David & Ros Carr Holdings Pty Ltd v Ritossa

1. [1]

   These proceedings concern a unit trust known as the Darbalara Property Trust (DPT or the Trust) set up by the second and third plaintiffs, Mr David Carr and Mrs Rosalind Carr (the Carrs), and the first and second defendants, Mr Ivan Ritossa and Mrs Marina Ritossa (the Ritossas). The Carrs (through the first plaintiff, David and Ros Carr Holdings Pty Ltd (DRCH)) and the Ritossas each hold 50% of the units in DPT and are directors of Darbalara Holdings Pty Ltd (Darbalara Holdings), the trustee of DPT. DPT was established in 2010, when the Carrs and the Ritossas were friends, as a vehicle through which the families would purchase ‘The Junction’, a rural property in Darbalara, near Gundagai, New South Wales. In early 2017, DPT purchased an additional rural property, ‘Bogolara’, which is about one hour’s drive from The Junction and conducts a significant farming business on the two properties.

2. [2]

   From the middle of 2017 until March 2020, the Gundagai area (where the properties are located) faced varying degrees of drought, which has affected the profitability of the business of DPT. The drought precipitated a series of disagreements commencing around mid-2019 between the Carrs and the Ritossas about the management of the farms by Carr Agriculture Capital Management Pty Ltd (CACM) a company of which the Carrs were the directors and shareholders. This led to Mr Ritossa expressing a desire in late August 2019 to sell the assets of DPT, and around the same time he engaged an external adviser, Mr Bert Glover, to provide an independent appraisal of CACM’s management of the farms.

3. [3]

   Following a meeting with Mr Glover in which he made criticisms of CACM’s management of the drought, the Carrs and Ritossas had a falling out on 7 December 2019 and the Carrs stated that they wished to terminate their business relationship with the Ritossas and exit the Trust. Mr Ritossa said that he no longer wanted to sell DPT. A heated argument ensued. This event marked a significant deterioration in the relationship, both personal and professional, between the Carrs and the Ritossas.

4. [4]

   In February 2020, Mr Ritossa initiated the first formal board meeting of Darbalara Holdings. From this point onwards, the decisions of Darbalara Holdings have largely been made through formal monthly meetings (where previously they were made through informal communications between Mr Carr and Mr Ritossa). The Carrs maintain their desire to exit the business relationship, while the Ritossas seek to continue their investment, which has culminated in these proceedings.

5. [5]

   The plaintiffs now seek to bring DPT to an end by the sale of its assets and after the discharge of its debts, have the net proceeds distributed to the two unit holders on a 50:50 basis in accordance with their unit entitlements. The defendants seek to maintain their investment in DPT, arguing that the plaintiffs are free to sell their units in accordance with the terms of the trust instrument, but are not entitled to unilaterally terminate the trust and sell its assets. The sale of the units in DPT is not as attractive to the plaintiffs as a mode of exiting their investment, because the market value of DRCH’s 50% unitholding is significantly less than the value of a 50% interest in the net assets of the Trust.

Claims

1. [6]

   The plaintiffs seek declarations and orders for the realisation of the assets of DPT, discharge of the Trust’s liabilities, payment of its expenses, the distribution of net assets of the Trust to unit holders and the termination of the Trust. The plaintiffs seek a declaration that the Trust is terminable on reasonable notice by either the Carrs or the Ritossas, and that the Carrs have given such notice. In the alternative the plaintiffs contend that the affairs of Darbalara Holdings have been conducted oppressively and seek orders under ss 232 and 233 of the Corporations Act 2001 (Cth) for the winding up of that company and the Trust. The plaintiffs also seek, in the further alternative, the appointment of a receiver to DPT pursuant to s 67 of the Supreme Court Act 1970 (NSW) or the inherent jurisdiction of the Court.

Issues

1. [7]

   These proceedings raise four issues:

   1. (1)

      Whether an agreement was reached or representations were made founding an estoppel, that if one party sought to exit the Trust, the underlying assets of the Trust would be sold?

   2. (2)

      Whether cl 2 and cl 16 of the Trust Deed, properly construed, provide a right for any individual Unit Holder to terminate the Trust or, alternatively, to call for a distribution of 50% of the capital of the Trust?

   3. (3)

      Whether the conduct of the Darbalara Holdings board constitutes oppression against Mr Carr pursuant to ss 232 of the Corporations Act, allowing for orders to be made under s 233 of the Corporations Act?

   4. (4)

      Whether the Court should appoint a receiver to the Trust property to sell and distribute the net proceeds to the unit holders pursuant to s 67 of the Supreme Court Act or the inherent jurisdiction of the Court?

2. [8]

   As there is some overlap between the issues for determination, it is convenient to set out first the factual narrative in more detail.

Approach to evidence

1. [9]

   The Carrs and the Ritossas each gave evidence by affidavit and were cross-examined. Each of Mrs Carr and Mr and Mrs Ritossa struck me as being an honest witness who tried to answer the questions he or she was asked to the best of their recollection.

2. [10]

   Although I accept that Mr Carr was an honest witness, there were a number of areas where his recollection of events conflicted with contemporaneous documents. The following are three examples.

3. [11]

   First, in his third affidavit Mr Carr disputed that he ever told Mr Ritossa in mid-2019 that the Carrs were under tremendous financial stress due to Warralong Pastoral Trust (WPT), a trust established by the Carrs which ran their personal farming properties, having budgeted to make $1 million profit, but in fact having lost $1 million. However, the financial statements in evidence for WPT disclose that it did make a loss of $913,000 for the 2019 financial year and during cross-examination Mr Carr changed his evidence and accepted that this conversation took place (T75). That the Carrs were under financial pressure around this time is also confirmed by Mr Carr’s email of 27 May 2019 referred to below.

4. [12]

   Second, Mr Carr said during cross-examination that there was a ‘standing permission’ from ANZ Bank that DPT could repay the unit holder loans (T110). I reject that evidence because it is contrary to the express terms of the Subordination Deed referred to below and would, if correct, make the Subordination Deed nugatory. Further, there is no evidence about such a ‘standing permission’ in any of Mr Carr’s affidavit evidence, there is no documentary evidence to support it, and it is inconsistent with a resolution proposed by the Carrs at the meeting of the board of Darbalara Holdings on 2 August 2022 that ‘subject to the ANZ’s approval, the unit holder loans be partially repaid in the amount of $450,000 each …’.

5. [13]

   Third, there are a number of inconsistencies between Mr Carr’s evidence of his conversation with Mr Ritossa which founds the alleged oral agreement dealt with in issue one below, and the contemporaneous records concerning the establishment of DPT.

6. [14]

   In light of these matters, and my concern that Mr Carr’s recollection of events is influenced by his interest in the outcome of the proceedings, I have relied primarily on the contemporaneous documents where there is a contest in his evidence and that of the other witnesses. There is extensive evidence in the form of emails, and texts in the period from 2010 to early 2020 and also transcripts of the directors’ meetings of Darbalara Holdings since February 2020, which provide the best evidence of the relevant events occurring over the period from 2010 to date. I have relied primarily on these documents, rather than the witnesses’ recollection of the relevant conversations or events, bearing in mind the well-known observations of McLelland CJ in Eq regarding the fallibility of human memory in Watson v Foxman (1995) 49 NSWLR 315 at 318:

Factual background

1. [15]

   The establishment of DPT came about as a result of discussions in late 2009 to early 2010 between Mr Carr and Mr Ritossa when they were each working for different banks in Singapore. Mr Carr and Mr Ritossa first met in 1987, when they were both working at Bankers Trust in Sydney. They became friends in around 2007 while both were working in Singapore.

2. [16]

   In 2009, Mr Ritossa told Mr Carr that he was interested in diversifying his investment portfolio and sought Mr Carr’s suggestions. Mr Carr suggested that he consider investing in rural property in Australia. At that time, Mr Carr was Global Head of Sales, Financial Markets at Standard Chartered Bank and Mr Ritossa was in a senior role at Barclays Capital, including as head of the foreign exchange department of the bank. Mr Carr owned his family’s farm, Warralong, at Coolac near Gundagai in New South Wales, on which he grew up and purchased from his father in 2001. During the period he lived in Singapore, he used an experienced farm manager, Growth Farms Pty Ltd, to manage the property.

