In the matter of Mobius Distilling Pty Ltd (in liq)

The Plaintiffs, Mr Alexander Hardie and his sister, Ms Carrie Hardie, bring claims for breach of contract and oppression against Mr Philip Crossley, although they also join the company that is the subject of the proceedings, Mobius Distilling Pty Ltd (in liq) (“Mobius”) as party to the proceedings.

By way of background, Mr Hardie incorporated Mobius on 7 March 2016 and, until about 10 April 2024, it operated a distillery business. Mr Hardie has been a director of Mobius since 24 March 2017, and 50% of the issued shares in Mobius were held jointly by Mr Hardie and Ms Hardie and 50% of the issued shares were held by Jamaphle Pty Ltd (“Jamaphle”), of which Mr Crossley has at all relevant times been the sole director and shareholder (Points of Claim (“POC”) [1]-[3]); Points of Defence (“POD”) [1]-[3]). It appears that Mr and Ms Hardie held their shares in Mobius as trustees for the Hardie Family Trust, on the terms of a discretionary trust deed dated 2 March 2016 (Ex P10). Mr Crossley was appointed as a director of Mobius, with Mr Hardie, from 15 February 2018 and, in early 2018, Mobius commenced distilling operations. The parties’ relationship deteriorated; Mobius was ultimately placed in insolvency administration in the circumstances that I address below; and interests associated with Mr Crossley acquired and now conduct its business. I address the nature of the claims and the relief sought by the Plaintiffs below.

I first turn to the affidavit evidence and cross-examination. In addressing that evidence, I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; Varma v Varma [2010] NSWSC 786 at [424]-[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [10]. I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[28]:

I have here drawn on my summary of the applicable principles in K&A Laird (N.S.W.) Pty Ltd (in liq) v Aidzan Pty Ltd (in liq) [2023] NSWSC 603 at [40]ff, Re Alora Davies Developments 104 Pty Ltd (in liq) & Ors v Raphael & Anor [2024] NSWSC 547 at [49]ff and Re 1derful Pty Ltd [2024] NSWSC 1414 at [7]ff. I have also borne in mind the cautionary observations of Basten JA (Handley JA agreeing) in Sangha v Baxter [2009] NSWCA 78 at [155], applied by Nixon J in Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293 at [42], that:

The Plaintiffs read several affidavits of Mr Hardie in support of the application, although significant parts of those affidavits were not admissible and were not read or, by agreement of the parties, were read subject to limiting orders under s 136 of the Evidence Act 2005 (NSW) (“Evidence Act”).

By his affidavit dated 4 September 2023, Mr Hardie outlined the circumstances in which Mobius was incorporated; noted that Mr Crossley became a director of Mobius and shares in Mobius were allotted to Jamaphle; and referred to his and Mr Crossley’s respective responsibilities in respect of Mobius’ business. He referred to a breakdown in the working relationship between Mr Crossley and himself between November 2021 and May 2022 and to criticisms that Mr Crossley had made of Mr Hardie’s work in relation to sales and marketing.

Mr Hardie also addressed a meeting on 14 November 2022 where Mr Crossley suggested a reduction of the Plaintiffs’ interest in Mobius from 50% to 10% (Hardie 4.9.23 [37]), to which I return below. He addressed the circumstances in which Mr Crossley appointed new accountants for Mobius (Hardie 4.9.23 [47]) and referred to Mr Hardie’s then taking “mental health leave” from Mobius (Hardie 4.9.23 [48]) and to his subsequent resignation as an employee of Mobius on 1 June 2022 (Hardie 4.9.23 [51]; Ex P4, CB 171). Mr Hardie’s evidence (Hardie 4.9.23 [53]-[54]), led without objection, was that after he resigned as an employee, Mr Crossley further excluded him from Mobius’ management and had since “operated the Company and made unilateral decisions in a manner that ought to have been made by both directors” and he gave examples of decisions taken by Mr Crossley without consulting him.

Mr Hardie then referred to correspondence between the parties, including a letter dated 16 September 2022 from Mr Crossley’s solicitors which plainly made incomplete disclosure of Mobius’ inventory (Hardie 4.9.23 [58]ff) and addressed Mr Hardie’s estimate of the substantial market value of four barrels of alcohol added to Mobius’ inventory, purportedly on the day that letter was sent, but not disclosed in that letter (Hardie 4.9.23 [76]). Mr Hardie also referred to an unsuccessful mediation between the parties and to subsequent correspondence between the solicitors prior to the exchange of letters which Mr Hardie contends gave rise to an agreement (“Sale Agreement”) as to the sale process for Mobius. He also refers to his and his solicitors’ consultation with several valuers after that agreement was alleged to have been formed (Hardie 4.9.23 [124]).

Mr Hardie then referred to subsequent actions of Mr Crossley, including the issue of creditor’s statutory demands by Mr Crossley and associated parties to Mobius. Mr Hardie also referred to a subsequent directors’ meeting on 30 August 2023, which his sister, Ms Hardie, attended as his alternate director (Hardie 4.9.23 [173]). I address that meeting below. Mr Hardie also addressed several matters relevant to the assessment of Mobius’ solvency (Hardie 4.9.23 [184]ff), which is plainly a significant matter where Mr Crossley sought to justify service of the creditor’s statutory demands on the basis of his then concern as to Mobius’ solvency, rather than contending, for example, that he could justifiably have served the demands in order to bring about the winding up of an apparently solvent company.

By his second affidavit dated 9 April 2024, Mr Hardie referred to Mr Beattie’s appointment as voluntary administrator of Mobius, which was agreed after the commencement of these proceedings and to reports issued by Mr Beattie to creditors in the course of the voluntary administration. He also referred to an offer made by Mr Crossley to acquire Mobius’ business in the course of the voluntary administration and addressed (Hardie 9.4.24 [37]ff) Mr Crossley’s claim, advanced during the voluntary administration, that Mr Crossley “owned” several key recipes used in Mobius’ business. Mr Hardie also referred (Hardie 9.4.24 [38]) to Mr Beattie’s observation, in his supplementary report to creditors, that Mr Crossley’s claim of ownership of those recipes adversely affected the attractiveness of the business for prospective purchasers, who expected to acquire those recipes as a component of the business’s goodwill. That report was admitted without limitation and it was likely a business record of the voluntary administrator. Mr Beattie was plainly an experienced insolvency administrator and was well qualified to assess the effect of a suggestion that a company operating a distillery did not “own” the recipes for its most significant products on a sale process. I have no hesitation in accepting Mr Beattie’s view as to that adverse impact of that claim on the sale process. Mr Hardie in turn referred to his involvement in the preparation of the relevant recipes in contending those recipes were confidential information of Mobius rather than being “owned” by Mr Crossley.

By his third affidavit dated 18 July 2024, Mr Hardie further updated events in respect of the acquisition of Mobius’ business by Infinity IP Pty Ltd (“Infinity IP”), as to which Jamaphle was the sole shareholder and Mr Crossley was then the sole director and shareholder, although associates of Mr Crossley have since been appointed directors of Infinity IP. Mr Hardie noted that, since the sale of mobius’ business to Infinity IP, Mr Crossley had rebranded products using the business name “Eureka Distilling”, which is in turn owned by Infinity Distilling Pty Ltd (“Infinity Distilling”), of which Mr Crossley is the sole director and Infinity IP is the sole shareholder. Mr Hardie also estimated the value of barrel stock sold by Mobius to Infinity IP, in the course of the deed administration, by reference to current sale prices of Eureka Distilling products. Mr Hardie was cross-examined as to that calculation, and it did not take into account some costs of the production and bottling process. Mr Crossley makes no attempt to establish the amount of those costs which would be a matter within his knowledge.

By a further affidavit dated 13 December 2024, Mr Hardie responded to Mr Crossley’s evidence concerning his claim to have created the recipes used by Mobius independently of Mobius. Mr Hardie also there addressed, in greater detail, the circumstances in which he and Mr Crossley worked together to develop several products, including an apple pie liqueur which has subsequently been commercially successful. Mr Hardie also there provides a detailed response to other aspects of Mr Crossley’s evidence. It is not necessary to determine many of the specific disputes between the witnesses as to these matters to determine the proceedings. Mr Hardie also there responds to evidence led by Mr Blaxhall in his affidavit dated 7 November 2024.

By his affidavit dated 27 March 2025, Mr Hardie responds to a second affidavit of Mr Crossley, addressing matters including Mobius’ Xero system and its use to record costs of producing Mobius’ inventory, Mobius’ stock value, cash sales by Mobius and additional costs incurred by Mobius. He also addressed a draft document which he had prepared about the time of the meeting with Mr Crossley on 14 November 2021, which he contended addressed the possibility that Mr Crossley could become the managing director of Mobius, although his evidence was that he did not recall addressing that matter at the 14 November 2021 meeting. In cross-examination, Mr Hardie fairly acknowledged that, given his lack of recollection, he could not deny that he had addressed that matter at that meeting. Little turns upon whether Mr Hardie had accepted that Mr Crossley should be managing director of the Company, given the conclusions that I reach on other grounds below.

Mr Hardie was cross-examined at some length, including as to the complaints made by Mr Crossley as to his work before he took mental health leave and as to unpleaded allegations of improper personal expenditures in relatively small amounts. Mr Atkin, who appears for the Plaintiffs, submits that Mr Hardie was a careful and considered witness and that he generally gave succinct and responsive answers to questions asked and made appropriate concessions, and he submits that Mr Hardie’s downloading of records of Mobius when he resigned as employee was “of no moment” where he remained a director and there is no evidence that he had misused that information. Mr Atkin also emphasised, in closing submissions, Mr Hardie’s evidence as to the circumstances in which the recipes utilised by Mobius to produce its products were developed, although it is not necessary to decide any question of “ownership” of those recipes given the findings that I reach below. Mr Cleary, who appears for the Defendants, acknowledged that Mr Hardie was a “careful witness” and was prepared to make some concessions against interest, although he points out that there were topics where such concessions were not made, including the circumstances in which he downloaded customer information from Mobius’ customer records. I recognise that Mr Hardie was not particularly convincing in cross-examination as to the extent of information which he downloaded from Mobius’ Google Drive on ceasing employment with Mobius, but it is not necessary to determine that question in order to determine the proceedings. Mr Hardie otherwise presented as a generally honest witness although he had difficulties of recollection in some areas.

The Plaintiffs also read an affidavit of Ms Hardie dated 4 September 2023 which was largely directed to the directors’ meeting of Mobius which she attended on 30 August 2023. A transcript of that meeting was made, by agreement of Ms Hardie and Mr Crossley, and I will refer to that transcript in dealing with that meeting below. Ms Hardie refers to the resolution which she proposed at that meeting, authorising Mobius to seek finance for the debts claimed in the statutory demands, which Mr Crossley did not support. Ms Hardie’s evidence is that, when she asked Mr Crossley whether he would be willing to withdraw the demands that he and his associated company, Myline Brewing & Distilling Solutions Pty Ltd (“Myline”) had issued, he stated that he would not “as he had doubts about the solvency of the Company” and also referred to the directors being at “loggerheads”. I do not accept that there was any reasonable basis for his suggested doubts about the solvency of Mobius, at least if had complied with the Sale Agreement and had not caused Mr Blaxhall to demand immediate repayment of debts that he claimed were owed by Mobius. Ms Hardie was briefly cross-examined, but her evidence was in limited scope, and there seems to me to be no reason to doubt her honesty.

The Plaintiffs also called Mr Blight, who was associated with a potential purchaser of Mobius’ business, who gave oral evidence confirming the position set out in his email dated 8 March 2024 (Ex P11, CB 5921), which I address below. Mr Cleary put to Mr Blight, in cross-examination, that his biggest concern in not proceeding with the purchase was the then market conditions in the industry. Mr Blight repeatedly rejected that proposition, while recognising that that was one concern, combined with the existence of the proceedings and his company’s inability to obtain security as to the use of the recipes, where Mr Crossley would not commit to that matter. I have no doubt as to the truth of his evidence and the significance of lack of certainty as to access to key recipes used in Mobius’ business to a potential purchaser of that business.

Mr Crossley read his affidavit dated 7 November 2024, parts of which were not admissible and were not admitted. He refers to his involvement with the alcohol and distilling industry over a significant period and to the circumstances in which he was introduced to Mr Hardie in 2015 or early 2016 and became involved with Mobius. His evidence was that he produced and provided Mobius with “numerous products from recipes that [he] had created in [his] own personal time such as gins, rums and an ‘apple pie liqueur’” and I address that matter below. Mr Crossley also referred to circumstances in which Jamaphle acquired half of the shares in Mobius (Crossley 7.11.24 [30], [36]). Mr Crossley noted that, at the time the business commenced trading, neither he nor Mr Hardie received a wage from it, and he outlined his and Mr Hardie’s initial duties in the business (Crossley 7.11.24 [38]-[41]). Mr Crossley also referred to the development of a “business model” for Mobius as set out in the Business Plan dated 21 May 2018 (“Business Plan”) which I address further below. Mr Crossley’s evidence is that he commenced full-time employment with Mobius in around July 2019 and his evidence was that his relationship with Mr Hardie began to deteriorate at that time (Crossley 7.11.24 [46], [48]). He set out, at some length, his criticisms of Mr Hardie’s performance of his role with Mobius. It is not necessary to reach findings as to those criticisms where, even if they were well-founded, they would provide no answer to the findings that I reach as to Mr Crossley’s conduct below.

Mr Crossley in turn claims (Crossley 7.11.24 [137]-[138]), in plainly self-serving evidence, that:

I pause to note, although it is of limited significance to my conclusions below, that Mr Crossley’s reference to Mr Hardie being “rewarded financially” by Mobius is doubtful where Mr Hardie was not then being paid a wage for his involvement with the business and the amount of expenses he claimed was not material; and Mr Crossley’s reference to supporting Mr Hardie’s “personal lifestyle” at the expense of Mobius and Mr Crossley is insupportable, where Mr Hardie was then living in Mobius’ leased factory premises because he could not afford to rent accommodation.

Mr Crossley in turn refers to document he prepared on 20 April 2022, which recorded his dissatisfactions with Mr Hardie (Crossley 7.11.24 [146]), which I also address below. He also refers to an email dated 26 April 2022 which I address below.

