on what I consider were spurious grounds.

78. [296]

    On 4 November 2014, Ms Tegen wrote to Ms Carruthers and Mr Chynoweth:

79. [297]

    On 22 December 2014, Dr Frumar suggested 30 January 2015 or 7 February 2015 for his first list at CEH.

80. [298]

    In cross-examination, Ms Tegen accepted that it would have been in the best interests of CEH for Dr Frumar to have been given that opportunity, but decided instead to appoint Mr Louttit as voluntary administrator, foreclosing that opportunity.

81. [299]

    Under cross-examination, Ms Carruthers’ response to the proposition put to her that from February to October 2014, Drs Duncan and Dunlop had given her the impression that they did not want a new cataract surgeon at CEH was simply to say ‘I can’t remember’. I have no doubt that she remembered.

THE LEGAL PRINCIPLES

1. [300]

   The essential criterion of conduct that is ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory against’ within s 232 of the Act is commercial unfairness.

2. [301]

   Commercial unfairness is assessed objectively in the eyes of a commercial bystander: Morgan v 45 Flers Ave Pty Ltd (1986) 10 ACLR 692. The test is whether the conduct is so unfair that reasonable directors would have thought it to be unfair: Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359 at [181].

3. [302]

   That an action of directors is in breach of fiduciary duty will be relevant to whether there has been unfairness in the context of oppression: Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 84 ACSR 121 at [176]; HNA Irish Nominee Ltd v Kinghorn (No 2) (2012) 88 ACSR 427 at [502]–[503]; Re Cumberland Holdings Ltd (1976) 1 ACLR 361; Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539 at 552.

4. [303]

   The passing of a resolution to appoint a voluntary administrator may amount to oppressive conduct: Saykan v Elhan [2004] VSC 83 at [33], [40]-[42]; Saykan v Elhan [2006] VSCA 320 at [18]; Ubertini v Saeco International Group SPA Societa A Socio Unico (No 4) (2014) 98 ACSR 138 at 228.

5. [304]

   Section 233(1) gives the Court a wide discretion with respect to relief. There is no automatic right to obtain a remedy where a breach of s 232 is established: Shelton v NRMA Limited (2004) 51 ACSR 278.

FINDINGS

1. [305]

   From no later than the time of the appointment of Ms Tegen and Mr Chynoweth as directors of CEH, its affairs were conducted in a sustained and deliberate way both contrary to the interests of the members as a whole and oppressive to, unfairly prejudicial to, and unfairly discriminatory against the minority.

2. [306]

   In the case of Dr Saunders, he was oppressed, prejudiced and discriminated against both as a member and in his capacity as a director.

3. [307]

   Throughout, Ms Tegen and Mr Chynoweth, in concert with the majority, acted so as to prefer the interests of the majority over those of the minority.

4. [308]

   The underlying grievance of the majority was the entitlement of the minority to share in the profits of CEH. For so long as this was the case, the majority had no intention of furthering the interests of CEH. Their primary intention was, as the objective material establishes, to achieve a restructure of the shareholding arrangements. As history reveals, if this could not be achieved, they had no intention that CEH should be kept alive. After all, CEH was CMS’ competitor in the cataract surgery market. An entitlement on their part to a passive income from CEH was, in my opinion, a minor, if not irrelevant consideration. If it had been important, they would have acted entirely differently. They made no attempt to attract other surgeons. They frustrated Dr Frumar. They took CEH’s valuable employees. They failed to provide funding for CEH. They sought to take CEH’s Head Lease. After they purchased the minority’s shares, CEH closed down. CEH was in fact worth more to them dead than alive.

5. [309]

   The majority’s need and desire for a restructuring was understood by Ms Tegen and Mr Chynoweth from the start, as is revealed from their 24 September 2013 exchange. Changing the Shareholders’ Agreement is, amongst others, referred to in Mr Della Marta’s Executive Summary of 13 November 2013, Ms Tegen’s letter to the majority and Mr Chynoweth on 11 December 2013, Mr Chynoweth’s letter to Dr Dunlop on 14 December 2013, Mr Chynoweth’s exchanges with Ms Tegen on 3 December 2013 and Ms Tegen’s letter to the majority and Mr Chynoweth on 2 September 2014. It is clearly included in the plan referred to in Mr Chynoweth’s letter to Ms Tegen on 26 September 2014.