3. [17]

   On 10 March 2010, Mr Carr sent an email to Mr Ritossa about the possibility of purchasing two rural properties, located side by side, one of which was The Junction. Mr Carr described the purchase as presenting ‘the chance for good returns and good gains’ and added:

4. [18]

   On 26 March 2010, Mr Carr emailed Mr Ritossa sending him a link to the real estate agent’s website regarding The Junction, and stating ‘This is that property I was talking about. Like you I am looking for a coupon after getting so much bank stock, but this is a hell of a nice place’. On 6 April 2010, Mr Ritossa replied ‘should we be bidding on this?’. Mr Carr responded by an email the following day attaching more detailed information regarding the property and then went on:

5. [19]

   On 15 April 2010, Mr Carr sent an email to Ms Casey Ryan of Custom Accounting (CA), the accounting firm he used for his farm Warralong, seeking advice on the appropriate investment structure for the purchase of The Junction, which included:

6. [20]

   On 20 April 2010, Ms Ryan responded to each of the questions Mr Carr had raised (her responses are shown in italics) as follows:

7. [21]

   Attached to the email was a document headed ‘Comparison of structures’ which compared particular features of a private company, discretionary trust, unit trust or partnership structure for the investment. Mr Carr forwarded the email and its attachment to Mr Ritossa.

8. [22]

   On Friday, 7 May 2010, the vendor’s solicitor sent to Mr Carr a draft contract for sale of the property for a price of $7,250,000 with a requirement that contracts be exchanged by the following Wednesday, 12 May 2010, so that the auction scheduled for the next day could be cancelled. The Carrs and the Ritossas had still not decided on the appropriate entity to own the property. Later, on 7 May 2010, Mr Carr sent the Ritossas an email which attached the draft contract and included the following (emphasis added):

9. [23]

   Later that day, Mrs Ritossa responded to Mr Carr on the question of ownership by an email which stated:

10. [24]

    Shortly afterwards, Mr Carr responded by email that he agreed that their respective accountants should be put in touch with each other, and then added:

11. [25]

    On Saturday, 8 May 2010, Mr Carr sent emails to the following:

    1. (1)

       CA, his accountants, giving the contact details of the Ritossas’ accountant and stating (emphasis added):

    2. (2)

       The solicitor acting for the families on the purchase (copying in the Ritossas), stating that (emphasis added):

    3. (3)

       Growth Farms (with a copy to the Ritossas) seeking a proposal from that company to manage the property, and stating that ‘we are intending to be long term investors, and are looking forward to receiving an investment yield as we go.’

12. [26]

    Also on 8 May 2010, Mr Andrew Blackwell (the Ritossas’ accountant) sent an email to the Ritossas in which he advised against the use of a company and recommended a unit trust as the entity to acquire the property and run the business. Mr Blackwell subsequently sent an email in materially the same form to Mr Carr early on Monday, 10 May 2010 prefaced by the statement ‘I would like to discuss the structure for The Junction with you and/or your accountant’. The email included the following under the heading ‘Option 1 – Unit Trust’, which was the option he recommended:

13. [27]

    At 11:29am on 10 May 2010, Ms Stephanie O’Connor of CA responded to Mr Carr’s email of 8 May 2010 stating her concern about the short time frame required and making the following suggestion to progress the decision on structure:

14. [28]

    Mr Carr did not take up this suggestion and instead responded by email later that day asking Ms O’Connor to speak directly to Mr Blackwell. The email concluded:

15. [29]

    Mr Blackwell and Ms O’Connor had discussions about the appropriate structure later that day and during the morning of Tuesday, 11 May 2010 following which she sent an email to Mr Carr which stated (emphasis added):

16. [30]

    Mr Carr does not give any evidence about any discussions he had with Ms O’Connor after this email, but I infer from the emails which passed between the parties later on 11 May 2010 that it was decided that a unit trust structure would be adopted, and Mr Damian Scroope of Sydney Business Lawyers was engaged to draft the trust deed for immediate execution by the parties, which he did.

17. [31]

    During the morning of 12 May 2010, the trust deed to establish DPT was executed (Trust Deed). The Carrs and Ritossas also signed applications for units in DPT. Later on that day, contracts were exchanged for the purchase of The Junction with the trustee of DPT as purchaser for $7.5 million. Settlement occurred on 23 June 2010.

18. [32]

    The Carrs and the Ritossas initially held 10 units each in DPT. In order to contribute equally to the purchase price of The Junction, both families purchased additional units, such that they each became the holders of 3,827,149 fully paid units, amounting to a holding of 50% of the units respectively. Mr and Mrs Ritossa hold 106 units jointly and Mr Ritossa holds 3,827,043 in his own name. The Carrs acquired their units as trustees of the Carr Family Trust (CFT). In November 2018, the first plaintiff, DRCH, became the trustee of CFT and the units in DPT were transferred to it in that capacity. Mr and Mrs Carr own all the shares in DRCH and are its directors.

19. [33]

    At 2:49pm on 12 May 2010 (which was shortly after the exchange of contracts for the purchase), Mr Scroope sent an email to the Carrs and the Ritossas recommending that a unit holders agreement be entered into (consistently with the advice previously given by Ms O’Connor to Mr Carr). His email stated:

20. [34]

    The questionnaire attached to the email went into some detail about the sorts of matters which might be included in a unit holders’ agreement, including questions relating to different types of ‘exit strategy’. The questionnaire noted presciently that ‘some would say the most important thing to get right when entering into a unit holders agreement is the exit strategy’. Neither family engaged with this request from Mr Scroope.

21. [35]

    On Friday, 14 May 2010, Ms O’Connor of CA sent an email to Mr Carr saying: ‘Let me know if I can help with the unit holders agreement (which is really important) in conjunction with Damian Scroope or using Ivan’s lawyer’. Mr Carr responded to this by email the same day which said: ‘Re the unit holders agreement, I will need help with that thank you. When do we have to do that please? Who initiates it?’ Ms O’Connor responded by email on the following Tuesday stating ‘The unit holders agreement should be put in place now, Damien Scroope can assist you with this.’ She attached to her email a copy of the questionnaire, and gave Mr Carr the contact details for Mr Scroope.

22. [36]

    The matter came up again in October 2011 when Ms Ryan of CA reminded Mr Carr of the earlier advice from Mr Scroope that it was important to have a unit holders agreement as ‘a safety net’ for dealing with all issues in the event of a dispute. She re-sent the questionnaire to Mr Carr. He forwarded it to Mr Ritossa by email on 16 October 2011, but neither of them filled in the questionnaire and the matter went no further. In Mr Carr’s covering email to Mr Ritossa he said:

23. [37]

    Darbalara Holdings, the third defendant, was appointed as trustee of DPT on 16 November 2010 replacing the initial trustee which was an entity provided by CA and was only intended to act temporarily in that role.

24. [38]

    At all relevant times, Mr Carr and Mr Ritossa have been the sole shareholders of Darbalara Holdings, with one share each and they have at all relevant times been directors of the company. On 31 October 2011, Mrs Ritossa and Mr Carr’s father were each appointed as directors of Darbalara Holdings (Mr Carr’s father was replaced by Mrs Carr on 12 May 2015). At all times since 12 May 2015, the sole directors of DRCH have been the Carrs and the Ritossas.

25. [39]

    Between 2010 to 2019, most decisions regarding Darbalara Holdings were made informally through emails, messages and telephone conversations between Mr Carr and Mr Ritossa. Mr Carr and Mr Ritossa lived in different countries (the former in Singapore and then Australia from late 2013, the latter in London throughout the relevant period). From 2010 to January 2020, there were no formal meetings of directors or shareholders of Darbalara Holdings.

26. [40]

    Between late 2010 and 30 June 2015, each of the unit holders lent Darbalara Holdings $834,000 to assist with the operation of The Junction (unit holder loans). The unit holder loans were not subject to any written agreement and were interest free.

27. [41]

    Initially, DPT appointed Growth Farms as the manager of The Junction. In early October 2012, DPT appointed another third-party farm management company, Customised Farm Management Pty Ltd (CFM) to replace Growth Farms.

28. [42]

    In December 2013, Mr Carr retired from his banking career and Mr and Mrs Carr returned to live in Australia. From this time Mr Carr took a more immediate role in the management of his family farm, Warralong.

29. [43]

    In late 2015, Mr Carr proposed to Mr Ritossa that CACM, a company established by Mr Carr in June 2015 and owned and controlled by Mr and Mrs Carr, take over the management of DPT’s properties, including The Junction. Mr Ritossa agreed. CACM took over in December 2015 and was paid a monthly flat fee. There was no formal written agreement between Darbalara Holdings and CACM. In 2023, CACM was replaced by Benview Farms Pty Ltd, trading as Southern Ag Management (SouthernAg), which remains the current farm manager.