Mr Crossley then refers to Mr Hardie’s having disclosed his mental health difficulties and taken leave on 5 May 2022. Mr Crossley claims (Crossley 7.11.24 [157]ff) that Mr Hardie had accessed and copied records of Mobius on the same day (Crossley 7.11.24 [157]). There is a dispute as to the extent of the records that were copied by Mr Hardie and as to whether those records extended, as Mr Crossley claims, to all of Mobius’ contacts, lists of current customers and lists of potential customers. It is also not necessary to determine that dispute, where Mr Hardie’s conduct in that respect could not displace the breach of duties on Mr Crossley’s part which I find below. Mr Crossley also refers to Mr Hardie’s resignation as an employee of the business on 1 June 2022 (Crossley 7.11.24 [163]) and to the circumstances in which he caused alleged personal expenses to be debited against Mr Hardie’s loan account (Crossley 7.11.24 [169]ff). There is a dispute as to the extent of personal expenses that were properly debited to that account, and it is plain that Mr Crossley cannot support many of the complaints as to personal expenses which he originally made against Mr Hardie. It is also not necessary to determine that dispute where the amount involved is not material and could not displace the breach of duties on Mr Crossley’s part which I find below.

Mr Crossley’s evidence (Crossley 7.11.24 [177]ff) is that, after Mr Hardie took leave and then resigned as an employee, Mr Crossley “took steps to progress the business towards the Business plan and Business Model that had been agreed between [Mr Hardie] and [Mr Crossley]” and he gives examples of some of the steps taken, including steps which on which Mr Hardie relies in his claim for oppression.

Mr Crossley’s evidence (Crossley 7.11.24 [182]ff) is that he created specified recipes personally, in his own personal time, and utilising his own personal equipment. He contends that he is the “sole owner of the exclusive intellectual property rights” to those recipes, which he says were created by him in and around 2014. Mr Crossley refers to a copy of a “recipe spreadsheet” (Ex D2, CB 1795-1798) on which he relies to establish his claim to own the relevant recipes. Mr Crossley says that (Crossley 7.11.24 [189]) that the recipe spreadsheet is dated 28 July 2014, but it is undated; the ‘28 July 2014’ reference appears in a handwritten record in Mr Crossley’s notebook which he says (Crossley 7.11.24 [197] is consistent with that spreadsheet and which I address below. Mr Crossley also says (Crossley 7.11.24 [190]), by way of bare assertion:

Mr Crossley then gives further evidence, to which I give greater weight than the assertions that I noted above, which outlines the work that he undertook in respect of the development of an apple pie liqueur (Crossley 7.11.24 [192]ff) and his evidence is that he had perfected the recipe for that product by the end of 2013. He refers to an extract from a notebook in respect of the recipe for the apple pie liqueur (Ex D2, CB 1799) but that document is virtually illegible and, if it in fact records the recipe for the apple pie liqueur, it was tendered without any claim to confidentiality in these proceedings. Mr Crossley also addresses (Crossley 7.11.24 [200]ff) matters on which he relies to claim intellectual property rights in respect of citrus and black cardamon gin, a signature gin, finger lime gin and several other gins and a vodka known as “38 Special Vodka”. He says, again by way of assertion (Crossley 7.11.24 [235]) that:

Mr Crossley’s evidence (admitted with a limiting order under s 136 of the Evidence Act as his understanding only) (Crossley 7.11.24 [236]) was that, towards the end of 2022, it became apparent that the sales of the Business had begun to trend into a decline. That proposition was not established by evidence and, even if it were true, it was not established that, but for Mr Crossley’s conduct, there was any issue as to Mobius’ solvency.

Mr Crossley also gave evidence (Crossley 7.11.24 [238]) that:

Mr Crossley refers to a valuation that was prepared by an accounting firm in late 2022 that valued the business at a median value of $120,148.61 (Crossley 7.11.24 [247]) and to an obviously overly optimistic valuation obtained by Mr Hardie of the business as worth in excess of $9.7 million, in preparation for a mediation. It is plain enough, from the evidence to which I refer below, that Mr Crossley did not consider the valuation that he had obtained accurately reflected the market value of Mobius’ shares or the business, allowing for its prospects of future growth, although the valuation obtained by Mr Hardie also did not do so.

Mr Crossley’s evidence is also that, after the disparity between the parties’ valuation of the business emerged, the mediation failed and Mr Hardie asserted an entitlement to be informed of and involved in decisions relating to Mobius (I interpolate, reasonably enough where he remained a director of Mobius):

Mr Crossley then addresses (Crossley 7.11.24 [257]ff) the correspondence relating to the Sale Agreement and I address the implications of that agreement below. Mr Crossley refers to having met with an advisory firm, de Jonge Read (“DJR”) (which provides pre-insolvency services) on 2 August 2023 (Crossley 7.11.24 [264]). He does not there disclose that he had been dealing with DJR from an earlier time, and indeed from the same day on which the Sale Agreement was reached. It is not necessary to determine whether that omission reflected a genuine failure of recollection.

Mr Crossley’s evidence is in turn (Crossley 7.11.24 [266]) that:

Mr Crossley also refers to Mobius’ profit and loss statement for the 2021 – 2022 and 2022 – 2023 financial years, neither of which indicate that it was unable to pay its debts as and when they fall due, which would require a cashflow analysis. It is plain enough Mobius’ debts to Myline, Mr Blaxhall and Mr Crossley, or indeed to Mr Hardie, were not matters that caused any difficulty for its solvency unless demands for payment were made, and Mr Crossley and Mr Blaxhall later caused those demands to be made as part of the strategy adopted by Mr Crossley, with DJR’s advice, to bring about a liquidation of Mobius from which he could acquire its business. Mr Crossley’s evidence was also that he created Infinity and Infinity IP because he “wished to continue in the industry even if [Mobius] was sold” (Crossley 7.11.24 [269]). That evidence is at best a half-truth where Mr Crossley created those companies so as to seek to acquire Mobius’ business in a liquidation, although I recognise that he may have used them for other purposes if his and DJR’s strategy for his associated companies to acquire Mobius’ business had not succeeded. Mr Crossley also leads evidence as to aspects of the administration and deed administration of Mobius and the attempts of the voluntary administrators and deed administrators to sell Mobius’ business. He refers to his having caused DJR to make an offer to acquire Mobius’ business on his behalf. His evidence in that respect is misleading in its attempt to treat his offer to acquire Mobius’ business as a separate step from those which preceded it, where those steps were all taken as part of a planned strategy to acquire that business in the insolvency administration of Mobius.

By a second affidavit dated 14 March 2025 Mr Crossley addressed issues as to Mobius’ inventory management; stock value; marketing and cash sales; the employment of Ms Crossley, Mr Blaxhall and others in Mobius’ business; and the amount that his associated entities paid to acquire Mobius’ business in the deed administration. Aspects of that evidence are directed to responding to allegations of wrongdoing by Mr Crossley in the day-to-day management of Mobius’ business, which seemed to me of lesser significance than the breach of his duties in respect of the insolvency administration of Mobius and the acquisition of its business.

Mr Atkin submits that Mr Crossley was an unsatisfactory witness, who gave evasive and non-responsive answers, which were on occasion revised in response to contemporaneous documents, and declined to explain aspects of his conduct. Mr Cleary submitted that Mr Crossley attempted to give truthful evidence in cross-examination while having a difficulty in recalling specific dates that events occurred. Regrettably, I am unable to take that view. I will address several aspects of Mr Crossley’s cross-examination in dealing with the chronology of events below. I am comfortably satisfied that Mr Crossley gave false or misleading evidence in significant parts of his affidavits and in cross-examination and was evasive in cross-examination, particularly in seeking to avoid accepting that he adopted and implemented a strategy recommended by DJR to cause the winding up of Mobius so as to acquire its assets as cheaply as possible in an insolvency administration. I will point to many examples of false, misleading or evasive evidence below, which seems to me to have undermined Mr Crossley’s credit generally, so that his evidence should not be accepted as a whole unless corroborated by contemporaneous records.

Mr Crossley also reads an affidavit dated 7 November 2024 of Mr Blaxhall, who was initially a contractor to Mobius, and who served one of the three creditor’s statutory demands which were intended to bring about the winding up of Mobius and then prompted the appointment of the voluntary administrator to Mobius. Mr Blaxhall addressed complaints as to Mr Hardie’s involvement in the management of the business, which seem to me to be of limited significance in the resolution of these proceedings. Mr Blaxhall plainly participated in the strategy which brought about the insolvency administration of Mobius, and it emerged in his cross-examination that he is party to an undocumented arrangement to acquire an equity interest in the companies which had later acquired Mobius’ business, which will be implemented after these proceedings are concluded. Mr Atkin submits that Mr Blaxhall had a poor recollection of events, and his evidence should be treated with caution, although he did not suggest any dishonesty on his part. I need not reach any findings as to Mr Blaxhall’s credit.

I will address the expert evidence led by the parties below.

I now turn to the parties’ pleaded cases and a chronology of events. In doing so, I have drawn on the affidavit evidence and on a helpful chronology set out in Mr Atkin’s opening submissions. I here reach findings as to disputed events to the extent that it is necessary to do so to determine the case.

In late 2015 or early 2016, Mr Hardie and Mr Crossley were introduced and they then met on several occasions to discuss creating a new company to open and operate an alcohol distilling business (Crossley 7.11.24 [19]-[20]). I have referred to the shareholdings in Mobius and to Mr Hardie’s and Mr Crossey’s appointment as its directors above. The Plaintiffs contend (POC [7]) that:

Mr Crossley admits (POD [7]) that Mr Hardie and he had different duties within the business and otherwise denies the paragraph and says that Mobius was never operated as a quasi-partnership. It is not necessary to determine that matter where that allegation is not necessary to establish a claim in oppression.

The Plaintiffs plead (POC [8]-[11]) that, from early 2018, Mobius, in the course of its business, developed novel recipes to distil an “apple pie liqueur”, flavoured gins, vodka, limoncello, and other spirits and liqueurs (“the recipes”); the recipes were confidential information belonging to Mobius; and Mobius used the recipes to distil and market various liqueurs and spirits, including specified products; that “[a]ll intellectual property and goodwill associated with the recipes and the products belonged to Mobius” and that Mobius won a number of prestigious awards for those products. Mr Crossley responds that he:

On 21 May 2018, Mr Hardie and Mr Crossley prepared the Business Plan for Mobius, which was subsequently revised on 2 September 2019. As Mr Atkin points out, the Business Plan recorded that Mr Crossley would be responsible for operations and production, while Mr Hardie would be responsible for sales and marketing (Ex D2, CB 1569) and they were jointly allocated responsibility for “accounting” and “corporate governance” (Ex D2, CB 1569). The Business Plan referred to Mobius’ products, knowledge, intellectual property and research and development, recording that:

The Business Plan then set out Mobius’ core products, including the apple pie liqueur and gins which would be released seasonally (Ex D2, CB 1655). It then recorded:

The Business Plan also referred to expansion into export markets as a “longer-term goal” that would only be explored “[o]nce the business is firmly established and financially sustainable” (Ex D2, CB 1627, 1633). That condition is of particular significance given the timing of Mr Crossley’s subsequent investigation of expansion of Mobius sales into Singapore. The Business Plan also described “Loss of key staff” as a risk, and listed as a strategy for addressing that risk as being “[e]nsure that all processes and procedures are documented…” (Ex D2, CB 1644).

Between FY2019 and FY 2023, Mobius achieved steady and substantial growth in its trading income (Ex D2, CB 1793), with trading income of $65,605.76 in FY19; $132,722.93 in FY20; $356,682.57 in FY21; $756,716.63 in FY22; and $1,086,700.39 in FY23. I recognise, however, that Mobius made trading losses in every year, other than the year ending 30 June 2022 in which a modest profit was made, and that profit appears to have depended on at least not paying market value for Mr Crossley’s and Mr Hardie’s work. That position may, however, not be uncommon for even a successful start-up company that is seeking to grow its business.

I pause to note that, notwithstanding the substantial growth in Mobius’ earnings and the apparent market recognition of the quality of its products, Mr Cleary, who appears for Mr Crossley, submits that:

There are obvious, and fundamental, difficulties with this submission. First, the value of a start-up company will, as the expert evidence recognised, often depend not on its current earnings but on its prospect of future earnings, and growing start-up companies with minimal earnings may have significant value to a purchaser who can support their growth. Second, Mr Crossley, who would be expected to know, valued Mobius at approximately $1 million in a setting where he would be expected to seek to achieve an accurate valuation (Ex P11, CB 5750), and made offers both to Mr Hardie and later to the administrators to acquire Mobius’ business at amounts that recognised it had significant value although they were much less than his own valuation of the business. Third parties also made offers to acquire the business, although their offers were plainly depressed by Mr Crossley’s claim that he, rather than Mobius, “owned” the recipes used in its business and those offers did not complete where that claim was then unresolved.

The Plaintiffs plead a subsequent breakdown in relationship between Mr Hardie and Mr Crossley, which it appears is common ground. It is common ground (POC [13]-[14], POD [13]-[14]) that, on 14 November 2021, Mr Crossley requested (or required) that Mr Hardie agree a restructuring of Mobius, so that Mr Crossley would hold 1,551,867 shares and Mr Hardie would hold 448,133 shares. A document titled “Mobius Restructuring” prepared by Mr Crossley (Ex P4, CB 123) listed several perceived issues with Mr Hardie’s contribution to the business, followed by the statement “That isn’t right nor fair”. Mr Crossley complained, inter alia, that he had advanced approximately $100,000 to Mobius and Mr Hardie had advanced approximately $30,000. These advances are described in document as “capital contributions”, but it is common ground that these advances were made by way of loan. Under the heading “The way forward”, Mr Crossley referred to his proposed change in the shareholding and indicated that a shareholder’s agreement would be drawn up as a matter of priority (Ex P4, CB 127). Mr Hardie did not agree to Mr Crossley’s request (or requirement) for a reallocation of the shares. Mr Hardie disputes the validity of many of those complaints but it will not be necessary to resolve them where, even if they were all justified, they would not conceivably justify Mr Crossley’s conduct which I address below.