6. [310]

   Voluntary administration as an alternative was under consideration from an early stage. As early as 17 October 2013 there was contact with Mr Louttit and discussion of voluntary administration. Documents for achieving this objective were prepared, without the knowledge or participation of Dr Saunders, as early as 26 August 2014. Mr Della Marta’s fee note of 29 August 2014 reveals that such an appointment was intended but should not be made ‘just yet.’ Steps were taken, when there was no agreement from the minority, to transfer the Head Lease to CEHM. Mr Chynoweth described the process as part of a ‘strategic negotiation’. The most probable explanation for the transfer is, I find, to protect the majority’s tenure with respect to the consulting rooms at the hospital.

7. [311]

   On 31 October 2014, Ms Tegen and Mr Chynoweth spoke with Mr Della Marta concerning the appointment of a voluntary administrator to CEH. Mr Della Marta also spoke with Mr Louttit, who provided him with appointment documents.

8. [312]

   The proposal to appoint an administrator was kept from, and then sprung on, Dr Saunders, amongst others, to avoid giving the minority an opportunity to make an appropriate injunction application to the court, as foreshadowed in the Holding Redlich letter of 19 December 2014, and in a manner which precluded appropriate discussion on the subject and in the knowledge that Dr Saunders opposed it.

9. [313]

   The appointment was made after the accreditation of Dr Frumar and just before he intended to commence surgery at CEH, which would have significantly, improved its prospects. The appointment was made at a time when CEH was solvent and understood by Ms Tegen and Mr Chynoweth to be solvent.

10. [314]

    Voluntary administration was in the interests of the majority but entirely inimical to the interests of the minority.

11. [315]

    As Mr Chynoweth understood, the supermajority requirement in the Shareholders’ Agreement did not apply to voluntary administration. Voluntary administration was a way of bringing CEH to its denouement without complying with that supermajority requirement.

12. [316]

    I find that the appointment of the administrator was in bad faith and for improper purposes.

13. [317]

    Ms Tegen and Mr Chynoweth conducted themselves as directors in a manner so unfair to the minority and Dr Saunders, as a director, that no reasonable director would have thought it to be fair and a reasonable director would think it to be unfair.

14. [318]

    They had private dealings with the majority, which, objectively viewed, reflect an intention to facilitate their interests over those of the minority. Proposals were developed in consultation with the majority to the exclusion of the minority.

15. [319]

    Mr Chynoweth took secret remuneration from the majority contrary to cl 4.2 of the Shareholders’ Agreement and apparently in breach, at least, of his duty under s 182(1)(a) not improperly to use his position to gain an advantage for himself.

16. [320]

    He proposed to Ms Tegen that they charge the majority a fee of eye watering proportions ‘for [them] to complete the plan’. This was not a fee which was to be paid or contributed to by the minority. The ‘plan’ was one for the majority.

17. [321]

    Ms Tegen and Mr Chynoweth prevented Dr Saunders from having any real participation, let alone fair participation, in the process which culminated in the appointment of the voluntary administrator, which appointment I find to have been made by them in bad faith. CEH was plainly not insolvent and, having regard to Dr Frumar’s recent accreditation and intention to work there, was not likely to become insolvent in the foreseeable future, something which if it was not clear to them (and I think it was), ought to have been.

18. [322]

    The conduct of the majority in the manner in which they dealt with Dr Frumar was not in the interests of the shareholders as a whole and oppressive and unfairly prejudicial to, and unfairly discriminatory against, the minority.

19. [323]

    By 17 April 2014, Dr Frumar had nominated Dr Saunders as his emergency back up and had provided the references from Dr Moshegov and Dr Cottee. On the assumption that the requirement for that nomination was a necessary prerequisite for his accreditation, from then, at the latest, there was no legitimate basis to deny or delay Dr Frumar’s accreditation. In my view, it is probable that Dr Frumar could and would have started generating revenue for CEH by 1 March 2014.

20. [324]

    The minority seek an order that the majority compensate them for the difference between what they say was the true economic value of their shares and the depressed value for which they say they sold them to the majority, because of the conduct complained of.

21. [325]

    The making of such an order is within the power given to the Court under s 233(1) to make any order which it considers appropriate in relation to the company. Section 233(1)(j) empowers the Court to require a person to do a specified act. That act can be the payment of money.

22. [326]

    The exercise required here is to ascertain, ignoring the oppressive conduct which I have found, the extent, if any, to which the value of the shares which the minority sold to the majority on 11 June 2015 under the Share Sale Agreement exceeded the amount of $1,776,000 paid for those shares.