30. [44]

    On 16 December 2016, DPT entered into a contract to purchase another rural property, ‘Bogolara’, at Berremangra, New South Wales, and its livestock, plant and equipment for $5.7 million (which had been in discussion since 10 November 2016). Bogolara is also located in the Gundagai area. Mr Ritossa lent DPT around $6.8 million for the purchase of Bogolara, financed from funds borrowed by him from Standard Chartered Bank in Singapore (the Ritossa Loan) on the terms of a loan agreement executed by Mr Ritossa and Darbalara Holdings in August 2017. The purchase settled in February 2017. Mr Ritossa and Mr Carr agreed to CACM managing Bogolara on the same basis as for The Junction.

31. [45]

    From 1 June 2017, the Gundagai area was classified as ‘drought affected, intensifying’.

32. [46]

    On 21 August 2017, a circular resolution was passed to ensure that there would always be equality of voting power at the board level between the Carrs and Ritossas, including that in the event one director died, their spouse would receive an additional vote to ensure parity between the families. They also agreed that there would be no chairperson with a casting vote at board meetings. These decisions were based on legal advice received on 20 January 2017 driven by a concern raised by the Ritossas that the Ritossa Loan, which was unsecured, exposed the Ritossas to increased risk if DPT’s business failed.

33. [47]

    In June 2018, the Gundagai area was classified as ‘in drought’.

34. [48]

    The Ritossa Loan was refinanced in September 2018. Darbalara Holdings (as trustee of the DPT) entered into a loan facility agreement with the ANZ Bank on 3 August 2018 for loans up to a maximum amount of $4.9 million. The security comprised (a) first registered mortgages over The Junction and Bogolara; (b) a general security agreement granting a security interest over the present and after acquired property of DPT; and (c) a subordination deed which gave priority to the ANZ over all amounts owing by DPT to the unit holders in DPT (Subordination Deed). In early September 2018, $3.8 million was advanced by ANZ Bank under this facility to DPT and each unit holder made a loan of $1,676,233 to DPT to enable the Ritossa Loan to be repaid and provide further funding for the business. The unit holder loans were not formalised in a loan agreement and are interest free.

35. [49]

    On 27 September 2018, Mr Carr sent an email to Mr Ritossa informing him that he had purchased ‘Mingay Bridge’, a small block neighbouring the Carr’s family farm, Warralong, through WPT. Mr Carr also mentioned that he was looking at another larger neighbouring property, ‘Gilla Willa’, but was not sure if he could afford it. The Carrs and Ritossas had previously inspected both properties on 1 January 2011 but had decided not to proceed in purchasing them. Mr Ritossa replied to Mr Carr saying, ‘Happy to go halves on both of them’.

36. [50]

    Mr Carr and Mr Ritossa exchanged emails about whether the properties should be purchased for DPT, rather than by the Carrs through WPT. Mr Ritossa informed Mr Carr in an email sent on 6 September 2018, that he believed Mr Carr’s planned purchase created four conflicts of interest for Mr Carr because while he understood it was a good property for WPT, it was also a good property for DPT. He added: ‘In the spirit of partnership, we should have had a discussion as to how to resolve the conflict. Particularly given you say you are not sure you can afford it, because DPT definitely can’. In a subsequent email, Mr Ritossa asked ‘if for whatever reason you are unable to purchase the property, will you offer it to DPT?’ Mr Carr responded that he wanted to purchase the property because of its proximity (and strategic importance) to his other property Warralong and would purchase it if he could through WPT and not DPT.

37. [51]

    It is clear from the email correspondence over the period from 30 September to 2 October 2010 that Mr Ritossa was annoyed with Mr Carr because he had decided to purchase Gilla Willa without first discussing the purchase with Mr Ritossa and offering it to DPT, and because it had the potential to limit the Carrs’ ability to contribute to the purchase of other farming properties through DPT. Mr Carr admitted that he should have discussed the matter with Mr Ritossa beforehand, but ultimately proceeded with the purchase. This was the first time there had been any conflict in the relationship between the two men about the affairs of DPT.

38. [52]

    On 28 November 2018 DRCH (as trustee for the Carr Family Trust) entered into a contract to purchase Gilla Willa for a total price of $13.8 million. The purchase settled on 18 December 2018 which the Carrs intended to finance wholly through debt. The Carr’s borrowed $12.8 million from ANZ bank and the remainder from Mr Carr’s Singapore pension fund. The defendants allege that this purchase put the Carrs under significant financial strain, which explained their subsequent desire to pay ‘dividends’ from DPT despite the drought and eventually, their desire to sell DPT’s assets.

39. [53]

    In 2014, 2016 and 2017 DPT made ‘distributions’ to unit holders as follows: (a) $180,000 on 21 April 2014 ($90,000 to each family); (b) $500,000 on 15 June 2016 ($250,00 to each family); and (c) $600,000 on around 26 March 2017 ($300,000 to each family). Although in some of the email correspondence, Mr Carr and Mr Ritossa referred to the distributions as a ‘dividend’, they were recorded in the financial statements of DPT in each case as a reduction in each unit holder’s loan account. This is consistent with the fact that DPT has never had income available for distribution to unit holders: see [106] below.

40. [54]

    Three issues emerged during the discussions between Mr Carr and Mr Ritossa in the period from May to August 2019.

41. [55]

    The first concerned the depletion of DPT’s cash reserves as a result of the worsening drought, in particular the high cost of paying for the feed of the cattle and sheep at The Junction and Bogolara.

42. [56]

    In February 2019, Mr Ritossa emailed Mr Carr noting that DPT was spending $23,500 per week, $101,790 per month amounting to $1.22 million a year on feed and that there was a trade-off between: (a) running the stock down to save on feed, but paying higher prices to re-stock in the future, (b) keeping the same head count and feed costs as currently, and (c) buying more stock at these lower prices, but incurring more feed cost. He adds that it was ‘hard to say which one is optimal as we don’t know how long the drought will last’, but then went on to ask Mr Carr how much cash DPT had left to fund the situation before it ran out.

43. [57]

    In a text exchange in March 2019, Mr Carr said the options for DPT included, ‘de-stocking part or all of our animals, not spending money to put a crop in this year or sell some land?’

44. [58]

    On 23 June 2019, Mr Carr emailed Mr Ritossa raising with him the need to borrow $150,000 from ANZ Bank to fund feed bills for the stock, due to poor cash flow. There followed a series of emails between them in which Mr Ritossa said that he did not support DPT borrowing to fund day to day operations, including feeding livestock essentially because it was uncertain when the drought would break.

45. [59]

    Mr Ritossa said in an email on 24 June 2019 that it was important to bear in mind that ‘our strategy has always been to take advantage of the drought to buy quality properties at fair prices. That’s how we are going to build long term wealth’. Mr Carr responded by an email on the same day saying that while he would prefer to avoid borrowing to fund day to day operations, it was necessary, for the reasons he gave, to do so. He concluded the email by saying:

46. [60]

    On 25 June 2019, Mr Ritossa emailed Mr Carr about the ‘3 levers’ farmers have to manage a drought, which he identified as ‘feed, stock and cash’ and explained why he was against borrowing to fund the cost of feeding the stock which was summed up by his observation: ‘We are long stock short feed and short cash. This is an unsuitable position the longer the drought lasts. Farmers and businesses in general, go bust because they run out of cash’.

47. [61]

    Mr Ritossa told Mr Carr that his preference was to fund the cash requirements by unit holder loans rather than borrowing from ANZ Bank. Mr Ritossa’s view that stock levels should be decreased as the drought worsened was informed by discussions he had with other land owners in the district, one of whom (Mr Alasdair MacLeod) had recommended to Mr Ritossa the services of Mr Bert Glover from ImpactAg. Mr Ritossa suggested to Mr Carr that he speak to Mr Glover in an email sent on 23 June 2019.

48. [62]

    In contrast, Mr Carr’s view was that the best strategy was to hold onto and feed the bulk of the core breeding stock through the drought and continue to breed and sell livestock, rather than sell the herd and try to restock when the drought broke, because this would avoid the difficulties and costs associated with restocking, and also allow DPT to earn revenue from the livestock during and following the drought.

49. [63]

    Mr Carr did recognise in November 2019 that there was a need to reduce stock levels during the drought. In an email of 7 November 2019 to Mr Ritossa he referred to The Junction having recently run 5,000 ewes and 460 cows but he was in the process of reducing this down to 3,000 ewes and between 150 and zero cows by the end of January 2020. In another email he sent to Mr Ritossa on 14 November 2019 he said he was ‘running down head count’.