It is common ground (POC [15], POD [15]) that, between November 2021 and May 2022, Mr Crossley made allegations that Mr Hardie had improperly used funds of Mobius to pay for personal expenses. On 13 April 2022, Mr Crossley sent an email to Mr Hardie entitled “personal use of Mobius funds” (Ex D2, CB 1690) which listed many transactions totalling approximately $4,700 which Mr Crossley then contended “should have been made from your [Mr Hardie’s] personal funds instead of the businesses [sic]”, including the cost of a mobile phone apparently used by Mr Hardie for business purposes and returned to Mobius when he resigned, travel expenses (Opal or Uber charges) or small expenditures at licensed venues in Sydney, which Mr Hardie contends were made while seeking to sell Mobius’ products to those venues.

Mr Hardie contends (POC [16]) that these allegations were “incorrect and baseless”; Mr Crossley responds (POD [16]) that he “denies that the allegations articulated at (POC [16]) were incorrect and baseless”. That denial put Mr Hardie to proof of that allegation but did not plead material facts that would permit Mr Crossley to put an affirmative claim that particular (unidentified) expenditures were wrongly made. Where Mr Crossley has not raised an affirmative claim, he cannot now put an affirmative case that he has not identified to allow the Plaintiffs a fair opportunity to meet it. In any event, it is also not necessary to determine this issue, where the amounts involved were not material in a quantitative or qualitative sense, and, even if Mr Crossley’s complaints were well-founded, they would not alone or with other matters provide any justification for his conduct that I address below.

The Plaintiffs in turn plead that Mr Crossley excluded Mr Hardie from the management of Mobius’ affairs and “r[a]n down the value of Mobius. The latter allegation is particularly important for their oppression claim. They plead (POC [17]), in summary, that, from about April 2022, Mr Crossley took steps to exclude Mr Hardie from the management of Mobius’ affairs and depress the ostensible value of Mobius, “for the purpose of permitting the purchase by Mr Crossley (or an entity owned and controlled by him) of either (i) Mr and Ms Hardies’ shares in Mobius, or (ii) Mobius’ business and assets.” Mr Crossley denies this claim (POD [17]) and contends that he “did not take any steps to exclude [Mr Hardie] from the management of Mobius’ affairs or depress the ostensible value of Mobius”; and that “[Mr Hardie] voluntarily chose to remove himself from taking part in the management of Mobius’ affairs.” Mr Crossley does not plead any affirmative case in response to the allegation that he ran down Mobius’ value, but his denial puts the Plaintiffs to proof of that allegation.

On 26 April 2022, Mr Crossley sent an email to his daughter, Eve Crossley, who worked for Mobius, and Mr Blaxhall with the subject “bit of a brain dump re global collective, export etc etc” (Ex D2, CB 1752). The email commenced as follows:

In his first affidavit, Mr Crossley refers to this email (Crossley 7.11.24 [147]) and claims that the email was “simply my exasperated frustration vented to the two people who were intimately aware of the situation, and to whom I frequently confided in”. Even if Mr Crossley was then “venting” any “frustration”, he plainly identified his view that there was “no point” in taking the specified actions for Mobius’ benefit, if it was only going to increase the price he would have to pay Mr Hardie to acquire his interest. Mr Crossley’s evidence in cross-examination was also that this was merely an expression of frustration and not seriously meant. I reject that evidence and find that email recorded Mr Crossley’s then unwillingness to develop the business, where doing so would increase the price to be paid to acquire Mr Hardie’s share in that business. By taking that position, Mr Crossley preferred his own interest in minimising that price to Mobius’ corporate interest.

On 3 May 2022, Mr Crossley met with accountants, JR Corporate Accountants Pty Ltd (“JR Corporate”), who he proposed to retain for Mobius. without informing Mr Hardie of that meeting in advance or allowing him an opportunity to attend it. On 4 May 2022 (POC [18], admitted POD [18]), Mr Crossley told Mr Hardie that he had engaged new accountants on behalf of Mobius and proposed that Mr Hardie and Ms Hardie’s shareholding be diluted to 10% of the shares in Mobius. The Plaintiffs plead (POC [19]), that “[a]t no time was Mr Crossley authorised to engage new accountants on behalf of Mobius.” It is not necessary to determine that question where, even if the accountant’s retainer was authorised, it did not properly extend to advising Mr Crossley as to the steps subsequently taken to depress the apparent earnings and value of Mobius for his and his associated companies’ benefit. Mr Crossley also then engaged JR Corporate to handle his personal accounting needs at about the same time. Mr Crossley also then sent an email to Mr Hardie with the subject “Outstanding items” (Ex D2, CB 1755), which contained a list of six “items I’ve previously asked for but not had any response”. The sixth item was “Share reallocation as per discussion way back in November.” The email concluded that “I need these to be closed out before I go to MLB next week”.

On 5 May 2022, Mr Hardie took mental health leave from his employment with Mobius (POC [20], POD [20]). Mr Crossley contends that “at the time [Mr Hardie] took leave he had already ceased contributing to the operation of the Company … anyway.” On the same day, Mr Crossley advised Mobius’ new accountants, J R Corporate, that:

On 9 May 2022, Mr Crossley sent an email to JR Corporate describing the need to “work out a value once we get the books tidied up” with a view to buying out Mr Hardie’s interest in Mobius. In that email, Mr Crossley also suggested that:

The Plaintiffs plead (POC [21]-[22]) that, on 24 May 2022, Mr Crossley caused Mobius’ accounts to be altered to reduce the amount of the loan owing by Mobius to Mr Hardie from approximately $31,026.87 to negative $3,996.77 and that alteration was unjustified. Mr Crossley denies these claims (POD [21]-[22]) and adds that “the loan owed to [Mr Crossley] was ultimately paid to him”, without addressing the quantification of that loan.

It is common ground (POC [23], POD [23]) that, on 1 June 2022, Mr Hardie resigned as an employee of Mobius (but not as a director of Mobius) and sent an email (Ex P4, CB 171) to Mr Crossley confirming that Mr Hardie remained a director of Mobius, as follows:

The Plaintiffs plead (POC [24]) that, from 1 June 2022, “Mr Crossley excluded Mr Hardie from the management of the business and affairs of Mobius”. Mr Crossley denies (POD [24]) excluding Mr Hardie from the management and business affairs of Mobius, and says that that Mr Hardie chose to not be involved in its management and business affairs.

This allegation has several elements. The first is a claim that Mr Crossley purported to make business decisions on behalf of Mobius, without consulting Mr Hardie, which he was not authorised to make on Mobius’ behalf without Mr Hardie’s consent, including purporting to cause Mobius to employ new staff, including friends and family members of Mr Crossley; increase wages paid to employees; incur substantial expenses to third party consultants and suppliers, including “Blaxhall Consulting”; incur substantial travel expenses for international travel undertaken by Mr Crossley; and purchase equipment. Mr Crossley admits that he made business decisions on behalf of Mobius, without consulting Mr Hardie, but contends that these decisions were made in the ordinary course of business and did not require Mr Hardie’s consent.

Second, the Plaintiffs contend, and Mr Crossley denies, that Mr Crossley refused to respond to reasonable requests for information by Mr Hardie. The Plaintiffs contend that Mr Crossley removed Mr Hardie’s access to “Vinsight”, the inventory management system used by Mobius, and that Mr Crossley edited Mobius’ website so as to remove mention of Mr Hardie and to present Mr Crossley as the sole founder of Mobius; Mr Crossley admits those matters but claims that they were done on the basis that Mr Hardie “was no longer an employee of [Mobius’] business nor contributing to [Mobius] pursuant to his duties and obligations as a director.”

The Plaintiffs then plead (POC [25]), denied POD [25]) that Mr Crossley caused Mobius to fail to record in its accounts all inventory held by Mobius; fail to record in its accounts all sales made by Mobius; and fail to deposit to a bank account cash received from sale of its products. The Plaintiffs then plead that an agreement relating to a sale process for Mobius was reached and later breached by Mr Crossley.

On 16 June 2022, Mr Crossley sent an email to JR Corporate with the subject “Mobius Valuations” (Ex P11, CB 5733) which stated:

Mr Crossley was here seeking advice from Mobius’ new accountants, who he had recently appointed and whose costs were to be paid by Mobius rather than him, as to how to minimise the amount paid to Mr Hardie to acquire his shares in Mobius or his interest in the business. An obvious way to do so, as the accountants then pointed out, was to reduce Mobius’ net earnings (I interpolate, likely contrary to its corporate interests) and Mr Crossley promptly took steps to do so.

Mr Crossley claimed in cross-examination (T128) that his proposition, similar to that which he previously raised with his daughter and Mr Blaxhall, that “I can’t proceed with ideas and plans as they will simply drive the value up and mean it’ll cost me more” was also merely “venting” on his part. I also do not accept that evidence, which is adverse to Mr Crossley’s credit, where he was plainly then advising of a perceived constraint on his management of the business, namely that he did not wish to improve its value in a way which would make the acquisition of Mr Hardie’s shares more expensive. Mr Crossley failed to acknowledge the conflict of duty and interest which arose from that matter when he responded to Mr Atkin’s putting that conflict to him in cross-examination, with the response “[t]hat’s not my intent” (T128). Mr Crossley also denied in cross-examination (T129) that he understood that his then suggestion that steps should be taken to minimise the FY 2022 tax position of Mobius “was very likely to involve taking steps to minimise the reported earnings of Mobius for FY 22”. Mr Crossley worked in banking before he took up his position with Mobius and I am satisfied that he well understood that matter and that denial was false.

On 21 June 2022, Mr Crossley sent a further email to JR Corporate (Ex P11, CB 5743) referring to the need to seek an invoice from Mr Blaxhall, who was described as a “guy who has been providing a lot of assistance to the business” so that it could be added “to the accounts payable”, which would, I interpolate, bring about a reduction of Mobius’ net earnings. On 28 June 2022, Mr Crossley recorded an invoice for $49,050 from “Blaxhall Consulting” in Mobius’ Xero account. The invoice included charges for two days per week of work over 40 weeks at a rate of $500/day, extending back into the period of the COVID-19 pandemic. Mr Crossley’s encouraging the hurried issue of this invoice was, of course, inconsistent with his then having any concern as to Mobius’ solvency.

By another email to Mobius’ accountants dated 28 June 2022, (Ex P11, CB 5891), Mr Crossley recorded that he had created a timesheet to account for eight weeks of overtime at $1,500 per week totalling $12,000 and asked whether it was the “best way to do it”; whether it should be a separate one-off payment; and whether he should pay himself tomorrow in that financial year. In self-serving evidence in cross-examination Mr Crossley attributed the decision to make this payment to the accountants. I reject that evidence, which further undermines his credit. This payment at once put funds in Mr Crossley’s hands, further depressed the value of Mobius and also reduced the funds available to it to respond to the statutory demands that Mr Crossley would shortly cause to be issued to Mobius. This payment was, of course, also wholly inconsistent with Mr Crossley then having any concern as to Mobius’ solvency.

On 31 August 2022, Mr Hardie’s then solicitor, sent a letter to Mr Crossley’s then solicitor (Ex P4, CB 179) which requested:

On 16 September 2022, Mr Crossley’s solicitors responded stating “that no additional barrels have been filled and added to the inventory between September 2021 and 30 June 2022” (Ex P4, CB 183). That proposition was seriously misleading, by omission, where four barrels of alcohol of substantial value were about to be added to inventory and were in fact added to inventory on that day. It is not necessary to decide whether that correspondence was intentionally misleading on Mr Crossley’s part.

On 14 October 2022, Mr Hardie’s solicitors raised claims that Mr Crossley had engaged in oppressive conduct (Ex P4, CB 200) and again requested “a current inventory of aging spirits… as opposed to an inventory to the end of the Financial Year” (Ex P4, CB 207). The letter noted that Mobius had purchased barrels since September 2021 and employed distillers and that Mr Hardie had witnessed the creation and storage of rum at the Marrickville premises and proposed that an “independent inventory” be prepared (Ex P4, CB 210). On 19 October 2022, Mr Crossley’s solicitors sent an email to Mr Hardie’s solicitors which included a table compiled by a third party, Mr Papps, being the current inventory of Mobius (Ex P4, CB 212).

On 9 November 2022, Mr Hardie’s solicitors requested (Ex P4, CB 240-241) that his loan of $31,026.87 to Mobius be repaid, and requested that Mr Crossley abandon his claims that Mr Hardie had engaged in inappropriate expenditure of Mobius’ funds. On 14 November 2022, Mr Crossley’s solicitors in turn denied that Mr Crossley had engaged in any oppressive conduct.

On 3 April 2023, Mr Crossley and Mr Hardie took part in an unsuccessful mediation.

On 20 April 2023, Mr Hardie and Mr Crossley passed a resolution of Mobius’ board (Ex P4, CB 642) confirming its solvency as follows:

Also on 20 April 2023, Mr Crossley’s solicitors wrote to Mr Hardie’s solicitors (Ex P4, CB 303), emphasising the risk of loss of value in Mobius’ business in a winding up as follows:

That position was likely correct and Mr Crossley must have recognised that matter at the time he later commenced a strategy to bring the winding up of Mobius, notwithstanding he later denied having recognised that matter in his cross-examination (T196). Mr Crossley there put an offer to acquire one-sixth of the Plaintiff’s shares in the Company for $60,000, and subsequent tranches of shares for amounts which value the Plaintiffs’ shares at $230,000, although the value of that offer would need to be discounted for the time value of money in respect of later payments.

On 21 April 2023, Mr Hardie’s solicitors sent a letter to Mr Crossley’s solicitors (Ex P4, CB 308) which, in effect, offered to sell his shares in Mobius as follows:

On 26 April 2023, Mr Hardie’s solicitors sent a further letter to Mr Crossley’s solicitors (Ex P4, CB 319) which referred to the earlier offer and said:

On 4 May 2023, Mr Hardie’s solicitors sent a follow-up letter (Ex P4, CB 325-327) and raised further questions concerning actual revenue received by Mobius at off-site events; the collection of $194,267 in outstanding accounts receivable; and expenses incurred by Mr Crossley for travel to Singapore and Vietnam and requested a response by 11 May 2023. The parties’ solicitors then engaged in further correspondence concerning these matters (Ex P4, CB 329-349).

The Plaintiffs plead (POC [26], denied POD [26]) that, between 26 May 2023 and 15 June 2023, Mr Crossley and Mr Hardie reached the Sale Agreement, which provided for them to take steps together to have Mobius valued as a going concern and for all of the shares in Mobius to be marketed for sale on the basis of that valuation. They rely on letters dated 26 May 2023 and 15 June 2023 from Mr Hardie’s solicitors and a letter dated 6 June 2023 from Mr Crossley’s solicitors in respect of that agreement and plead (POC [26A]-[27A], denied POD [26A]-[27A]) the terms of the alleged agreement.