23. [327]

    The oppressive conduct was the unjustified delay in accrediting Dr Frumar and the appointment of the voluntary administrator. The minority’s shares are to be valued on the footing that Dr Frumar had started when he could and would have, and the voluntary administrator had not been appointed.

24. [328]

    Each side called an expert forensic accountant. The minority called Mr Brendan Halligan. The majority called Dr Rodney Ferrier. The accountants produced various valuation reports, including joint reports, which have significantly assisted the Court.

25. [329]

    The assessment of the value of the shares is to be done on the footing that the oppressive conduct did not occur: Rankine v Rankine (1995) 124 FLR 340.

26. [330]

    There is consensus as to the appropriate valuation methodology for this case.

27. [331]

    I consider that the Court must take account of the fact, now known, that the direct benefit of Dr Frumar’s exertions would not have extended past 10 April 2016: Kizbeau Pty Ltd v WG&B Pty Ltd (1995) 184 CLR 281 at 293; HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at [40].

28. [332]

    Relief is discretionary and I would approach the matter in this way as a matter of discretion in any event. It accords with fairness in this case. Had the oppressive conduct not occurred, the minority would not have sold. Their attitude was always that they wanted to hold their shares and earn revenue from them. It would not be fair to compensate them on the footing that they would not have sold their shares, but Dr Frumar would have survived beyond the date of his passing.

29. [333]

    Shares in CEH are appropriately to be valued by reference to their percentage entitlement to the underlying business of CEH.

30. [334]

    Conventionally, the business (if it would have been profitable) is to be valued using the capitalised maintainable earnings (or CME) method which entails an assessment, as at the appropriate date, of what the maintainable annual earnings before interest and tax (EBIT) were and applying to the figure a capitalisation multiple. There is added to this the value of surplus net assets, that is, the assets owned but not necessary to generate the maintainable earnings.

31. [335]

    The application of the CME method requires a determination of the annual maintainable earnings of CEH on the basis that Dr Frumar would have started when he could and would have, in other words, a determination of the profits that would have been earned directly and indirectly as a result of Dr Frumar’s work at the hospital. Profits would have been earned directly from his own exertions and, the minority submit, indirectly from his presence which would have attracted other surgeons to work at the hospital.

32. [336]

    I record that the minority argued that in assessing CEH’s maintainable earnings the Court should take the approach, with respect to the potential profit that might have been emanated from other surgeons, which is taken in assessing damages where future or hypothetical events are to be taken into account and proof of them is necessarily unattainable. In such cases, the Court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect that degree of probability. A lost commercial advantage or opportunity is a compensable loss, even where there is a less than 50% likelihood that the commercial advantage will be realised: Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 at 643; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 125; Sellars v Adelaide Petroleum NL & Ors (1994) 179 CLR 332 at 349.

33. [337]

    This approach would entail taking the full amount of revenue which each notional additional surgeon would earn and discounting it to reflect the degree of probability that the surgeon would have generated it.

34. [338]

    I do not think that this approach is apposite to this case. The Court is not assessing damages or a lost opportunity, but the value of shares in CEH derived on a maintainable earnings basis. Earnings are not earnings, let alone maintainable earnings, if, on the probabilities, they would not have been made. The capitalisation multiple takes account of the risk to the maintenance of the earnings as assessed.

35. [339]

    In any event, I am not satisfied that the evidence extends to establishing any meaningful likelihood that Dr Frumar’s presence would have attracted any other surgeons who would have contributed to the revenue of the hospital. Efforts to attract other surgeons by Dr Saunders had very limited success. Realistically, the majority were never going to help in this quest. I am not satisfied that Dr Burt, who was an oculoplastic sub-specialist, was likely to start doing any significant cataract work. Even if the oppressive conduct had not occurred, the majority and the minority would still most probably have remained at loggerheads. Drs Burt and Tsirbas were not willing to commit to hospital lists of any type whilst the dispute between shareholders remained. Even if I were to adopt the loss of opportunity analysis, the percentage reduction would be so great as to make the lost benefit of no real value.

36. [340]

    I do not think that there was any realistic possibility that the non-shareholder surgeons at CEH would have returned.

37. [341]

    I also think it is unlikely that Drs Dunlop and Khannah would have continued to perform their injection procedures at the hospital for any appreciable length of time.

38. [342]

    The consequence of this is that I am not satisfied that any revenue equivalent to that which Dr Frumar (or some replacement doctor) would have generated would have continued, in effect, in perpetuity that is maintainable for the conventional application of the CME method.