50. [64]

    I do not regard these November 2019 emails as being contrary to Mr Carr’s evidence as to his strategy (as the defendants submitted), because the key element of Mr Carr’s strategy was maintenance of the core breeding stock during the drought.

51. [65]

    However, the essential point is that there was a genuine disagreement on a matter of business judgment between Mr Ritossa and Mr Carr about the extent to which the stock (sheep and cows) should be retained during the drought. Mr Ritossa considered that a much greater reduction was required than did Mr Carr.

52. [66]

    The second issue concerned the strategy for acquiring new properties in DPT. Both Mr Carr and Mr Ritossa had been in broad agreement since the inception of DPT that its strategy, as Mr Carr expressed it in an email to Mr Ritossa on 2 September 2019, was to exploit price and production opportunities in the market by buying cheaper land and hedging the finishing risk of livestock production by developing The Junction to be a fodder and finishing property, and then taking stock from DPT’s breeding farms to the fattening block for finishing and sale directly to processors, eg. Coles.

53. [67]

    Mr Ritossa agreed that that was the strategy, but added that the biggest issue for DPT by mid-2019 was that it had very limited capacity, irrespective of the drought, to acquire further land ‘large enough to spread [DPT’s] running costs over a reasonable amount of acres’ (email of 3 September 2019).

54. [68]

    Mr Carr had looked at over 30 properties in the period from inception of DPT to September 2019, and it had become clear to both Mr Carr and Mr Ritossa that the cost of acquiring a further property of the size and capacity that they were looking at would be very high (estimated in one email to be in the order of $17-21 million). One such property was ‘Bundarbo’, a large property in the Gundagai region.

55. [69]

    However, in an email sent on 27 May 2019, Mr Carr told Mr Ritossa that the Carrs’ financial position was ‘stretched’ due to interest on the debt to fund their recent purchase of Gilla Willa and the enormous unbudgeted expense of having to hand feed all the animals on Warralong caused by the drought. This led Mr Ritossa to consider the purchase of Bundarbo himself, and not through DPT.

56. [70]

    In mid-2019, DPT did make two relatively small acquisitions. In June 2019, DPT purchased a cottage at Brungle Road, Gundagai for use as employee accommodation for $172,500. The purchase was financed through DPT drawing down on its ANZ loan facility. In July 2019, DPT entered into a contract to purchase a parcel of land containing the original Homestead of The Junction (Homestead) for $2.1 million, funded through drawing down on the ANZ facility. The sale completed in November 2019. The Ritossas had expressed a desire to purchase the Homestead in their names, but the Carrs thought it was better for DPT to do so because it would improve the value of the Junction property, and ultimately that is what was decided.

57. [71]

    The third issue concerned, the manner in which Mr Carr had handled the purchase of the Homestead. This caused some tension in the relationship between him and Mr Ritossa, because the Ritossas had initially wished to purchase the property themselves as a potential base in the district. Mr Ritossa expressed irritation in an email dated 31 August 2019, that Mr Carr had vetoed the Ritossas’ suggestion that they would buy it, rather than DPT, without a proper discussion of the idea beforehand, given that he perceived that Mr Carr had gone ahead with the purchase of Gilla Willa over Mr Ritossa’s objections in 2018. As Mr Ritossa put it in an email of 31 August 2019, ‘You vetoed me buying it in favour of DPT buying it. I feel I did WPT a favour at the expense of DPT. I was hoping for some reciprocity, that’s all.’

58. [72]

    Mr Carr recognised that he had handled the purchase of the Homestead poorly and apologised in an email on 2 September 2019.

59. [73]

    These three issues came to a head in late August 2019. Mr Carr deposes that in late August 2019, Mr Ritossa told him in a telephone conversation ‘I think we should be selling. The market is good. Commodity prices are high, property prices are high’. Mr Ritossa does not dispute that this conversation occurred. On 30 August 2019, Mr Ritossa, by email, asked Mr Carr if he had further thoughts about ‘the quickest and most profitable way to sell DPT’. Mr Carr said he had spoken to various people about it, and suggested that six months would be the minimum amount of time, and that a three or four-year plan would be more profitable. While Mr Carr deposed that he was ‘completely shocked and disappointed by [Mr Ritossa’s] request to sell the properties’, it is something which Mr Carr had himself raised in his email of 24 June 2019 as an outcome which he would accept.

60. [74]

    In an email sent on 2 September 2019, Mr Carr discussed what he thought DPT’s strategy had been and concluded by saying ‘We are disappointed but accepting to sell DPT, but we do not want to abruptly sell it at fire sale prices.’ He said that it would be ideal to sell in 2-3 years when the farms were fully developed. Mr Ritossa responded on 3 September 2019, discussing strategy but stating that his desire to sell DPT had ‘nothing to do with strategy’ and instead concerned ‘DPT’s ability to fund its growth at a time when the drought is bringing growth opportunities’. Mr Carr replied, ‘Ros and I have discussed and agreed that we will work to try and sell DPT asap’.

61. [75]

    During September 2019, Mr Carr and Mr Ritossa had discussions about the appropriate strategy to adopt to sell DPT’s properties, which included obtaining a valuation from CBRE of The Junction and Bogolara. On 1 October 2019, CBRE provided an estimate of the total value of The Junction and Bogolara of $33-35 million and a recommendation that the properties should not be marketed for sale until, at the earliest, the autumn of 2020.

62. [76]

    At the same time that Mr Carr and Mr Ritossa were discussing options for selling DPT’s assets, in mid-September Mr Ritossa raised with Mr Carr again the possibility of engaging Mr Glover of ImpactAg to provide a review of DPT’s operations. In early October, Mr Ritossa met with Mr Glover in London (during the course of a visit to London by Mr Glover for other business) and engaged him, with Mr Carr’s approval, to undertake that review. As noted earlier, Mr Glover had been recommended to Mr Ritossa by a friend (Mr Alasdair MacLeod) who had worked with Mr Glover in relation to a beef operation he conducted in New South Wales.

63. [77]

    In late October 2019, Mr Ritossa told Mr Carr that he was willing to reconsider the sale of DPT’s assets. In an email to Mr Carr on 4 November 2019, Mr Ritossa said he was keen ‘to de-risk DPT by taking out as much equity as possible’. By this he meant that DPT could drawdown under the ANZ facility to fund payments to the unit holders, including in reduction of their unit holder loans. This idea went no further, and Mr Ritossa accepted in cross-examination that his thinking on this had been muddled and incorrect.

64. [78]

    In November 2019, it was arranged for Mr Glover to provide an audit of the operations of DPT, and one of the matters which Mr Carr asked Mr Glover to address was DPT’s drought strategy. Ultimately, it was agreed that the Carrs and the Ritossas would meet with Mr Glover in early December 2019 when the Ritossas were planning to visit the properties, at which time Mr Glover would provide his report on the business. Mr Ritossa said in an email to Mr Carr on 18 November 2019 that: ‘Once we review the business we will have a better view on sell or don’t sell’.

65. [79]

    In around September or October 2019, Mr Ritossa started to reconsider his desire to sell DPT’s assets although he did not inform Mr Carr of this until the meetings with Mr Glover and the Carrs in December 2019. He deposed that he changed his view because, based on Mr Glover’s advice he decided that The Junction and Bogolara were good properties, and that the problem was with the way CACM was managing them and not with the properties themselves.

66. [80]

    In November 2019, the Gundagai area was classified as ‘drought affected’.

67. [81]

    On 5 and 6 December 2019, the Carrs, the Ritossas and Mr Glover inspected The Junction, Bogolara and the Homestead. On 6 December 2019, Mr Glover presented his review of the operations at the two properties to the Carrs and Ritossas. During this meeting, Mr Glover made observations which were critical of CACM’s approach to managing the farms, including the need to destock during a drought, which Mr Carr disagreed with.

68. [82]

    In particular, Mr Glover observed that the stocking rate on the land did not match its carrying capacity and expressed his view that DPT had too much stock, and should be adjusting its stock level (or head count) in line with rainfall, with a strategy (which Mr Carr did not agree with) that ‘if it doesn’t rain for a period of three months, you should start selling’. Mr Glover said that ‘if it doesn’t rain by March 2020, you will have run out of money and will have to let go of your stock’. Mr Glover also observed that DPT would need a significant amount of capital and operational expenditure over the coming two to four years (approximately $4 million in total).