Turning now to these letters, by letter dated 26 May 2023 from Mr Hardie’s solicitors to Mr Crossley’s solicitors (Ex P4, CB 351), Mr Hardie made an offer to the effect that:

Importantly, Mr Crossley there, and in subsequent correspondence concerning the Sale Agreement, raised no concern as to Mobius’ solvency. A concern as to that matter would have been highly relevant to that proposal if it were genuinely held.

On the same day, Mr Hardie’s solicitors also requested Mr Crossley to explain the basis upon which he considered that he had authority to take various actions on behalf of Mobius and requesting that he consult with Mr Hardie about specified types of business decisions going forward (Ex P4, CB 354-357).

By letter dated 6 June 2023 from Mr Crossley’s solicitors to Mr Hardie’s solicitors (Ex P4, CB 384), Mr Crossley indicated his acceptance of Mr Hardie’s 26 May 2023 offer, provided that three further conditions were agreed by Mr Hardie, as follows:

That letter is properly characterised as a counter-offer where it stipulated three additional conditions, but little may turn on that.

On 15 June 2023, Mr Hardie’s solicitors accepted that counter-offer as follows (Ex P4, CB 386):

On 19 June 2023, Mr Hardie’s solicitors sent a letter to Mr Crossley’s solicitors (Ex P4, CB 388) proposing steps to be taken to ready Mobius for valuation and sale.

On 20 June 2023, despite the previous exchange of letters between the solicitors to reach the Sale Agreement, Mr Crossley contacted DJR (Ex P11, CB 5846).

By letter dated 21 June 2022 (Ex P11, CB 5743), Mr Crossley again emailed Mobius’ accountants in relation to “get[ting] the figures updated so we can calculate the valuation” and noted that:

By letter dated 3 July 2023, Mr Crossley’s solicitors suggested to Mr Hardie’s solicitors that steps be taken to prepare Mobius’ business for sale without obtaining a full valuation (Ex P4, 396) and raised the possibility of valuing the trademarks to be included in Mobius’ accounts. Mr Hardie was, unfairly, later challenged in cross-examination for not promptly moving to appoint the valuers of the business which Mr Crossley had suggested were not needed.

On the same day, DJR provided Mr Crossley a “strategy proposal” which recommended that Mr Crossley issue, and cause his associated company, Myline, to issue creditor’s statutory demands to Mobius so as to found an application to wind up Mobius and sell it in a liquidation (Ex P11, CB 5847). While that proposal is coyly phrased, it plainly addressed the practical likelihood of a subsequent sale of Mobius’ business, at a depressed price, by a liquidator to Mr Crossley or associated companies. It will immediately be recognised, first, that that course is starkly inconsistent with the course provided by the letters comprising the alleged Sale Agreement, which provided for Mr Crossley’s director’s loan to be paid, not on demand, but “prior to the proceeds of any sale are distributed between both shareholders” and for an invoice issued by Myline to be “paid out in full prior to the proceeds of any sale being split between both shareholders”. Second, a sale of Mobius’ assets at a depressed value in a liquidation would plainly be adverse to Mobius interests, as Mr Crossley’s solicitors had rightly previously recognised.

In cross-examination as to advice provided by DJR (Ex P11, CB 5857; T196) Mr Crossley acknowledged that DJR’s recommendation was that he bring a claim against Mobius in order to resolve his dispute with Mr Hardie by placing Mobius into liquidation; he responded to the proposition that the next step would then be to see if it was possible to purchase Mobius’ business and assets from an appointed liquidator that “[t]hat was an option”, and he claimed not to have understood any sale by a liquidator would be a fire sale (T196). Both aspects of his evidence in that respect were false, where the purchase of the business and assets from a liquidator was central to DJR’s recommendation and not merely an “option”, and Mr Crossley had well understood, and previously had his solicitors warn Mr Hardie of, the loss of value in Mobius’ business and assets in a liquidation. Mr Atkin put to Mr Crossley that he understood, at the time he received that advice from DJR, that the steps that DJR were recommending “would be inconsistent with the [Sale A]greement that you had reached with Mr Hardie”. Mr Crossley responded evasively, answering that “I can neither confirm nor deny that” (T201).

By email dated 14 July 2023 to Mr Crossley (Ex P11, CB 5887), DJR sought to persuade him to engage DJR and made clear the intent of its suggested strategy to buy Mobius’ business out of an insolvency administration, as follows:

This email made clear that DJR’s advice was directed, not to the issue of a creditor’s statutory demand to a potentially insolvent company so as to bring about a realisation of its assets and the distribution of the proceeds to creditors and contributories, but instead to Mr Crossley’s getting Mobius’ business “into [his] hands”. That reading of the email is consistent with subsequent events and with the lack of any real inquiry by Mr Crossley or DJR as to Mobius’ solvency at that time. I do not accept Mr Crossley’s evidence which steadfastly refused to accept this obvious fact in cross-examination, which once again undermines his credit. I also note that, at this time, Mr Crossley took no steps to disavow the commitments made in the letters alleged to constitute the Sale Agreement or disclose to Mr Hardie that he was now exploring taking an utterly inconsistent approach.

The Plaintiffs then plead (POC [28]-[29], denied POD [28]-[29]) that, on or about 18 July 2023, without Mr Hardie’s knowledge or consent, Mr Crossley caused Infinity Distilling and Infinity IP to be incorporated, for the purpose of purchasing Mobius, or its business and assets; and, on or about 14 August 2023, in breach of the term of the Sale Agreement, Mr Crossley caused creditor’s statutory demands to be served on Mr Hardie in respect of certain debts. On 18 July 2023, Mr Crossley caused Infinity Distilling to be incorporated and on 20 July 2023, Mr Crossley caused Infinity IP to be incorporated (Ex P4, CB 402-403). It is plain that he did so with the objective of acquiring the Mobius business in the manner contemplated by DJR’s advice.

Mr Crossley maintained, in cross-examination, that he had incorporated Infinity Distilling “with multiple ideas” and not for the “express purpose” of acquiring Mobius’ business from an insolvency administration (T222-223). I do not accept that evidence. I also do not accept his evidence that he had not considered the risk that Mobius could obtain finance that might allow it to pay amounts claimed in the statutory demands to avoid a winding up application (T227). Mr Crossley had specifically obtained advice form DJR as to that matter, which he rightly perceived was a risk of the strategy he had adopted. I do not think it likely that Mr Crossley had merely forgotten his consideration of that issue. That evidence is also adverse to his credit.

At 5:09pm on 14 August 2023, a firm of solicitors, JHK Legal, sent emails to Mr Hardie attaching a creditor’s statutory demand issued by Mr Crossley to Mobius, requiring repayment by Mobius of the loan to him of $95,569.35 and a creditor’s statutory demand issued by Myline to Mobius, require payment of two invoices totalling $39,174.30 (Ex P4, CB 101, 106, 426-427). Late on that day, Mr Hardie’ solicitors sent an email to JHK Legal asking that JHK Legal answer a number of questions, including identifying for whom JHK Legal was acting (Ex P4, CB 430). On 15 August 2023, the solicitors who had previously acted for Mr Crossley in negotiating the Sale Agreement informed Mr Harie’s solicitors that they no longer had instructions to act for Mr Crossley (Ex P4, CB 438-439). On 15 August 2023, JHK Legal advised Mr Hardie’s solicitors that it was acting on behalf of DJR (Ex P4, CB 434-436) which, of course, was not a creditor of Mobius, unless by reason that Mr Crossley had caused Mobius to engage DJR (as I noted above) to orchestrate its own winding up in purported insolvency.

On 20 August 2023, Mr Hardie’s solicitors sent a letter to Mr Crossley (Ex P4, CB 453) which sought clarification as to whether JHK Legal acted for Mr Crossley; asserted a breach of the Sale Agreement; outlined potential offsetting claims of Mobius against Mr Crossley; and addressed the solvency of Mobius, with reference to a prior bank pre-approval of a business loan. That letter also stated that:

Mr Crossley did not respond to that request. Mr Atkin submits, and I accept, that that failure casts significant doubt upon the genuineness of his professed concerns as to Mobius’ solvency, but that simply reinforces the absence of any reasonable basis for those concerns in the absence of any serious attempt by Mr Crossley or his advisers to assess Mobius’ cashflow position or its capacity to meet its debts as they fell due from its cashflow. That letter also sought clarification as to the purpose of Infinity Distilling and Infinity IP and whether those companies had interests potentially conflicting with those of Mobius.

On 21 August 2023, JHK Legal advised Mr Hardie’s solicitors that they acted for Mr Crossley and Myline (Ex P4, CB 471-472).

On 22 August 2023, a third statutory demand issued by Blaxhall Consulting was posted to Mobius’ registered address, although Mr Hardie was not advised of it until 30 August 2023 (Ex P4, CB 535). That creditor’s statutory demand relied on Mr Blaxhall Consulting’s invoice numbered BC001-22 dated 28 June 2022 (Ex P4, CB 323) which claimed a payment of $40,000, for two days’ work per week over 40 weeks, and provided a very short account of work claimed to have been done to support that payment and on a further invoice numbered BC001-23 dated 30 June 2023 in the amount of $29,924 (Ex P4, CB 681). Mr Crossley sought to maintain, in cross-examination, that Mr Blaxhall’s decision to issue that creditor’s statutory demand was made independently of Mr Crossley. I reject that evidence, and I infer, given the business relationship between Mr Crossley and Mr Blaxhall, their common dealings with DJR, and the coincidence in timing of the issue of the three statutory demands, that they reflected a co-ordinated strategy.

On 28 August 2023, Mr Hardie convened a meeting of the directors of Mobius to be held on 29 August 2023 (Ex P4, CB 547) and appointed Ms Hardie as his alternate director to attend the meeting. On the same date, Mr Hardie’s solicitors advised Mr Crossley’s solicitors (Ex P4, CB 208-209) of Mr Hardie’s assessment that Mobius’ value in a liquidation would be between $260,000 and $300,000, while if it were sold as a going concern, it would be valued at between $255,000 and $470,000.

At that directors’ meeting, Ms Hardie asked Mr Crossley whether he believed that Mobius was solvent at the moment, and he responded “I have my concerns” (Ex P4, CB 552). She asked whether Mr Hardie was consulted about the extent of Mr Blaxhall’s work, a matter that was plainly significant to the amount of the debt claimed by Blaxhall Consulting in its creditor’s statutory demand, and Mr Crossley responded that the amount was “raised in Xero”, the accounting system, and that Mr Hardie had access to Xero (Ex P4, CB 558), which does not indicate that Mr Hardie had been asked to approve services of that scale. Mr Crossley was asked whether Mr Blaxhall had “any relationship” with DJR and he falsely advised Ms Hardie that “I don’t know” (Ex P4, CB 561-562). Mr Crossley plainly knew of such a relationship because he had arranged for Mr Blaxhall to meet with DJR in developing the strategy to place Mobius in liquidation. Ms Hardie sought Mr Crossley’s agreement to Mobius seeking finance to pay the debts claimed in the creditor’s statutory demands and Mr Crossley responded that Mr Hardie was welcome to seek finance in his personal capacity, but that he did not approve Mobius obtaining that finance (Ex P4, CB 577). It seems to me that a director, then acting in Mobius’ interests, would at least have authorised an inquiry as to its ability to obtain third party finance to pay the amounts claimed in the creditor’s statutory demands, and Mr Crossley was then preferring his own interests in bringing about a winding up of Mobius to Mobius’ interests and his duties owed to Mobius as a director.

The Plaintiffs commenced these proceedings on 4 September 2023 (POC [30], admitted POD [30]) and initially sought the appointment of a provisional liquidator to Mobius to investigate its affairs; leave to bring proceedings on behalf of Mobius to set aside the statutory demands issued by Mr Crossley, Myline and Blaxhall Consulting; relief under the oppression remedy; and other relief.

On 8 September 2023, Mr Crossley advised DJR that he was inclined to accept the third party offer to acquire Mobius’ business noting that the “economic outlook isn’t great” and that:

By an email dated 14 September 2023 to DJR (Ex P11, CB 5749), Mr Crossley rightly also recognised the risks of appointing a Court-appointed liquidator to Mobius; raised the question of operating the business under licence; expressed much less confidence as to who owned the recipes used by Mobius than he later put to the voluntary administrators and deed administrators of Mobius and in these proceedings, asking:

I note that, first, DJR were plainly not qualified to advise as to Mr Crossley’s rights to those recipes and there is no evidence that they did so. Second, Mr Crossley did not seek to tender any advice obtained from any intellectual property lawyer as to his rights to the recipe for the apple pie liqueur in these proceedings, still less any evidence as to the factual assumptions on which any such advice was given. Third, if an intellectual property lawyer had given the advice to which Mr Crossley referred, he or she must have paid insufficient attention to the case law as to directors’ duties that I address below.

Mr Crossley also recognised, in that email, the real risks of a “protracted legal dispute”, which have subsequently come to pass, and the advantages of Mr Hardie buying out Mr Crossley’s interest in the business. He calculated the EBITDA of the business as $260,000 and applied a multiple of 4 to derive a valuation of $1,040,000 and calculate the value of a 50% share in the business as $520,000 or, in an alternative option, as approximately $920,000 after third party liabilities, to give rise to a value of a 50% interest in the Company of $459,028. Mr Crossley also there recognised that certain liabilities would need to be paid out, in connection with a sale of the business.

In cross-examination, Mr Crossley acknowledged that the EBITDA stated in that email was his understanding of the EBITDA of Mobius’ business at the time of the email; but he claimed that the email was based on previous valuations done for the mediation, many months before and, when Mr Atkin put to him that that evidence was not truthful, he denied that proposition (T228). Mr Atkin also put that Mr Crossley was then seeking to make an assessment of the current value of Mobius’ business and he repeated that:

It is common ground (POC [31]-[32], POD [31]-[32]) that, on 6 October 2023, Mr Beattie was appointed as voluntary administrator of Mobius. Mr Crossley admitted on the pleadings (POD [32]) that, after Mr Beattie’s appointment as voluntary administrator to Mobius, Mr Crossley not only asserted (in breach of duty, as I find below) that the recipes used in Mobius’ business were his personal trade secrets and were not information confidential to Mobius but also refused to deliver those recipes up to the voluntary administrator, with the consequence that the voluntary administrator was left to sell the business without being able to deliver the recipes for the products that it manufactured to a potential purchaser. Mr Beattie recognised the adverse impact of the matter on the sale process in his report to creditors, to which I referred above. Contrary to Mr Cleary’s submission, further evidence from the voluntary administrator or expert evidence is not necessary to draw obvious inference that that position materially undermined the sale process and reduced the likelihood that third party purchasers would make an offer for the business or pay fair value for the business if they did so. I return to the significance of that matter below.