39. [343]

    The experts agree that on this basis, the business would become unprofitable after Dr Frumar’s death and that the appropriate valuation method is, therefore, to assume that the business would operate for two years until Dr Frumar’s death and then be liquidated and the proceeds distributed to shareholders. They produced agreed models based on varying assumptions to reflect this approach.

40. [344]

    They assumed both a multiple of 4x and Dr Frumar’s revenue ceasing after two years. In their opinion, these assumptions were inconsistent because they account for the risk of Dr Frumar’s death in both the multiple and the earnings. However, removing the risk of Dr Frumar’s death from the multiple would increase it to 5.125x, but the effect of doing this would be to increase the value of the shares by an immaterial amount. Additionally, the multiple of 4x is for an annuity in perpetuity. Given Dr Frumar’s death, the experts adjusted it to reflect its application to a limited period which is to a multiple of 1.62x as at 1 March 2014.

41. [345]

    Ignoring the oppressive conduct, if the business would not have been profitable, the appropriate method is to ascertain the amount of the dividend the shareholders would receive had CEH been placed into liquidation. The dividend would represent the entitlement to share in the company’s net realisable assets. This method of valuation is known the Notional Realisation of Assets (or NRA) method.

42. [346]

    The experts produced a series of valuations resting on different assumptions. Ultimately, they produced a series of joint valuations as at 1 March 2014 and 27 January 2015 respectively.

43. [347]

    As will be observed later, based on the assumptions which I consider are to be adopted and which follow from the findings which I will now make, the amount which the minority received for their shares well exceeds what those shares were worth on either approach.

44. [348]

    As to the net revenue that would have directly been earned from Dr Frumar’s exertions, this requires findings as to when he would have started, how many operations he would have carried out annually, the fee that would have been charged for each procedure and what increased variable costs would have been incurred in generating the additional revenue. The capitalisation multiple is applied to the figure which is yielded.

45. [349]

    Discussion between the experts resulted in consensus that 46.9% is the appropriate variable cost rate to be applied to all additional revenue.

46. [350]

    There was no consensus on whether the value of the minority shares should be discounted because it was a minority holding. I do not consider that a minority discount is appropriate. The control provisions in the Shareholders’ Agreement, including the supermajority provision and the embargo on directors being paid, effectively kept the minority on an equal footing with the majority.

47. [351]

    There was no legitimate reason for delaying Dr Frumar’s accreditation beyond 17 April 2014 and maybe, not beyond 1 April 2014. For present purposes, the difference between these dates and 1 March 2014 is immaterial. The valuation should be done on the footing that 1 March 2014, as selected by the experts, should be adopted.

48. [352]

    The evidence shows that Dr Khannah performed about 9 cataract procedures per day, Dr Duncan about 11 and Dr Dunlop about 8. Dr Frumar was a highly experienced cataract surgeon. I think that 10 should be adopted.

49. [353]

    By all accounts, Dr Frumar was extremely busy and operated at various places. He spent some weeks of the year operating in Cambodia. I think he would have operated at CEH for no more than 40 weeks per year.

50. [354]

    There was argument about the fees earned from a cataract procedure. $2,150 was the price charged to insured patients. Uninsured patients may have paid less. I do not see why it should be assumed that Dr Frumar would have taken any less than the price charged to insured patients. This was the figure used in business plans and models prepared for the directors in October 2013 and February 2014.

51. [355]

    I am satisfied on the evidence that Dr Frumar would have been likely to have had a list once a week in Canberra. The board minutes of 29 October 2014 record an intention on his part to come two days a week. I do not consider that there is a sound evidentiary basis for a finding that he would have operated more than two lists per week. Two (perhaps a little generously) is the number I consider should be adopted.

52. [356]

    The valuations which follow from these findings are as follows:

VALUATION USING MODIFIED CME METHOD

1. [357]

   Thus, the CME method results in a valuation of the minority shares of $700,000 and the NRA method $274,000.

2. [358]

   Even if one were to adopt the assumption that Dr Frumar’s earnings would have lasted in perpetuity (derived from another practitioner after his passing), the value of CEH based on the CME method, plus the value of surplus net assets, is $3,093,816 of which the minority share would be $1,330,341, still below the amount they were paid. [33]

3. [359]

   Whilst the minority have made out their complaint of oppressive conduct, they have failed to establish that, had it not occurred, they would have been in a better position than they are now.

4. [360]

   It follows that the proceedings must be dismissed.

5. [361]

   I will hear the parties on costs and on any other issues which are required to be resolved, including the correction of any arithmetical errors which I may be revealed to have made.

6. [362]

   The exhibits are to be returned.