69. [83]

    On 7 December 2019, the Carrs and Ritossas met at breakfast. In their affidavit evidence they each gave differing versions of what occurred, but ultimately it is not necessary to determine which is correct. Mr Carr was offended and did not agree with the assessment of Mr Glover, and felt he had been ambushed by the presentation. Mr Ritossa was of the view that the farms were in a bad state, including as a consequence of over stocking, and that Mr Glover had made a number of good suggestions to improve the farms which appeared to be sensible, but Mr Carr was intent on ignoring that advice. It is likely that both of them expressed these views to the other in the meeting. Mr Carr and Mr Ritossa got into a heated argument. Mr Carr told the Ritossas that the Carrs would like to end their business relationship and sell DPT. Mr Ritossa indicated that he no longer wanted to sell DPT.

70. [84]

    On 23 December 2019, Mrs Carr arranged for the payment from DPT’s bank account of $295,000 to each of the Carrs and the Ritossas which she described in an email to Mr Ritossa as a ‘dividend’. Mrs Carr deposed that she understood Mrs Ritossa as having agreed to the payment based on a phone conversation they had on 22 December 2019.

71. [85]

    Mrs Ritossa denies that she agreed to the payment, and this is supported by a contemporaneous file note she made of the conversation. I accept her evidence. In my opinion, it is likely that Mrs Carr’s belief that Mrs Ritossa had agreed to the payment was due to a misunderstanding on Mrs Carr’s part. All previous distributions had been arranged by Mr Carr and Mr Ritossa, and it is unlikely that Mrs Ritossa would have agreed to such a large payment without discussing it with Mr Ritossa first, particularly given the presentation by Mr Glover earlier that month. Ultimately, Mr Ritossa objected to it in an email to Mrs Carr and each family repaid the amount on 27 December 2019.

72. [86]

    On 18 February 2020, Mr Ritossa sent the Carrs a Notice of Meeting of the Directors of Darbalara Holdings for 28 February 2020, which was the first board meeting called for Darbalara Holdings.

73. [87]

    In March 2020, the drought broke.

74. [88]

    In November 2021, Mr Carr received an offer from a third party to purchase The Junction for $30 million. He passed this on to Mr Ritossa who indicated that he did not wish to sell any of DPT’s assets. In late 2022, an offer of $35 million was received from another third party for the Junction. Mr Carr raised this with Mr Ritossa and received the same response.

75. [89]

    In April 2022, the Carrs sent a buy-sell open offer to the Ritossas, being an offer to purchase the Ritossas’ units or sell the DRCH’s units for $21.5 million (on the basis that the unit holder loans be paid out by DPT). Another similar buy-sell offer for $23.25 million was sent by the Carrs in March 2023. Each offer was rejected. There have also been two separate offers for DRCH’s units from third parties known to the Ritossas, but in each case for amounts less than $8 million, which the Carrs rejected as the prices offered were not acceptable to them.

76. [90]

    On 14 April 2022, the Carrs sent a Wind Up Notice which stated:

Expert valuation evidence

1. [91]

   The parties relied upon two types of expert valuation evidence. The first was evidence as to the value of the underlying assets of DPT, and the second was evidence as to the value of the units in DPT.

2. [92]

   Both parties relied on expert evidence as to the market value of the underlying assets of DPT. The plaintiffs tendered three reports by Mr Daniel Thomas (formerly of CBRE and now LAWD). In his first report, Mr Thomas’ opinion as to the market value of The Junction (including the Homestead) as at 1 September 2020 was $24,450,000 and Bogolara was $10,700,000. Mr Thomas then updated the report as at 24 November 2021, when he appraised the market value of The Junction (including the Homestead) to be $30,230,000 and Bogolara to be $12,810,000. Finally, Mr Thomas has updated his valuations as at 11 May 2024, at which time he appraises the market value of The Junction as $38,350,000, and Bogolara as $17,000,000.

3. [93]

   The plaintiffs also relied on the following valuation evidence:

   1. (1)

      The expert report of Mr Cameron Rosser, a livestock agent who assessed the value of DPT’s livestock at The Junction, Bogolara and Myora as at 1 September 2020 to be $2,350,150 and as at 31 October 2021 to be $2,437,405. On 1 July 2024, Mr Rosser provided an updated annexure to his first report, with the values of the livestock of DPT as at 15 May 2024 in a total amount of $1,192,670.

   2. (2)

      The expert report of Mr Tim O’Mara valuing the plant and equipment of DPT. As at 21 June 2024, the farm equipment and vehicles of The Junction and Bogolara combined were assessed to be worth $448,400 at fair market value or $331,000 at forced liquidity value.

4. [94]

   The defendants tendered a report by Mr John Ewing of Donoghue Property Valuations. Mr Ewing’s opinion was that the market value as at 29 May 2024, of The Junction was $36,000,000 and Bogolara was $15,450,000.

5. [95]

   During the course of the trial, Mr Ewing and Mr Thomas held an experts’ conference and on 16 July 2024 reached consensus as to the values to be given to The Junction and Bogolara, provided in the form of two Joint Property Valuation Reports of 19 July 2024, in which they agreed that The Junction should be valued at $36,600,000 and Bogolara at $15,900,000. These are the figures which this judgment adopts.

6. [96]

   Turning now to the value of the units, the only expert evidence provided to the court on that issue is the reports of two experts called by the defendants, Ms Wright and Mr Waters of FTI Consulting. Ms Wright and Mr Waters prepared two Joint Reports dated 26 October 2021 and 5 July 2024, to which Ms Wright then provided an Addendum Report on 17 July 2024 adjusting her figures from the 5 July report.

7. [97]

   Ms Wright was initially instructed to provide an expert opinion on the fair market value of 50% of the units in DPT as at 1 September 2020 (the 26 October 2021 report). Her assessment of fair market value is based on the price that a hypothetical willing buyer would pay for 50% of the units in DPT. Ms Wright adopts a ‘net assets’ valuation methodology, rather than a ‘discounted cash flow’ approach, as DPT was asset rich but had limited earnings history to enable an earnings-based approach and lacked forecasts.

8. [98]

   In each report, Mr Waters assessed the value of the livestock of DPT, and Ms Wright used this valuation to derive the value of the net assets of DPT. As at 1 September 2020, Mr Waters concluded that the value of the livestock of DPT was in the range of $1.5 million to $2.8 million. Mr Waters’ assessment of the livestock value was based on average sale prices at the time, without complete details as to the specific breed, age, or weight of all livestock. As such Mr Waters provides a lower and upper range of values, noting that auction prices can be quite variable depending on the qualities of the livestock and the market at the time. Taking this into account, Ms Wright assessed the value of the net assets of DPT to be between $27.3 million and $28.6 million as at 1 September 2020. Ms Wright’s calculations were based on a balance sheet as at 30 June 2020 to which she made certain adjustments. Ms Wright then applied two main discounts to the net asset value of DPT to reach her final valuation. The discounting factors raised in the 2020 report remained the same as those raised in the 2024 reports and are outlined below. Following these calculations, Ms Wright’s opinion as to the fair market value of 50% of the units in DPT as at 1 September 2020 was in the range of $6.1 million to $8.2 million.

9. [99]

   Ms Wright was then instructed to provide an updated valuation of 50% of the units in DPT as at 30 April 2024. Mr Waters adopted the first livestock valuation undertaken by Mr Rosser, which he deemed to be reasonable. Ms Wright took into account property valuations undertaken in the interim by Mr Ewing and Mr Thomas. As at 29 May 2024, based on adjustments made to the reported net assets, Ms Wright assessed the value of the net assets of DPT to be approximately $42 million (adopting Mr Ewing’s valuations) or $46 million (adopting Mr Thomas’ valuations). In Ms Wright’s opinion, after discounting, the value of 50% of the units in DPT adopting Mr Ewing’s valuations was in the range of $9.35 million to $11.96 million, while if Mr Thomas’ valuations were adopted, it was in the range of $10.23 million to $13.01 million.

10. [100]

    During the trial, Ms Wright was provided with the Joint Property Valuation Report of Messrs Ewing and Thomas, as well as Mr O’Mara’s report as to the value of plant and equipment of 21 June 2024. Based on this new information, Ms Wright provided an Addendum Report of 17 July 2024, updating her valuation in the 5 July 2024 report as to the net assets of DPT, including the book values of the water licence, property and land assets and property improvements recorded in its balance sheet. It was not necessary for Mr Waters to update his portion of the report. Ms Wright found that the adjusted net assets of DPT as at 30 April 2024 were in the range of $42,127,991 to $42,308,689. Ms Wright then applied the following discounts (consistently with her earlier reports):

    1. (1)

       A discount for minority interest of 5-10%: This discount is for the fact that a purchase of a 50% unitholding in DPT would not provide voting control over DPT. Ms Wright noted that it was a generally accepted valuation principle that all else being equal, participants would generally prefer to have control over a subject asset than not. As a 50% unitholding in DPT gave neither party control, Ms Wright considered that an appropriate discount was within the range of 5% to 10%.