I also recognise that, as Mr Cleary points out, Mr Crossley did not proceed to a winding up of the Company based on creditor’s statutory demands that his and Mr Blaxhall’s companies had issued, but instead joined with Mr Hardie in appointing a voluntary administrator to Mobius. As events developed, that seems to me to have amounted to no more than his adopting a different strategy to bring about a sale of the Company’s assets in an insolvency administration, in which Mr Crossley could (and did) assert a right to ownership of Mobius’ recipes and refused to make them available to the insolvency administrator so as to discourage third party purchasers and facilitate his (or an associated entity’s) acquisition of those assets at undervalue. I return to the process which he adopted in that regard below.

On 16 October 2023, Mr Crossley sent an email to DJR (Ex P11, CB 5775) stating that:

It is also common ground that, relying on his claim that the recipes were his personal trade secrets and were not information confidential to Mobius, Mr Crossley refused to deliver the recipes up to Mr Beattie. The Plaintiffs contend and Mr Crossley denies (POC [33], POD [33]) that:

On 8 December 2023, Mr Crossley sent a further email to DJR titled “Feedback on ‘offer’” (Ex P11, CB 5776), likely referring to the terms of an offer that he proposed to cause his associated companies to make to acquire Mobius’ business, which read:

This email makes clear that Mr Crossley then understood the effect of his assertion of ownership of the recipes and, in particular, the recipe for the “Moreau” apple pie liqueur, which had the result that Mobius trademark for that product became (as he there recognised) a “stranded asset”, devaluing that trademark. Mr Crossley did not frankly concede that obvious fact in cross-examination (T233) and his failure to do so is again adverse to his credit. That email also makes clear that the recipe information which Mr Crossley claims is a “trade secret” was contained in emails held on Mobius’ computer system, unsurprisingly, where it was used in Mobius’ business, undermining Mr Crossley’s claim that he was entitled to assert confidentiality in, or “ownership” of, that information against Mobius.

It is common ground (POC [35]-[40], POD [39]-[40]) that, in late 2023 or early 2024, Mr Beattie accepted an offer from a third party to purchase Mobius’ business for a cash sum of $350,000 in preference to an offer made by Infinity IP to purchase that business for a cash sum of $95,514 and withdrawal of asserted debt claims.

On 8 January 2023, Mr Beattie issued a supplementary report to creditors (Ex P6, CB 939) proposing that Mobius execute a Deed of Company Arrangement (“DOCA”) for the purpose of effecting the sale to the third party purchaser. That report also records matters which significantly undermined the accuracy of Mobius’ financial records and also undermined the sale process for its business that was undertaken in the voluntary administration and which are important to the conclusions that I reach as to valuation below. Mr Beattie there recorded (Ex P6, CB 947-948) Mr Crossley’s claim that the in-house distilling recipes for Mobius’ liquor products were Mr Crossley’s personal trade secrets and not property owned by the Company; he referred to legal advice provided by Mr Crossley to support that position and to Mr Crossley’s subsequent failure to provide documentary evidence to support that advice. Mr Beattie also noted the advice which he had received that:

I will find below that, whatever the status of Mr Crossley’s asserted “ownership” of those recipes, he breached his director’s duties and acted oppressively in denying the Company’s use of, and access to, those recipes. In any event, the question of who “owned” the recipes was of little practical importance where Mr Crossley refused to make them available to the voluntary administrators and thereby minimised the amount of price competition that he would face from third party purchasers who could not acquire those recipes without his cooperation, in the sale of the business. I return to the significance of that matter below.

Mr Beattie in turn referred (Ex P6, CB 951) to issues as to significant deficiencies in Mr Crossley’s recording of cash sales made by Mobius, as follows:

Mr Beattie noted such “discounts” as a percentage of revenue and sales were up to 20% in several financial years. Mr Beattie also referred to Mr Crossley’s explanation of discounting, which I note provided no adequate explanation of the failure properly to record cash sales, or why products sold at full price for cash should be treated as either “discounted” or as “marketing sample[s]”. Contrary to Mr Crossley’s affidavit evidence, there is no reason to think the amount of revenue lost to this practice was not significant, given the level of “discounts” to which Mr Beattie referred.

Mr Atkin in turn relies on statistics produced by the Reserve Bank of Australia in order to estimate the level of cash sales which would be expected in the ordinary course (Ex P9). It is sufficient for me to find that the amount of cash sales that were not properly recorded in Mobius’ financial accounts was likely material, although it is unquantifiable. That undermines the reliability of Mobius’ financial records which likely materially understate Mobius’ revenue and asset position, and any valuation that is derived from the revenue and asset information contained in Mobius’ financial records. I return to the significance of that matter in addressing valuation issues below.

On 16 January 2024, at a resumed second meeting of creditors, Mobius’ creditors resolved that Mobius execute the DOCA and that Messrs Ross and Ingram, who were nominees of Mr Crossley, be appointed as deed administrators (POC [37], POD [37]). By 5 February 2024, the DOCA was executed by Mobius and by the deed administrators. The deed administrators did not proceed to sell the business to the third party purchaser and advised that this was because the third party purchaser indicated on 13 February 2024 that it did not wish to proceed with the sale (POC [39], POD [39]).

On 20 February 2024, the deed administrators sent an email to Charles Blight of Bloody Monday Beverages Pty Ltd (“Bloody Monday”), a potential purchaser of the business, which stated that:

On 23 February 2024, Mr Blight sent an email (Ex P11, CB 5904) to the deed administrators stating “We would require the recipes as well as the trademarks”. The deed administrators responded (Ex P11, CB 5902) that:

On 27 February 2024, Mr Blight sent a further email to the deed administrators (Ex P11, CB 5915) which listed information that was required in order to inform an offer, including:

On 5 March 2024 (Ex P11, CB 5910), the deed administrators sent an email to Mr Blight indicating that “we hope to receive clarification regarding the ownership of recipes later today and will forward same upon receipt”. There is no evidence that matter was further clarified. On 6 March 2024, Mr Blight appears to have communicated (Ex P11, CB 5910) an indicative offer of $140,000, less assumed liabilities, which the deed administrators considered more attractive than the offer that had been made by Infinity IP. On 8 March 2024, Mr Blight then sent an email to the deed administrators (Ex P11, CB 5921) indicating that “we aren’t willing to proceed any further with the purchaser” and indicating three “[o]verarching factors contributing to this decision” including:

The exchange of emails between Bloody Monday and the deed administrators indicates that the deed administrators rightly recognised the materiality of ownership of the recipes to a purchaser of that business and the need for disclosure of that matter and Bloody Monday, unsurprisingly, also recognised the significance of that matter for its proceeding to a purchase. I have also referred to Mr Blight’s oral evidence concerning those matters above.

In March 2024, the deed administrators accepted an offer from Infinity IP to purchase Mobius’ business for cash consideration of $100,000.00, transfer of employee entitlements, novation of vehicle finance, and withdrawal of asserted debt claims. Mr Crossley adds (POD [40]) that Infinity IP’s offer “was accepted after the deed administrators ran a further comprehensive and extended sale campaign to sell [Mobius’] business” but that proposition does not recognise that any sale process was inevitably affected by Mr Crossley’s claim to own the key recipes, which I have addressed above.

The parties are at issue (POC [41], POD [41]) as to whether the purchase of Mobius’ business by Infinity IP was for a value that was less than the true value of Mobius’ business and the true value that Mobius’ business would have had, but for Mr Crossley’s conduct that is alleged to have depressed the value of the business and his asserted ownership of the recipes. I return to that question in dealing with the expert evidence and damages below.

On 24 April 2024, the DOCA was terminated and the deed administrators became liquidators of Mobius (POC [42], POD [42]). It is common ground (POC [43]-[44], admitted POD [43]-[44]) that Mr Crossley, Infinity Distilling and Infinity IP are now using the recipes to produce and market gin, vodka, limoncello and apple pie liqueur under the label “Eureka Distilling” and are now selling the rum and whiskey produced by Mobius for as much as $190 per bottle under that label.

As I noted above, the Plaintiffs plead (POC [8]-[11]) that, from early 2018, Mobius, in the course of its business, developed the recipes; the recipes were confidential information belonging to Mobius; and Mobius used the recipes to distil and market various liqueurs and spirits, including specified products; that “[a]ll intellectual property and goodwill associated with the recipes and the products belonged to Mobius”; and that Mobius won a number of prestigious awards for those products. Mr Crossley responds (POD [8]) that he:

In opening submissions, Mr Atkin submits that:

Mr Cleary responds that:

I will assume, without deciding, that Mr Crossley’s affidavit evidence which I have addressed above is capable of establishing his claim that he originated several of the recipes which Mr Hardie contends belong to Mobius, and which Mr Crossley contended belonged to him, both in the course of the insolvency administration of Mobius and in these proceedings. I also recognise that the two versions of Mobius’ Business Plan prepared by Mr Hardie and Mr Crossley, to which I referred above, support Mobius’ claim that the recipes were treated as confidential information of Mobius rather than confidential information of Mr Crossley personally. I recognise that Mr Hardie bears a legal and evidentiary onus to establish his claim that Mobius “owns” those recipes, and Mr Crossley bears an evidentiary onus in establishing his claim to the contrary.

I am not satisfied that Mr Hardie has established that Mobius “owns” those recipes in the strict sense, but he has at least established that Mobius was entitled to use the recipes in its business (whether by a licence arising from a common understanding and/conduct or by estoppel). The applicable principles are well-established. In Victoria University of Technology v Wilson (2004) 60 IPR 392; [2004] VSC 33 (“Wilson”), Nettle J noted at [104] that:

A somewhat similar issue to that arising in this case was considered by the High Court in Concrete Pty Limited v Parramatta Design & Developments Pty Limited (2006) 229 CLR 577; [2006] HCA 55 In that case, Parramatta Design & Developments Pty Ltd (“PDD”) provided architectural services; its sole director and shareholder, Mr Fares, who was an architect, and a solicitor, Mr Barrak, established a property development company (“Landmark”) and entered into a joint venture agreement with another company (“Toyama”) to develop land. PDD provided architectural services for the joint venture, including, for a fee, preparing plans for the proposed development, and then further plans with no charge. The relationship between the joint venturers then deteriorated. Trustees for the sale of the site were appointed under s 66G of the Conveyancing Act 1919 (NSW) and PDD notified the trustees that it was the owner of the copyright in the plans embodied in the development consent and that it refused to grant a licence to any prospective purchaser of the site. The purchaser of the site, Concrete Pty Ltd (“Concrete”) brought proceedings claiming that it had an implied licence to use the plans and that PDD’s assertions to the contrary amounted to unjustifiable threats in contravention of s 202 of the Copyright Act 1968 (Cth).

On appeal to the High Court, Gummow ACJ held (at [12]-[17]) that the joint venture between PDD, Landmark and Toyama possessed fiduciary characteristics and to allow PDD to assert copyright in the plans and drawings so as to deny Concrete its consent to use the plans and drawings would be to allow PDD to pursue its own interests in conflict with the purposes of the joint venture. His Honour observed (at [15]) that:

Kirby and Crennan JJ reached the same result by reference to the architect’s role in the venture and also held (at [95]) (with Gummow ACJ agreeing at [16]) that, in the absence of any reservation of copyright in the plans and drawings or the withdrawal of the development application prior to its determination, the implied licence to use the plans and drawings in favour of the purchasers was irrevocable (at [16], [95]). Hayne J similarly held (at [122]-[124]) that PDD, Landmark and Toyama were engaged in a common business enterprise; a relationship of mutual trust and confidence arose between the participants; and following the breakdown of the relationship:

In Geltch v MacDonald & Ors [2007] NSWSC 1000 at [49], Brereton J noted the application of these principles in a partnership context, although holding they were there narrowed by the terms of a lease.

These issues were also addressed by French J (then sitting at first instance in the Federal Court of Australia) in University of Western Australia v Gray (No 20) (2008) 246 ALR 603; [2008] FCA 498 (“Gray”), approved on appeal in University of Western Australia v Gray (2009) 259 ALR 224; [2009] FCAFC 116 (“Gray FCAFC”) at [155]. Importantly, French J there observed (at [130]) that:

The observations of Nettle J in Wilson were in turn cited with approval by the Court of Appeal (Campbell JA, Spigelman CJ and Allsop P agreeing) in Oates v Consolidated Capital Services Ltd [2009] NSWCA 183 at [142], [154] and by the Full Court of the Federal Court in Gray FCAFC at [150].

I also addressed these issues in my decision in Re Carbon Copies Composites Pty Ltd [2023] NSWSC 911 (“Carbon Copies Composites”), where I addressed a claim by a director and employee of a small company, Mr Hutchison, that he had developed and “owned” the aircraft designs that were the core of the company’s business. I reviewed the case law and observed (at [233]) that:

I also there addressed the position Mr Hutchison’s claim to have created the designs before the relevant company was established, in a similar manner to Mr Crossley’s claim that he had created the recipes before he joined Mobius and made them available for its exploitation. I observed (at [240]) that:

Mr Crossley here has also not established an entitlement to prevent Mobius using the recipes, at the time he claimed that entitlement to undermine any sale of Mobius’ business other than to his associated companies. First, assuming that Mr Crossley originated recipes for relevant products prior to 2014, his evidence does not establish (as distinct from merely assert) that the recipes used by Mobius at the point of its insolvency administration were the same or substantially the same as those that he originated several years before. Second, Mr Crossley did not establish that any steps had been taken to preserve the confidentiality of those recipes by preventing Mr Hardie or employees or consultants of Mobius knowing them, where at least Mr Hardie was involved in their continuing development and refinement and others were involved in producing the products; there is no evidence, for example, that any confidentiality agreements were entered into with those persons as to those recipes; and any duties of confidentiality owed by those person as employees were owed to Mobius rather than to Mr Crossley personally. Third, as I noted above, Mr Crossley himself recognised that information concerning those recipes was held on Mobius’ email and Google Drive systems, in indicating his concern that Mr Hardie may have copied that information, and that undermines any claim that that information was confidential as against Mobius.