    2. (2)

       A discount for lack of marketability of 40-50%: This second discount is for the lack of marketability of DPT. Marketability reflects the concept that when comparing otherwise identical assets, a readily marketable asset would have a higher value than an asset with a long marketing period or restrictions on the ability to sell the asset. Marketability can be defined as the relative ease and promptness with which an ownership interest can be bought or sold or otherwise be monetised and refers to the ability to quickly convert property to cash at minimal cost. In Ms Wright's opinion an appropriate discount for the lack of marketability based on the characteristics of the business was between 40% and 50%.

11. [101]

    Ms Wright provided essentially four reasons for the large marketability discount. First, the business did not have a historical track record of profitability. Second, the business required significant capital expenditure which was difficult to fund in the context of a lack of profitability and the potential for decision-making deadlock. Ms Wright noted that neither the Trust Deed nor the Constitution of Darbalara Holdings contained any mechanism for resolving a decision making 'deadlock' between each block of unit holders. Third, the pool of potential investors in a privately owned unit trust with a lack of limited liability, and in circumstances where the other 50% unitholding was a 'family group', was limited as compared to other structures, such as a purchase of shares in a company. Fourth, clause 7 of the Trust Deed states that Unit Holders may only transfer their units to a person approved by the Trustee and the Trustee can refuse approval without providing a reason, which could impose a significant obstacle on the marketability of the units. Further, the non-adjacent locations of the two farms may be a negative feature. In Ms Wright's opinion this could further increase the discount required because it reduced the range of hypothetical market participants who may be interested in DPT.

12. [102]

    Taking all these discounting factors into account and the updated valuations as to the underlying assets in DPT, Ms Wright ultimately concluded in her Addendum Report that the value of a 50% unitholding in DPT as at 30 April 2024 was in the range of $9.48 million to $12.06 million. This range of figures has been accepted by both the plaintiffs and defendants and as such, is used as a reference point in this judgment.

13. [103]

    It follows that there is a significant discrepancy between the value of the net assets of DPT and the value of a 50% unit holding in DPT at the relevant time or times. Taking the position as at 30 April 2024 as illustrative, and adopting the mid-point of the range of values given by Ms Wright in the Addendum Report, on that date the value of a 50% interest in the net assets of DPT was around $21.1 million whereas the value of a 50% unit holding in DPT was around $10.8 million.

The financial performance of DPT from 2011 to 2024

1. [104]

   It is clear from the valuation evidence referred to above that the value of the two key assets of DPT has increased significantly since their purchase. The net value of DPT’s assets on each of the dates addressed by the valuation evidence indicates that DPT following the end of the drought in 2020, was and is in a strong financial position. However, as noted in Ms Wright’s reports, the activities of DPT to date have not been profitable.

2. [105]

   The following has been extracted from the financial statements for DPT for the financial years ended 30 June 2010 to 30 June 2023 inclusive:

3. [106]

   The significance of the final column in the above table is that the accounts for DPT record that for each financial year up to and including the 2023 year, DPT has not had a distributable income to which a unit holder could be presently entitled: Commissioner of Taxation v Bamford (2010) 240 CLR 481; [2010] HCA 10 at [45]. While in some years there was a profit for that financial year, it was offset by the carry forward loss which as at 30 June 2023 stood at $1,069,927. The relevant provisions of the Trust Deed are referred to in the discussion of issue two below.

First issue: Oral agreement or estoppel

1. [107]

   The plaintiffs contend that there was an oral agreement between Mr Carr and Mr Ritossa, or representations to the same effect founding an estoppel, that each of the Carrs and the Ritossas would be entitled to unilaterally terminate the joint venture constituted by DPT by reasonable notice to the other.

2. [108]

   More particularly, the plaintiffs contend that the Court should find that:

   1. (1)

      On or about 8 May 2010, Mr Carr and Mr Ritossa had a conversation in which Mr Ritossa said words to the effect that if either the Ritossas or the Carrs wanted to end the joint venture then the property would be sold (the Representation), to which Mr Carr agreed.

   2. (2)

      Between May 2010 and December 2019, the Ritossas represented to the Carrs, by their words and conduct the following (collectively, the Ongoing Representations):

3. [109]

   The Representation referred to in (1) above is founded on Mr Carr’s evidence that he had a conversation with Mr Ritossa on or about 8 May 2010 to the following effect:

4. [110]

   Mr Ritossa denies that any such conversation ever occurred.

5. [111]

   In John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 Hammerschlag J (as his Honour then was) said:

6. [112]

   Where the existence and terms of an oral contract is in issue, consideration of the surrounding circumstances including the history of the relationship between the parties and their conduct prior to and at the time the alleged contract was entered into is permissible, as well as post-contractual conduct: Colyer Fehr Tallow Pty Ltd v KNZ Australia Pty Ltd [2011] NSWSC 457 at [47]–[50]; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25].

7. [113]

   In view of the fallibility of human memory, it is recognised that where the events (including conversations) relied upon took place many years ago, ‘the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities together with the documentation tendered in evidence’: Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15 at [15]-[16]; ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [25]–[29] (and cases there cited).

8. [114]

   Finally, I note that in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34, Dixon J emphasised that when the law requires the proof of any fact the Court must feel an actual persuasion of its occurrence or existence before it can be found, and ‘it cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality’ (at 361).

9. [115]

   I prefer Mr Ritossa’s evidence on the alleged conversation to that of Mr Carr for the following reasons.

10. [116]

    First, the alleged conversation occurred over 10 years before Mr Carr made his affidavit. As noted earlier, the human memory is unreliable as to events occurring that long ago, which is illustrated by Mr Carr’s own evidence. In the same affidavit he deposed that he was surprised when he received Mr Ritossa’s email of 6 April 2010 stating ‘Should we be bidding on this’, because he had not thought about the possibility of Mr Ritossa being interested in buying something jointly with him until the 6 April 2010 email was received. He could not have been surprised because he had made the very suggestion of a joint investment to Mr Ritossa in his email of 10 March 2010 referred to above.

11. [117]

    Second, there is no mention in any of the contemporaneous emails in the period from 10 March 2010 to 12 May 2010 of any understanding or arrangement of the kind referred to in the alleged conversation (which can be referred to as a ‘one out/all out’ arrangement), which would corroborate that the alleged conversation occurred. Indeed, to the contrary, the email correspondence referred to earlier suggested that no thought was given by Mr Carr as to what would happen if one party wanted to exit other than that there should be a right of first refusal for the remaining party. Particularly telling are:

    1. (1)

       Mr Carr’s email to CA on 8 May 2010 quoted at [25] above, because it refers to each party having the right of first refusal if the other party wished to sell its share of the investment (which is in fact contained the Trust Rules). Had there also been a ‘one out/all out’ arrangement then one would expect it to have been mentioned in the emails.

    2. (2)

       Mr Carr’s email to Mr Ritossa of 16 October 2011 makes no mention of it. Had Mr Carr already agreed with Mr Ritossa that there was to be a ‘one out/all out’ arrangement, it would be expected that he would have raised it as a reason for a unit holders’ agreement being necessary to document that arrangement.

    3. (3)

       Mr Carr’s version of the conversation states that the next step was for him to speak to his accountant, but there is no evidence that he did so (in particular, it is not mentioned in the contemporaneous emails to and from his accountant, CA).

12. [118]

    Third, Mrs Carr makes no mention of any discussion with Mr Carr at any time of a ‘one out/all out’ arrangement.

13. [119]

    Fourth, when the dispute arose between Mr Carr and Mr Ritossa in December 2019 about whether DPT should be brought to an end because the Carrs could no longer work with the Ritossas, Mr Carr did not in any of the correspondence or conversations about which he gives evidence, refer to the existence of a ‘one out/all out’ arrangement.