Fourth, even apart from Mr Crossley’s other conduct which I address below, it seems to me that his assertion that he “owned” the recipes, while he remained a director of Mobius, was in breach of his director’s duties owed to Mobius. If (contrary to his evidence) the recipes were created in the course of his duties as a director, then he would plainly hold them in trust for Mobius: Fine Industrial Commodities Ltd v Powling (1954) 71 RPC 253 at 257-258, approved in Gray at [120], approved on appeal in Gray FCAFC at [155]. However, even if, as he contends, the recipes were created prior to his involvement with Mobius, or in his own time while employed with Mobius, they were plainly at the centre of Mobius’ business and within the scope of his duties owed as a director of Mobius, and he breached his duty by denying that Mobius had at least an irrevocable licence to continue to use the recipes. I have referred to the approach taken in Parramatta Design above. In Eastland Technology Australia Pty Ltd v Whisson (2005) 223 ALR 123; [2005] WASCA 144 at [67], McLure JA similarly accepted that, even if a director had made an invention in his own time, which related to the company’s business:

Fifth, applying the standard set in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and in s 140 of the Evidence Act, even if Mr Crossley had “owned” the recipes as a matter of fact or law, I find that his conduct as a whole – which involved committing Mobius to a retainer of DJR which was advising him how to bring about its demise, then causing the issue of the statutory demands and declining to explore the opportunity for Mobius to obtain finance to pay them; thereby bringing about the insolvency administration of Mobius and the forced sale of its business; and then asserting a right to ownership of the recipes to undermine the sale of its business other than to Mr Crossley’s associated companies, in a manner that was plainly adverse to Mobius’ interests in maximising the sale price of its business and that preferred Mr Crossley’s own interests to Mobius’ interests, all while Mr Crossley remained a director of Mobius – was a breach of his directors duties. It is not necessary to decide whether Mr Crossley could have asserted a claim to ownership of the recipes without first resigning as a director of Mobius if he had not committed Mobius to a retainer of DJR and then brought about Mobius’ insolvency administration and the forced sale of its assets, because that would be an entirely different case. It is also not necessary to decide whether Mr Crossley’s resignation as director could have avoided a breach of director’s duties, where that resignation would arguably have been directed to perfecting a breach of duty that had commenced before it took place, since he did not resign as director of Mobius. It seems to me that Mr Crossley’s assertion of his claim to ownership of the relevant recipes, combined with the other conduct to which I have referred, amounted to an actual conflict of duty and interest and a breach of his director’s duties and amounted to oppression, where his personal interests on the one hand and Mobius’ interests and his duties owed to Mobius on the other, were plainly opposed in that regard. I return to these matters below.

It is convenient to first address the Plaintiffs’ narrower breach of contract case. The Plaintiffs bring a claim for breach of contract against Mr Crossley (Amended Originating Process (“AOP”) [11B]). As I noted above, the Plaintiffs plead (POC [26], denied POD [26]) that, between 26 May 2023 and 15 June 2023, Mr Crossley and Mr Hardie reached an agreement to take steps together to have Mobius valued as a going concern and all of the shares in Mobius marketed for sale on the basis of that valuation. They rely on letters of Mr Hardie’s solicitors of 26 May 2023 (Ex P4, CB 351) and 15 June 2023 (Ex P4, CB 386) and a letter of Mr Crossley’s solicitors of 6 June 2023 (Ex P4, CB 384) in respect of that agreement and plead (POC [26A]-[27A], denied POD [26A]-[27A]) the terms of the alleged agreement. The Plaintiffs plead (POC [46]-[47], denied POD [46]-[47]) that Mr Crossley breached the alleged sale agreement and that breach caused loss and damage to Mr Hardie, particularised as the loss of the opportunity to sell his shares, as part of a joint sale of Mobius as a going concern. Mr Crossley sensibly took no privity point at the hearing and accepted that this claim should be treated as available to and brought by both Plaintiffs.

In opening, Mr Atkin summarises this case as follows:

The applicable principles as to whether a contract was formed are well-established and I have here drawn on my summary of them in Re Gerringong Storage Pty Ltd [2025] NSWSC 302 at [52]ff (“Gerringong Storage”).

In Masters v Cameron (1954) 91 CLR 353 at 360–362, [1954] HCA 72 (“Masters v Cameron”), the High Court identified three categories of case which may exist where parties which have been in negotiation reach agreement upon terms of a contractual nature. The first category of case is one where the parties have reached finality and intend to be immediately bound to the performance of the relevant terms but propose to have the terms restated in a form which will be fuller or more precise, but not different in effect. A second case is where the parties have reached complete agreement but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. A third case is one in which the intention of the parties is not to make a concluded bargain unless and until they execute a formal contract. At first instance in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628 (“GR Securities”), McLelland J identified a fourth case, where the parties were content to be bound completely and exclusively by the terms they had agreed, while expecting to make a formal contract in substitution for the first contract, containing, by consent, additional terms.

Whether a contract has been formed in this situation depends on the objective intention of the parties ascertained from the terms of the relevant document, read in light of the surrounding circumstances, and, if the terms of that document indicate that the parties intended to be bound immediately, then effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction: GR Securities at 634, 636; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-9 (“XIVth Commonwealth Games”); Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 at [66] (“Sagacious Procurement”).

In XIVth Commonwealth Games at 540, Gleeson CJ observed that:

In Pavlovic v Universal Music Australia Pty Limited (2015) 90 NSWLR 605; [2015] NSWCA 313 (“Pavlovic”), Beazley P (with whom Bathurst CJ generally agreed and Meagher JA agreed) observed (at [64]-[65]) that whether parties intend to be immediately bound, where they have reached agreement as to the terms of a contract but have also agreed that a further, formal agreement is to be executed, is to be determined objectively, having regard to the “outward manifestations” of their intentions. Her Honour also observed (at [65]) that the question was “what each party by words and conduct would have led a reasonable person in the position of the other party to believe”. Beazley P also observed (at [69]) that the three classes of case in Masters v Cameron above no longer applied, if they ever were, as strict categories into which cases must fall. Her Honour noted (at [72]) that it was relevant to consider the commercial context and surrounding circumstances of the parties’ dealings in determining whether a binding agreement had come into existence. The Court of Appeal also there noted (per Bathurst CJ at [15] and per Beazley P at [118], with whom Meagher JA agreed), consistently with the case law to which I referred above, that the Court may have regard to subsequent conduct of the parties in determining whether, at an earlier juncture, the parties intended to enter into a binding agreement.

In Nurisvan Investment Ltd v Anyoption Holdings Limited [2017] VSCA 141 at [106] (“Nurisvan”), the Court of Appeal of the Supreme Court of Victoria similarly observed, in determining whether the heads of agreement in that case constituted a binding contract to enter into a share sale, that:

The fact that the parties might negotiate further, additional terms, that were not included in a first agreement, is not necessarily inconsistent with a conclusion that the first agreement constituted a binding contract between them: Nurisvan at [107]. The Court may have regard to the conduct of the parties after the date of entry into the alleged contract to determine whether they entered a binding contract: Sagacious Procurement at [105]; Nurisvan at [77]ff, [82]-[83].

In Ausko Cooperation Pty Ltd v Junapa Pty Ltd (2021) 20 BPR 41,523; [2021] NSWSC 615 at [45]-[46], Darke J considered whether the parties had there reached a binding agreement for a new lease, and observed that:

I have also had regard to the detailed discussion of the case law in United Group Rail Services Ltd v Rail Corp (NSW) (2009) 74 NSWLR 618; [2009] NSWCA 177 at [30]ff (“United Group”) and to the conclusion reached by Allsop P (with whom Ipp J and Macfarlan JJA agreed) at [74], in respect of a dispute resolution process, that:

Turning now to the parties’ submissions, Mr Atkin submits that:

I accept that each of these matters supports an objective characterisation of the exchange of letters as giving rise to a binding agreement.

Mr Cleary responds that there was no consideration for the Sale Agreement and that:

Mr Atkin responds to that contention that the Sale Agreement imposed obligations on both Mr Hardie and Mr Crossley to perform specified actions and rightly points out that an exchange of promises between counterparties is good and sufficient consideration for a contract. I accept that submission, where the Sale Agreement at least included mutual promises as to the process by which the business would be sold, to a third party by a market sale process. Mr Atkin also submits, although it is not necessary to decide, that further consideration is established where Mr Hardie withdrew his requirement that Mr Crossley respond to his queries of 26 May 2023, as an act of forbearance on his part, and did not then commence the oppression proceedings which had been threatened.

Mr Cleary submits that:

In closing submissions, Mr Atkin responds that:

I accept the second, third and fourth submissions above and, most significantly, it seems to me that these matters are not sufficiently material to undermine the certainty or enforceability of the Sale Agreement. Mr Atkin also submits, and I accept, that the commercial context of that agreement was such that there was no necessary conflict of interest between Mr Crossley and Mr Hardie in respect of a sale process where each would have had a common interest in maximising the sale proceeds in a sale to a third party. However, as events developed, any such common interest failed once Mr Crossley sought to undermine a competitive sale process in the voluntary administration so that no third party purchaser would make a higher offer to acquire the business than that made by Mr Crossley’s associated company.

Mr Atkin responds to the claim that the Sale Agreement is uncertain by noting that courts strive to be “the upholders of bargains and not their destroyers” and “should be astute to adopt a construction which will preserve the validity of the contract”, including by the implication of terms where necessary: Meehan v Jones (1982) 149 CLR 571 at 589; Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551 at 14,570. I need not address that submission further, where I can see no such lack of certainty in the exchange of letters said to give rise to the Sale Agreement. I am satisfied, here, that the Sale Agreement was objectively intended to be binding between the parties, so as to define how Mobius’s business was to be sold and, importantly, how debts owed to Mr Crossley and Myline would be repaid out of the sale proceeds. It was sufficiently certain for that purpose and the exchange of mutual promises in it was sufficient consideration for it.

I am also satisfied that Mr Crossley breached the Sale Agreement in a manner that caused substantial loss to the Plaintiffs. Mr Atkin points to the terms of the Sale Agreement as pleaded at POC [26A]-[27], which I accept reflect the express terms recorded in the exchange of letters. Mr Atkin points out that the Plaintiffs allege that it was a term of the Sale Agreement that the debts owing to Mr Crossley and to Myline would not otherwise be enforced pending performance of the Sale Agreement. I accept that term was a necessary implication for that statement in the Sale Agreement as to how those debts would be repaid prior to the distribution of proceeds of sale. I also accept Mr Atkin’s further submission that:

I also accept that, as Mr Atkin submits, Mr Crossley’s actions in causing creditor’s statutory demands to be served on Mobius with a view to precipitating the appointment of liquidators constituted a breach of the Sale Agreement. There is no substance in Mr Crossley’s response that Mr Hardie breached that contract by not promptly nominating valuers, where Mr Crossley had suggested that a difference approach be taken, which would have been a consensual variation of that agreement; and, in any case, Mr Crossley did not then terminate that agreement and, instead, simply disregarded the obligations he had assumed under it.

The principle in Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 indicates that a Plaintiff is entitled to recover such damages as arise naturally, that is, according to the usual course of things from the breach, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach. In Koufos v C Czarnikow Ltd [1969] 1 AC 350 at 385, Lord Reid observed that:

That statement of principle has been accepted in later case law including Wenham v Ella (1972) 127 CLR 454 at 471–472; Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 368; [1993] HCA 4; Carpenter v McGrath (1996) 40 NSWLR 39 at 58. It seems to me plain that the loss of value of Mobius business in a sale in an insolvency administration was plainly likely to result from Mr Crossley’s breach of the Sale Agreement, where that agreement was intended to avoid that result; and he did, or a reasonable person would have, realised that such result was likely to result at the time of entry into that Sale Agreement. That was, I should add, also the intended consequence of his breach of the Sale Agreement, where DJR’s plan as to how he or his associated companies could acquire Mobius’ business at a lesser price in a liquidation necessarily depressed the price obtained by Mobius for that business and the amount that would be available to Mr Hardie on a sale of that business.

The Plaintiffs here bring a loss of opportunity case. In order to establish that case, they must demonstrate that there was a “substantial, and not merely speculative, prospect” that the relevant benefit, a sale of the business at a higher value, could have been obtained but for the breach of contract: Malec v JC Hutton Pty Ltd (No 2) (1990) 169 CLR 638; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54 (“Amann Aviation”); Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355–356; Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [38]–[41]. I am satisfied that there was here plainly a substantial prospect of a sale of the business at market value had the Sale Agreement not been breached, where there was real third party interest in purchasing the business from the administrators or deed administrators, and a sale was not then achieved, in significant part, by reason of Mr Crossley’s claim to own the recipes in a manner that excluded Mobius’ continuing use of them. The Plaintiffs would be entitled to recover contractual damages calculated on a loss of opportunity basis for Mr Crossley’s breach of the Sale Agreement, if they had not succeeded in obtaining relief for oppression. I address the quantum of damages in dealing with the question of relief in oppression below.

I now turn to the Plaintiffs’ oppression claim. They seek (AOP [11]) a declaration that:

They also seek (AOP [11A]) orders that Mr Crossley purchase their shares in Mobius at a value set so as to compensate them for the oppression which has taken place; alternatively, an order that the Mr Crossley pay compensation to them; or that the account to the Mobius in respect of profits and other benefits obtained by him and third parties as a result of the oppressive conduct of the Mobius’ affairs; or such further or other orders as the Court thinks fit. I address the relief sought below.

The applicable principles in respect of oppression are also well-established and I have drawn my summary of them from my judgments in Re Gunyahweh Pty Ltd [2023] NSWSC 1133 at [130]ff and Gerringong Storage at [175]ff. Section 232 of the Act provides that the Court may make an order under s 233 if:

Section 53 of the Act in turn identifies the “affairs of a body corporate” for several provisions of the Act, including s 232, as including the “promotion, formation, membership, control, business, trading, transactions and … dealings of the body” (s 53(a)) and “the internal management and proceedings of the body” (s 53(c)). The orders which may be made include, relevantly, an order for the purchase of any shares by any member (s 233(1)(d)) and an order that a company be wound up (s 233(1)(a)).

Section 232 of the Act and its predecessors extend to conduct involving “commercial unfairness” or where the conduct complained of involves a visible departure from the standards of fair dealing and a violation of the conditions of fair play, or a decision has been made so as to impose a disadvantage, disability or burden on the plaintiff that, according to ordinary standards of reasonableness and fair dealing, is unfair: Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704; Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68. Conduct may be oppressive even when a defendant believes that he or she is acting for proper purposes: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [176] (“Backoffice”).

The principles applicable to a claim for oppression were summarised by Austin J in Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [39], and the Court of Appeal noted the parties did not challenge that summary of the applicable principles in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310; (2011) 84 ACSR 121; [2011] NSWCA 104 at [140]. Austin J there observed that:

As I noted above, the Plaintiffs contend, relying on the alleged exclusion of Mr Hardie from Mobius and the alleged steps taken to depress the value of its business, and contend (POC [45], denied POD [45]) that the conduct of the affairs of Mobius has, since no later than April 2022, been contrary to the interests of members as a whole; and oppressive to, unfairly prejudicial to, and unfairly discriminatory against Mr Hardie and Ms Hardie.

In opening, Mr Atkin summarises this case as follows:

Mr Atkin points to unilateral decision-making on Mr Crossley’s part, including as to the appointment of new accountants for Mobius. There is a dispute as to the extent to which Mr Hardie acceded to that appointment which it is not necessary to resolve. Mr Atkin also submits, and the correspondence to which I have referred above makes clear, that:

I accept that, even if aspects of these expenses, for example the costs of a marketing trip to Singapore, were justified, their totality, and the large payments to Mr Blaxhall and the overtime payments to Mr Crossley, reflected a concerted attempt to depress Mobius’ apparent earnings so as to reduce its apparent value in any purchase of the Plaintiffs’ shares by Mr Crossley. I also accept that the evidence indicates that Mr Crossley did not promptly respond to proper requests for information made by Mr Hardie, which should have been made available to him as a director, even taking into account that he had ceased to be an employee of Mobius and ceased involvement in its day-to-day business. Ultimately, little turns on that matter where other aspects of Mr Crossley’s conduct provide a more compelling basis for relief in oppression.

Mr Atkin also points to Mr Crossley’s admission that Mobius failed to record receipt of cash sales at off-site events such as markets and festivals, and to possible irregularities in the manner in which “discounts” of stock have been recorded in Mobius’ accounts. These are significant matters, and their importance is exacerbated rather than reduced by the difficulty in now quantifying the amounts that were lost to Mobius in this way.

I have addressed the issues arising from Mr Crossley’s causing Mobius to retain DJR to bring about its winding up and serving the statutory demands so as to bring about a liquidation and a forced sale of Mobius assets above. Mr Atkin also submits that:

Mr Cleary responds that:

I need not decide that question, where I have found above that Mr Crossley did not here merely serve a creditor’s statutory demand to recover a loan from a company, but engaged in a much more sophisticated, and ultimately successful, strategy directed to the ultimate acquisition of Mobius’ business at an undervalue in an insolvency administration.

Mr Cleary also submits that Mr Crossley’s conduct was not relevant conduct within the meaning of s 232 of the Act and “cannot possibly be oppressive nor a breach of directors duties.” I do not understand the basis of that submission, at least in respect of the conduct that I have found on Mr Crossley’s part, and I reject that submission.

As I noted above, the Plaintiffs first seek (AOP [11A]) orders that Mr Crossley purchase their shares in Mobius at a value set so as to compensate them for the oppression which has taken place. I recognise that the question whether such an order can be made although Mobius is now in liquidation is arguably open on the Australian case law.

Mr Atkin undertook a detailed review of the case law before and after Backoffice dealing with the question whether the Court can order that one shareholder buy another’s shares after a company is pleaded in liquidation, in a proper case. In Re A Company No 008126 of 1989 [1992] BCC 542 at 554-555 (“Hailey Group”), Mr Sykes QC (sitting as a Deputy High Court Judge) observed that:

In the Court of Appeal in Campbell v Backoffice Investments Pty Ltd (2008) 66 NSWLR 359; [2008] NSWCA 95, Giles JA observed (at [123]) that there will ordinarily be no occasion for making a buy-out order if the oppression has otherwise been brought to an end; obviously enough, that observation draws attention to the question whether a liquidation in fact brought the oppression to an end in the particular circumstances or, as here, crystallised its continuing adverse effect on the value of the oppressed party’s shares in the relevant company. His Honour observed (at [132]) that it was not necessary that the conduct complained of be continuing at the time the Court considers making an order, although the Court had a discretion whether to make an order in that regard. His Honour noted that relief was not granted in Webb v Stanfield [1991] 1 Qd R 593; (1990) 2 ACSR 283, because the necessary relief was there available to a liquidator. That is not the case here, where the interests that were adversely affected were the Plaintiffs’ interests as shareholders. His Honour also referred to Hailey Group and left open the possibility that a buy-out order would be made where the effects of the relevant conduct were continuing at the time that order was sought. Basten JA (at [195]-[196]) also there observed that the section did not require that the company’s business be continuing in order to found relief in oppression and Young CJ in Eq (at [382]-[383]) contemplated that relief could be allowed where the oppression had a “continuing effect”.

Mr Atkin submits that, on appeal in the High Court:

I accept that submission. It seems to me that the High Court there held that a buy-out order was not appropriately made at first instance in the relevant circumstances which included the nature of the plaintiff’s complaint as to exclusion from management, which was plainly addressed by the appointment of a provisional liquidator who assumed management of the company, and the consensual sale process then adopted for the company’s assets. French CJ (at [72]) concluded that the trial judge’s decision should be set aside because her discretion had not been properly exercised in the relevant circumstances. The plurality (at [176], [178]) observed that the oppression provisions should not be read narrowly and should not be “hedged about by implied limitations” and noted (at [179]) that, by the time of trial, a provisional liquidator had been appointed and had sold the whole of the company’s undertaking on a consensual basis. By contrast, in this case, the appointment of a voluntary administrator was partly consensual, although made under the pressure of the issue of creditor’s statutory demands to Mobius by Mr Crossley and his and Mr Blaxhall’s companies, but a sale process conducted on the basis that Mr Crossley refused to provide Mobius’ key recipes to the voluntary administrator was plainly not consensual in nature. The plurality also there noted (at [182]) that there was no continuing oppression when the matter went to trial; but that decision does not, in my view, address the position where the effects of oppression continue.

Mr Atkin also draws attention to Ubertini v Saeco (No 4) (2014) 98 ACSR 138; [2014] VSC 47 (“Saeco”), where Elliott J made a buy-out order although the oppressive conduct had rendered shares in the subject company worthless, following the sale of the company’s business by an administrator. In that case, as in this case, a shareholder called in debts in a manner inconsistent with existing arrangements, and for an ulterior purpose of breaking the stalemate confronting it and providing it with a basis for obtaining the company’s business without the need for the other director’s and shareholder’s consent.

Mr Atkin also refers to my decision in Re Imperium Projects Pty Ltd [2017] NSWSC 141 at [29]-[31], where I observed that:

In Driver v Botanical Water Technologies Pty Ltd [2024] NSWSC 1409 at [191], Ball J (as his Honour then was) observed that:

Mr Atkin also, helpfully, drew attention to the decision of the High Court of Justice in Queensgate Place Ltd v Solid Star Ltd & Ors (No 2) [2024] EWHC 1816, where Mr Rees KC (sitting as a Deputy Judge of the High Court) referred to Hailey Group and Via Servis Ltd; Skala v Via Servis Ltd [2014] EWHC 3069 (Ch), and held that the Court had jurisdiction to make a share purchase order notwithstanding the company’s subsequent insolvency and did so. The Deputy Judge there observed (at [18]) in language that would also be applicable here that:

I conclude that an order for the buy-out of the Plaintiffs’ shares by Mr Crossley is available here notwithstanding the issue of creditor’s statutory demands by Mr Crossley and his and Mr Blaxhall’s companies, the subsequent voluntary administration of Mobius and the sale of its business to interests associated with Mr Crossley, and its subsequent liquidation. I conclude that such an order is also appropriate below.

Mr Cleary in turn refers to my observation in Re Bailey Roberts Group Pty Ltd (in liq) [2025] NSWSC 227 (“Bailey Roberts”) at [210] that, in the circumstances of that case:

Mr Cleary also submits that:

I do not accept that submission, for the reasons that I have noted above, and primarily because the steps taken by Mr Crossley to prevent the voluntary administrators making recipes available to third party purchasers in the sale process, and Infinity IP’s acquisition of the business where Mr Crossley had undermined any competitive sale process, had the consequence that that process perfected rather than cured, the oppression that preceded it.

Mr Cleary also submits:

I also do not accept that submission. Obviously enough, there was little that the voluntary administrators could practically do that would achieve the best possible sale price for Mobius’ shares or its business, once Mr Crossley had, in breach of duty, declined to provide them with the recipes used for Mobius’ products and there is no suggestion that the voluntary administrators had sufficient funds to resolve that matter by litigation or could reasonably have delayed the sale process to do so.

Mr Cleary then submits that:

I also cannot accept that submission. At the risk of repetition, the first four matters do not assist Mr Crossley where he used the appointment of the voluntary administrator as an alternative means to a liquidation to bring about a sale of Mobius’ business and then undermined the process by which the sale took place. The second matter is a reference to Mr Crossley’s 14 September 2023 email to DJR, which rightly recognises the risks of a liquidation-based strategy. Mr Cleary also submits that that email indicates that Mr Crossley did not have the “nefarious intent that the Plaintiffs’ attempt to paint it with”. Regrettably, I cannot accept that submission, although I would not have adopted the term “nefarious”. That letter indicates that Mr Crossley, for a time, considered the sensible approach of a negotiated sale of the business, rather than the alternative of a sale through an insolvency administration in which he was actively seeking to depress the value of the business and discourage third party purchasers. Regrettably, for all parties in these proceedings including Mr Crossley, he then chose the latter approach rather than the former, as his subsequent conduct amply demonstrates. That choice gave rise to oppression, for the reasons I have noted. The fifth, sixth and seventh matters also do not assist Mr Crossley, where they neglect the extent to which Mr Crossley’s refusal to make Mobius’ key recipes available to the voluntary administrator and deed administrators actively undermined the sale process and permitted Infinity IP’s acquisition of the business at a lower price.

It seems to me that the relevant oppression is here at least the conduct of Mr Crossley which I set out in paragraph 143 above. That conduct has continuing effects, where Mobius was and is deprived of its business and of payment of fair value for that business; the Plaintiffs were and are deprived of the fair value of their shares, either at the point that Mobius’ business could have been sold by the process contemplated by the Sale Agreement or the point the creditors’ statutory demands were served or Mobius was placed in voluntary administration in consequence of those demands; and Mr Crossley and his associated companies were and are the continuing beneficiary of that conduct where they acquired Mobius business in consequence of his breach of his director’s duty owed to Mobius and at an undervalue. The continuing character of that oppression is sufficient to support orders that Mr Crossley now buy out the Plaintiffs’ shares at a price that excludes the effect of the oppressive conduct. The Plaintiffs initially indicated that they did not press this relief if they succeeded in their contractual claim for breach of the Sale Agreement. However, I have determined this claim where the making of an order on this basis would remove any loss arising from that breach, just as an order for contractual damages would likely remove the need for an order on this basis.

I now turn to the applicable legal principles in respect of questions of valuation arising in respect of a buy-out order. The court has a broad discretion as to the mode of valuation in an oppression case: United Rural Enterprises Pty Ltd v Lopmand Pty Ltd (2003) 47 ACSR 514; [2003] NSWSC 910. The court’s task is to fix a price that is fair in all the circumstances having regard to the value that the shares would have had, but for the oppressive conduct. In Strategic Management Australia AFL Pty Ltd v Precision Sports & Entertainment Group Pty Ltd (No 3) [2017] VSC 35 at [34]–[35], Sifris J observed that:

In Re Scientific Management Associates Pty Ltd (2019) 141 ACSR 115; [2019] NSWSC 1643, Rees J similarly observed that the basic requirement in an oppression suit is that “the valuation must be fair on the facts of the particular case”, and will be determined as a “price that is fair in all the circumstances having regard to the value that the shares would have had but for the oppressive conduct” and that:

I also bear in mind the nature of a “market value” test as described in MMAL Rentals Pty Ltd v Bruning (2004) 63 NSWLR 167; [2004] NSWCA 451 at [55], in the context of the purchase of shares on exercise of a call option, by Spigelman CJ (with whom Mason P and Hodgson JA agreed) as follows:

In Tomanovic v One Australia Pty Ltd (2015) 104 ACSR 596; [2015] NSWCA 11 at [180]–[188], Bathurst CJ also set out the principles governing the valuation of company shares, and observed, inter alia, that “[t]he process of valuation may produce a range of results from different judges valuing in accordance with accepted principle and making no error of law.”. The range of accepted valuation methodologies was noted by Dixon J in Smith v Gould [2012] VSC 461 at [125], where his Honour observed that:

I recognise that, as I observed in Re Global Mortgage Equity Corporation Pty Ltd (2013) 97 ACSR 30; [2013] NSWSC 1586, the Court is not bound to choose between the respective valuations prepared by accounting experts, adopting one or the other without modification, although any adjustments to an expert valuation must be supported by the evidence.

Mr Atkin also submits, and I accept that, where I have found that Mobius’ financial records were inadequate and, in particular, where Mr Crossley had caused Mobius to fail to record income from cash sales of its products, I should take a robust approach to the assessment of the value of Mobius and the damages to which the Plaintiffs are entitled: Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59, where Handley JA (with whom Mason P and Beazley JA agreed) observed that:

Both parties led expert evidence, although the Plaintiffs ultimately did not seek to rely on Mr Giliberti’s report (Ex P3) led in their case. Mr Giliberti’s report initially addressed the questions whether Mobius was “financially viable” as at 30 June 2023; whether there were lost profits by reason of “Mr Crossley’s Conduct” (as defined) and Mr Hardie’s exclusion, and what those amounts were for years past and future; the “true value” of the business as at 30 June 2023 absent Mr Crossley’s Conduct; and the market value of the Mobius brand absent Mr Crossley’s Conduct. That report was based, in part, on specified assumptions as to Mr Crossley’s conduct, and the conclusions that Mr Giliberti reached as to Mobius’ financial viability in turn reflected the exclusion of the consequences of that conduct. That approach undermined the utility of his report, where he assumed that Plaintiffs’ case would be proved in its entirety and his report would not assist if that was not the case.