14. [120]

    Fifth, Mr Ritossa’s explanation for why he would not have agreed to a ‘one out/all out’ arrangement, which is that he considered this to be a long-term investment and wanted to have control over when he exited it, is coherent. A key difficulty with the ‘one out/all out’ concept is that at any time, one party could require the Trust to come to an end without the consent of the other, irrespective of the financial consequences for that other party in doing so. Having read the extensive correspondence between Mr Carr and Mr Ritossa over the entire period of the investment and observed Mr Ritossa during his lengthy cross-examination, I consider it to be highly unlikely that he would have agreed to a ‘one out/all out’ arrangement.

15. [121]

    Sixth, in cross-examination, Mr Carr gave evidence that part of the ‘one out/all out’ arrangement was that if one party wanted to sell, the other party had to agree to sell or to buy the other party out (T19-20). This additional element had not previously been mentioned in any of his four affidavits. I do not accept this evidence. It is a significant addition to the alleged ‘one out/all out’ arrangement, and is not supported by any of the contemporaneous material.

16. [122]

    In so far as the plaintiffs contend that there were Ongoing Representations of the kind alleged, there is no evidence in any statements by Mr Ritossa after 12 May 2010 which would support a ‘one out/all out’ arrangement. In so far as his conduct is concerned, it is true that he did in August 2019 state that he wanted the assets of DPT to be sold, but he did not mention that he was doing so as part of a ‘one out/all out’ arrangement previously agreed between he and Mr Carr. I have read all the evidence of the communications (by email and text) between Mr Ritossa and Mr Carr in the period from May 2010 to December 2019 and the only time at which there is a discussion between Mr Carr and Mr Ritossa about the sale of the assets of DPT is in the period August to December 2019. During these discussions, Mr Ritossa stated that he wanted the assets of DPT to be sold or for Mr Carr to buy out the Ritossas 50% interest in DPT, but he did not demand that this occur. It would have been open to Mr Carr to have said to Mr Ritossa that he objected to a sale of DPT’s assets, but he did not. Indeed, he had previously foreshadowed in his email of 24 June 2019 that the sale of DPT’s assets was a possible outcome given the financial difficulties created by the drought and his willingness to go along with Mr Ritossa if that was his preference. However, this was not because there was a ‘one out/all out’ arrangement to that effect. For these reasons, I am not satisfied that the Ongoing Representations were made.

Second issue: DRCH’s rights under the Trust Deed

1. [123]

   DRCH contends that the Wind Up Notice was effective pursuant to cl 2.1(b) to bring the Trust an end or, alternatively, that DRCH is entitled to require the Trustee to pay to it 50% of the capital of the Trust in specie or the net proceeds of 50% of the capital of the Trust pursuant to cl 2.1(b) read with cl 16.1 of the Rules.

2. [124]

   Clause 1 of the Trust Deed provides:

3. [125]

   Clause 3.1 of the Trust Deed provides that the Rules attached to the Deed (Rules) have effect as part of the Trust Deed.

4. [126]

   Clause 2 of the Rules provides as follows:

5. [127]

   The expression ‘Income’ is defined in cl 1.2 to mean ‘the income of the Trust as determined in the Trustee’s absolute discretion but failing such determination means the assessable income of the Trust (whether of an income or a capital nature) less all allowable deductions allowed to it in accordance with the Income Tax Assessment Acts 1936 and 1997 …’ It is recognised that the distributable income of a trust is the income ascertained by the trustee according to appropriate accounting principles and the trust instrument: Bamford at [45].

6. [128]

   Clause 4 permits the Trustee to allot units following an application in writing, but no allotment may be made on or after 80 years from the date of the Deed (cl 4.5). Given that an allotment of new units must be approved by the Trustee, each unit holder effectively has a veto over any new allotment of units.

7. [129]

   Clause 5.1 gives the Trustee power to redeem any unit at a price determined on the basis of net asset value, according to Australian accounting principles, of the Trust at the time of the redemption.

8. [130]

   Clause 7.1 permits a unit holder to transfer any unit to any person approved by the Trustee. The right of a unit holder to transfer its units is subject to the pre-emptive rights provision set out in the Third Schedule. The regime set out in the Third Schedule is in summary as follows: (a) a unit holder proposing to transfer any units (referred to as the ‘Transferor’) must give notice in writing to the Trustee which specifies the price the Transferor will accept; (b) the Trustee (as agent for the Transferor) must then offer the units to each other unit holder in proportion to their unit holding; (c) within 35 days of offering the unit holders the units effected by a transfer notice, the Trustee must nominate the unit holder or other parties approved by the Trustee as purchasers of the units. If a majority of the proposed purchasers require it, the Trustee is required to obtain a valuation of the units offered for sale, and the price fixed by the valuation will become the price payable to the Transferor, if the Transferor so agrees; (d) if after 35 days the Trustee has not found purchasers for all the units offered under the transfer notice, the Transferor may during the next 35 days transfer all the units offered to any person, at a price not less than the lesser of the price stated in the transfer notice or the price fixed by the valuation obtained by the Trustee.

9. [131]

   Clause 9 of the Rules deals with the ending of the Trust and provides:

10. [132]

    Clauses 15 and 16 of the Rules deal with the unit holders’ present entitlement to income and capital respectively. They provide:

11. [133]

    Under cl 17.1 of the Rules, the Trustee holds the Fund in trust for the unit holders as tenants in common in proportion to the number of units held.

12. [134]

    Clause 19.2 of the Rules provides that the Trustee is entitled to be indemnified out of the Fund in respect of any liability incurred in actual or purported exercise of the powers, duties and discretions conferred by the Trust Deed.

13. [135]

    It may be noted that the Trust Deed does not contain a vesting date. The Trust Deed does not infringe the rule against perpetuities due to the prohibition on the allotment of further units beyond 80 years under cl 4. The parties were in agreement that the Trust will in effect be perpetual unless brought to an end by the unit holders exercising their collective right under cl 9.1 (or the rule in Saunders v Vautier (1841) 41 ER 482). In my opinion, that is the correct view: see Scott, The Law of Trusts (3rd ed, 1967, Little, Brown and Company) at Vol 1, §62.10, pp 600-601; AJ Oakley (Ed), Trends in Contemporary Trust Law (1996, Oxford: Clarendon Press), pp 10-12.

14. [136]

    It was not in dispute that the reason for the inclusion of cl 2 was to enable the Trust to qualify as a ‘fixed trust’ for land tax purposes. Where a trust owning land is a fixed trust, it will not be a ‘special trust’ and therefore the trustee will be entitled to claim the tax-free threshold under Part 2 of Schedule 13 of the Land Tax Act 1956 (NSW).

15. [137]

    The provisions of the Land Tax Management Act 1956 (NSW) (LTMA), setting out when a trust will be a fixed trust are ss 3A(2), (3), (3A) and (3B) which provide as follows:

16. [138]

    The context of these provisions is that land tax is payable on the taxable value of all land in New South Wales which is not exempt, by the ‘owner’ of the land at midnight on 31 December immediately preceding the land tax year. The term ‘owner’ is defined in s 3(1) of the LTMA to include, relevantly, every person who jointly or severally whether at law or in equity is entitled to the land for an estate of freehold in possession. Where land is owned by the trustee of a fixed trust, the trustee is liable to tax as if it was beneficially entitled to the land (s 24) and the beneficiaries of the trust are also liable to land tax, as secondary taxpayers, as if they were the legal owner of their interest in the land, but subject to a deduction to prevent double taxation (s 33).

17. [139]

    The current definition of ‘fixed trust’ was introduced in 2006 to overcome the decision in CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98. This is apparent from the Second Reading Speech for the State Revenue Legislation Amendment (Tax Concessions) Bill 2006 (NSW) which introduced it, which states (New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 17 October 2006 at 2751):

18. [140]

    CPT Custodian concerned a similar definition of ‘owner’ in the Land Tax Act 1958 (Vic). The issue in that case was whether two companies which held units in unit trusts, the trustees of which were the registered proprietors of land in Victoria, were subject to land tax on the basis that they were entitled to an estate of freehold in possession in the land. The High Court held that none of the unit holders had such an entitlement because under the terms of each unit trust deed, while the beneficial interest in the fund as a whole was divided into units, no unit conferred any particular interest in any part of the assets of the fund, in contrast to the trust deed at issue in Charles v Federal Commissioner of Taxation (1954) 90 CLR 598; [1954] HCA 16: see [20] and [29]-[40]. As a consequence, the only person liable to land tax in respect of the land held in each unit trust was the trustee.

19. [141]

    In CPT Custodian, it was also held that the position was no different in the case of those unit trusts which had a single unit holder because the rights of the trustee to indemnity and exoneration for the discharge of liabilities incurred in the administration of the trust meant that the unit holder could not bring the trust to an end under the ‘rule’ in Saunders v Vautier: see [49]-[51].