Mr Giliberti initially valued Mobius’ business at $842,367 and had regard to the sale of another distillery business in doing so. He was cross-examined at some length as to the implications of that sale for his valuation and Mr Cleary submitted, in closing, that:

By a subsequent revision to that report on 2 April 2025, Mr Giliberti adjusted that valuation because he had not added back legal expenses incurred in connection with registration of trademarks, which increased his assessed value of Mobius’ business to $886,702. It would of course then be necessary to have regard to Mobius’ liabilities to derive a value of the Plaintiffs’ shares in Mobius.

In indicating that the Plaintiffs no longer relied on Mr Giliberti’s report, Mr Atkin there recognised, rightly in my view, that the assumption made by Mr Giliberti as to the accuracy of Mobius’ financial records had been undermined by the evidence of (I interpolate, material but unquantifiable) cash sales made by Mr Crossley and by the difficulty in valuing the barrels of alcohol acquired by Infinity IP in the voluntary administration, which had a value substantially exceeding the value recorded in Mobius’ financial records. Mr Cleary, notwithstanding his criticisms of Mr Giliberti’s evidence, pointed out that that report had been tendered and was in evidence, and relied on that report so far as it may have impliedly valued the Plaintiffs’ shares at a lesser figure than that for which they now contend.

Mr Crossley in turn relied on an expert report dated 4 March 2025 of Mr Goodyer (Ex D1) which concluded that Mobius’ business had a net asset deficiency for a significant period prior to 21 April 2024 and that it had insufficient working capital to meet its debts throughout much of that period, although that conclusion appears to depend upon the treatment of the debts asserted by Mr Crossley’s and Mr Blaxhall’s companies against Mobius. I have addressed the circumstances in which those debts were claimed above. Mr Goodyer assumed, on instructions, that the recipes for key products used by the Company were not intellectual property owned by it, but were owned personally by Mr Crossley, and that Mr Crossley was “therefore entitled to deal with” the relevant product. That assumption was not correct, on the conclusions that I have reached above, and it is plain that Mr Goodyer’s approach would need to be adjusted to have regard to the value of those recipes and their capacity to generate future revenue for Mobius or an adequately capitalised purchaser of its business. Mr Goodyer also relied upon the financial statements for the Company for the 2020 and 2022 financial years, which plainly understate its revenue and assets, likely materially, by reason of Mr Crossley’s failure properly to record cash sales.

Mr Goodyer in turn emphasised the financial challenges facing Mobius, including its need for continuing shareholder support. I recognise that matter, although I also recognise a willing but not anxious purchaser of the shares in Mobius or its business would have regard to the capital which it could make available to support its continuing activities, in determining the price that it would pay to acquire its business. Mr Goodyer concluded there was no utility in a future maintainable earnings valuation of the Company, where it did not have a positive EBITDA. While I accept that proposition is correct in a limited sense, it indicates the potential lack of utility in such a valuation in respect of a company that is in a growth phase and building its business rather than generating profits in the early years of its existence.

Mr Goodyer’s report valued the Company at $257,272.73 as at 30 June 2023 using fair market value for the continued use of its equipment and stock stated in a third party valuation, although that valuation was wholly based on an auctioneer’s valuation of that equipment, and at $77,345.45 as at 21 April 2024 using a forced liquidation value. It seems to me, with respect to Mr Goodyer, that his report provides no assistance in this matter. First, the approach which he has adopted, either by reference to equipment and stock or a forced liquidation value, has no regard to the prospective value of the Company, arising from its recipes and apparent growth prospects, to which a willing but not anxious purchaser of the business would have had regard. Second, the use of a forced liquidation value reflects the result of Mr Crossley’s oppressive conduct. Third, as Mr Goodyer fairly accepted in cross-examination, an asset-based valuation was not appropriate where assets were undervalued, and it is apparent that, at least, the barrels of alcohol which were acquired by Infinity Distilling in the voluntary administration had not been valued in a way that represented their fair market value

The experts in turn prepared a joint expert report dated 24 March 2025 (Ex P3) which was to some extent superseded by the late amendment to Mr Giliberti’s report to which I referred above. In an approach which frustrated the purpose of an expert conclave and joint report, Mr Giliberti and Mr Goodyer observed that their respective instructions did not allow them to reach conclusions on value which were directly comparable. I do not accept that proposition. The legal representatives should not have given, and the experts should not have accepted, instructions that prevented their engagement with each other’s methodology in a manner that would have properly exposed the valuation issues which the Court had to decide.

Mr Atkin now relies, to value the Plaintiffs’ shares in Mobius, on the email dated 14 September 2023 from Mr Crossley to DJR (Ex P11, CB 5749), where (as I noted above) he valued Mobius, prior to liabilities owed to his associated companies and Mr Blaxhall’s company as $1,040,000, and a 50% share of Mobius as $520,000 or, in an alternative option, as approximately $920,000 after third party liabilities, to give rise to a value of a 50% interest in the Company of approximately $450,028.

In closing submissions, Mr Atkin initially submitted that:

In oral submissions, Mr Atkin sought to further vary Mr Crossley’s calculation in this email to exclude deductions which Mr Crossley had made. I do not consider that I should take that approach. That valuation has weight because of Mr Crossley’s familiarity with the business, his knowledge of the extent of its unreported cash sales (the amount of which is not known to the experts) and the fact that the conclusion which he has reached is one that he regarded as having sufficient basis to be provided to DJR to consider an alternative cause to forcing Mobius into liquidation. As Mr Atkin submits, Mr Crossley may have made deductions which an expert accountant would not have made; as Mr Cleary submits, he may have applied a higher multiple than an expert accountant would have applied, although I again recognise that he had knowledge of Mobius’ unreported cash earnings which would likely have supported adopting a higher multiple of understated earnings; but it is not necessary or appropriate to make either adjustment in giving weight to Mr Crossley’s own assessment of the value of the shares in Mobius.

Mr Cleary responds (T340) that that email does not seek to put a “serious or formal value on the business” and is merely addressing a starting point for a negotiated resolution; and that the figures used do not represent a realistic value of the business, in either adopting an EBITDA of $260,000 or in the multiple adopted. Mr Cleary also submits (T341) that the multiple adopted in that calculation exceeds a multiple of 2.9 times EBITDA to which Mr Goodyer referred (CB 5712), in respect of a recent valuation of a solvent entity conducting a distillery business with a better turnover and profit margin that Mobius. However, any comparison of turnover or profit margin between that entity and Mobius is undermined by the fact that Mobius financial records do not set out its true position, by the under-reporting of cash sales. Mr Crossley had information that the Plaintiffs and the experts who prepared reports in this case did not, as to the unrecorded cash sales of the business, to which I referred above.

I also bear in mind the offer made by Mr Crossley on 20 April 2023 to acquire Mr Hardie’s shares (Ex P4, CB 303) by which, as I noted above, Mr Crossley put an offer to acquire one-sixth of the Plaintiffs’ shares in the Company for $60,000, and subsequent tranches of shares for amounts which value the Plaintiffs’ shares at $230,000, although that amount would need to be further discounted for the time value of money in respect of later payments. Mr Cleary in turn refers to a letter dated 14 October 2022 from Mr Hardie’s solicitors (CB P4, CB 200), which identified a value of his shares of $260,000 as the starting point for negotiations, which is substantially less than the value which he now claims. I recognise that that letter also provides some basis for a valuation of the shares.

I can give little weight to third party offers in the sale process undertaken by the voluntary administrator where Mr Crossley had deprived the voluntary administrator of the opportunity to realise fair value for that business by withholding its key recipes at the time of the sale process as I noted above, and that allowed Infinity IP to acquire that business with lesser price competition from third party purchasers who were left at risk that they could not acquire those recipes. Mr Cleary also points to the amount paid by Infinity IP to acquire the business in the voluntary administration, and it appears that Infinity IP acquired Mobius business for a stated consideration of $354,154, including a payment of about $100,000, withdrawal of asserted debt claims, providing replacement security for a lease, paying out employee entitlements and assuming the costs and liabilities associated with a vehicle. The Plaintiffs obtained no apparent benefit, as shareholders in Mobius, from that transaction.

I bear in mind the principles applicable in a valuation in an oppression case, to which I have referred above, and the difficulties which arise because of the inadequacy of Mobius’ financial records and Mr Crossley’s failure properly to record cash sales in those financial records, and the issues as to the valuation of alcohol barrels which Infinity IP acquired in the sale under the voluntary administration. I have borne in mind the difficulties with Mr Giliberti’s report, arising both from the inadequacies of the financial records which he relied and his attempt to make adjustments for the conduct alleged against Mr Crossley; and the difficulties with Mr Goodyer’s report, which provides no useful basis for determining the amount which a willing but not anxious purchaser would pay to acquire Mobius’ business. I also bear in mind the extent to which the sale process in the voluntary administration was undermined by Mr Crossley’s denying access to the recipes to the voluntary administrator.

In these circumstances, it seems to me that Mr Crossley’s own assessment in the 14 September 2023 email of the value of the business, made where he had reasons to seek accuracy and only he knew the amount of the undisclosed cash sales, and conveyed to his advisers, provides substantial assistance in assessing the value of that business. However, I must also bear in mind the possibility that a willing but not anxious third party purchaser would not have been prepared to pay the value which Mr Crossley ascribed to the business, even if Mr Crossley had not undermined the sale process by preventing the voluntary administrators from accessing the recipes used in the business. I am not persuaded that I can adopt Mr Crossley’s calculation as to the value of the business without further discount, although I am comfortably satisfied that that calculation provides a better starting point for a valuation than the other alternatives.

It is not possible here to derive a valuation of the Plaintiffs’ shares with any mathematical certainty, given the issues to which I have referred above. I am, however, required to do the best I can in these circumstances. It seems to me that, bearing in mind Mr Hardie’s starting point for negotiations, to which Mr Cleary referred, Mr Crossley’s calculation, on which Mr Atkin relied and the experts’ reports with the deficiencies to which I have referred above, a fair valuation of the Plaintiffs’ shares in Mobius’ business, discounting for the uncertainty involved in any sale process, is $350,000 and Mr Crossley should be ordered to buy-out the Plaintiffs’ shares on that basis.

Mr Crossley is not entitled to any discount or set-off for the amount paid by Infinity IP to the voluntary administrator to acquire Mobius’ assets in the voluntary administration. That result follows because, first, Mr Crossley and Infinity IP are separate legal entities; and, second, the Plaintiffs received no financial benefit from that payment which was apparently applied to the insolvency administrators’ costs and, possibly, creditors’ claims including the purported claims of Mr Crossley, Mr Blaxhall and their associated companies.

Turning now to the Plaintiffs’ claim for contractual damages, I bear in mind the observations of Mason CJ and Dawson J in Amann Aviation at 83 that:

I also accept that this is not a case where an assessment of the amount of damages recoverable by the Plaintiffs has no rational basis or would be a mere guess, although that assessment will be made on incomplete or imperfect evidence for the reasons noted above, by contrast with the position where no rational basis for an assessment of damages is available: Troulis v Vamvoukakis [1998] NSWCA 237; McCrohan v Harith [2010] NSWCA 67 at [128].

Although the Plaintiffs’ contractual claim is put as a loss of opportunity case, it seems to me that there is no real doubt that the shares in Mobius or its business could have been sold for fair value, but for the steps taken by Mr Crossley to deny the voluntary administrator access to the recipes for its key products during the sale process. That is demonstrated by the fact that not only Mr Crossley but also third parties sought to acquire the business from the voluntary administrator, even in circumstances where there was no assurance that its recipes could be delivered to them. No discount to the Plaintiffs’ contractual damages is required for any material risk that the business would not have sold at its market value in the relevant circumstances, but for the steps taken by Mr Crossley to undermine any competitive sale process,

Once relief is granted in oppression on the basis set above, the Plaintiffs no longer have any compensable loss arising from the breach of the Sale Agreement. If I had not granted relief on that basis, I would have assessed damages in contract in the same amount as the amount required to buy-out the Plaintiffs’ shares.

The Plaintiffs alternatively seek an order that the Mr Crossley pay compensation to them. I addressed the legal basis of such a claim in Bailey Roberts at [273], where I observed that:

The Plaintiffs alternatively seek an order that Mr Crossley account to Mobius in respect of profits and other benefits obtained by him and third parties as a result of the oppressive conduct of the Mobius’ affairs. I understand that the Plaintiffs also do not press this relief, and it seems to me they could not obtain it, if (as is the case) they have succeeded in their claims for oppression and for breach of the Sale Agreement.

The Plaintiffs also plead (POC [5]) that, since Mr Crossley’s appointment as a director of Mobius on 15 February 2018, he has owed “fiduciary” duties to Mobius:

Mr Crossley responds (POD [5]) that he:

Neither pleading is particularly precise, where neither a duty of confidentiality nor relevant statutory duties can properly be characterised as fiduciary duties. The Plaintiffs also contend (POC [48], denied POD [48]), as part of their oppression claim, that Mr Crossley has relevantly contravened his statutory duties under ss 180-182 of the Act. The Plaintiffs then plead (POC [49], denied POD [49]) that Mr Crossley is liable to account to Mobius for payments of Mobius’ funds in discharge of debts and expenses that Mr Crossley was not authorised to incur on Mobius’ behalf, without identifying the payments and facts that fall within that category; inventory and sales that were not recorded in Mobius’ accounts, without identifying what falls within that category; cash from sales that was not deposited to Mobius’ accounts, without identifying the transaction in which that occurred; and any profits he, or his related entities, make from the use of the recipes, without further identifying any such profits. It is not necessary to determine these claims, although I have addressed matters that are relevant to them above, where I understand that the Plaintiffs also do not press this relief. It seems to me they could not obtain this relief, if (as is the case) they have succeeded in their claim for breach of the Sale Agreement.

I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 14 days and, in the event of disagreement, their respective draft orders and submissions not exceeding five pages in Arial font 12, one and a half spacing as to the differences between them.