20. [142]

    The High Court stated at [47] that the modern formulation of the rule in Saunders v Vautier is as follows:

21. [143]

    It may be noted that the last part of this observation in CPT Custodian conforms closely to the words of the second limb of s 3A(3B)(a)(ii) of the LTMA referred to above.

22. [144]

    The High Court in CPT Custodian went on to recognise at [47]-[51] a qualification in the operation of the rule in Saunders v Vautier which is that it will not apply where the trustee has rights of reimbursement and exoneration in respect of the trust property which are unsatisfied. In CPT Custodian itself, the trustee had an unsatisfied right of reimbursement and exoneration for its fees, which mean that it was impossible to say what the trust fund in question was, and consequently the rule in Saunders v Vautier did not apply. It may be noted that this aspect of the decision in CPT Custodian is not relevant to whether the Trust is a fixed trust due to s 3A(3) of the LTMA: see Sayden Pty Ltd v Chief Commissioner of State Revenue (2013) 83 NSWLR 700; [2013] NSWCA 111 at [18].

23. [145]

    Prior to the 2006 amendment, the expression ‘fixed trust’ was defined in s 3A(2) to mean a trust under which ‘the equitable estate in all the land that is the subject of the trust is owned by a person or persons who would … be considered to be owners of the land for land tax purposes’. In light of the decision in CPT Custodian, many unit trusts would not satisfy this definition because the unit holders would not be regarded as owners of any equitable estate or interest in the land.

24. [146]

    Section 3(3A) overcomes this problem by deeming the persons who are beneficiaries of a trust which satisfies the ‘relevant criteria’ to be the owners of an equitable estate in the land, so that the trust will qualify as a fixed trust.

25. [147]

    In Sayden, Gzell J (Meagher JA and Tobias AJA agreeing) after setting out the terms of s 3(3A) and (3B) made the following observations:

26. [148]

    Gzell J did not make any further observations regarding the proper construction of ss 3A(A) and 3A(B). The focus of the remainder of his Honour’s reasons was the question whether the appeal panel had erred in concluding that the trust deed at issue in that case had failed to comply with the relevant criteria in s 3A(3B).

27. [149]

    The relevant clause of the trust deed before the Court in Sayden was in the following terms:

28. [150]

    Immediately after setting out this clause, Gzell J made the following general observations about it at [32]-[33]:

29. [151]

    Consistently with that last statement, his Honour said at [44] that the effect of cl 2(c)(iii) was as follows:

30. [152]

    His Honour explained the reasoning for that conclusion at [54]-[57] as follows:

31. [153]

    I agree with the defendants’ submission that Sayden was essentially a decision regarding the proper construction of a different trust deed to the one in the present case. However, aspects of the reasoning in Sayden on the construction of the trust deed in that case will be referred to below.

32. [154]

    One further point may be noted regarding the structure of the specification of the ‘relevant criteria’ in s 3A(3B). The provision has three elements: sub-paragraph (a) requires the trust deed to specifically provide that ‘the beneficiaries’ have the particular entitlements specified; sub-paragraph (b) then requires that those entitlements are entrenched in the trust deed; and sub-paragraph (c) then sets out a further requirement which must be satisfied if the trust is a unit trust.

33. [155]

    In so far as sub-paragraph (a) of s 3A(3B) is concerned, on its face it will be satisfied if the beneficiaries collectively have the relevant entitlements. That view is supported by the fact that the second limb of sub-paragraph (a)(ii) (commencing ‘and may require …’) is directed to whether the rule in Saunders v Vautier applies, which confers a right on the beneficiaries acting collectively, rather than individually. It would be an odd use of language if the first limb of sub-paragraph (a)(ii) (commencing ‘are presently entitled …’) were read differently as requiring that the beneficiaries should have the present entitlement to capital individually and severally rather than collectively.

34. [156]

    The plaintiffs contend that DRCH is entitled to require the Trustee to wind up the Trust by distributing the trust property or the net proceeds of the trust property to unit holders in proportion to the unit holdings by virtue of cl 2.1(b) of the Trust Rules, or alternatively, that DRCH can call for 50% of the trust capital pursuant to cl 16.1. The defendants contend that the rights conferred on unit holders by cl 2.1(b) and cl 16 are conferred on them collectively and not severally.

35. [157]

    There was no dispute between the parties regarding the approach to be taken on the proper construction of the Trust Deed (including the Rules). It is to be construed in accordance with the principles which apply to the construction of contracts: Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 at [17], [53]-[55], [59] and [102]-[105]. Those principles include relevantly the following:

    1. (1)

       The meaning of each provision of the Trust Deed is to be determined objectively, by reference to what a reasonable person would have understood the provision to mean having regard to the text, context and purpose of the deed: Mount Bruce Mining Pty Ltd v Wright Prospecting (2015) 256 CLR 104; [2015] HCA 37 at [46].

    2. (2)

       The words of the Trust Deed should be given their natural and ordinary meaning unless they had a special or technical meaning, or the context or purpose suggests otherwise: Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93 at [21].

    3. (3)

       The Trust Deed should be construed as a whole, since the meaning of any one part of it may be revealed by the other parts, and the words of every provision should if possible be construed so as to render them all harmonious one with another: Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99 at 109. Consistently with that principle, a contract which gives a congruent operation to the various components of the whole instrument is to be preferred to one that does not: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16].

    4. (4)

       A construction which avoids a capricious, unreasonable, inconvenient or unjust result is to be preferred to one that does not where the provisions of the instrument permit: Australian Broadcasting Commission at 109; Onley v Catlin Syndicate Ltd as Underwriting member of Lloyd’s Syndicate 2003 (2018) 360 ALR 92; [2018] FCAFC 119 at [33].

36. [158]

    It was also not in dispute that the Trust Deed is properly regarded as a commercial contract, reflecting the fact that it was entered into between the Trustee and the two unit holders (the first plaintiff and the defendants) for a commercial purpose of acquiring rural properties for business purposes. As a commercial contract, it is necessary to consider the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the Trust Deed; appreciation of the commercial purpose or objects is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating; the Court is entitled to approach the task of giving the Trust Deed a business like interpretation on the assumption that the parties intended to produce a commercial result, and it is to be construed so as to avoid making commercial nonsense or working commercial inconvenience: Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35].

37. [159]

    The starting point in the construction of cl 2.1 is that it should be read together with cll 9, 15 and 16 which expand on the concepts dealt with by cl 2.1 in the following way:

    1. (1)

       Clause 2.1(a) provides that the unit holders are presently entitled to the income of the trust subject to the payment of the Trustee’s proper expenses.

    2. (2)

       Clause 15 amplifies the right conferred by that clause in two ways: (a) by clarifying that it is an entitlement which arises in respect of the income of each income year (cl 15.1) and (b) by stating the proportion of the income to which the unit holders are entitled (cl 15.2). Both are important aspects of the present entitlement which are not dealt with in cl 2.1(a). It is made clear in both cl 2.1(a) and cl 15.2 that the present entitlement of the unit holders is subject to (i.e., arises after allowance for) the payment of the Trustee’s proper expenses. It may be noted that such a qualification does not deny to a beneficiary a present entitlement to income of the Trust for the purposes of s 97(1) of the Income Tax Assessment Act 1936 (Cth) and hence is entirely orthodox: see Federal Commissioner of Taxation v Totledge Pty Ltd [1982] FCA 64 (1982); (1982) 82 ATC 4168 at 4173-4175; Cajkusic v Commissioner of Taxation (No 2) [2006] FCAFC 164 at [37].

    3. (3)

       Clause 2.1(b) contains, like s 3A(3B)(a)(ii) of the LTMA, two limbs. The first limb provides that the unit holders are presently entitled to the capital of the trust. Cl 16 amplifies this right in three ways: (a) cl 16.1 states what each unit holder’s proportionate entitlement to capital is; (b) cl 16.2 confers a power on the Trustee to distribute capital to unit holders in proportion to their unit holding prior to determination of the Trust, and (c) cl 16.3 states that when the Trust ends, capital will be distributed under cl 9.

    4. (4)

       The second limb of s 2.1(b) states that the unit holders may require the Trustee to wind up the trust, which is a matter dealt with in some detail in cl 9. Two aspects of cl 9 are important. First, cl 9.1 states that the Trust continues until it is resolved by unit holders to end it. The word ‘until’ recognises that the Trust Deed contains no vesting date consequently it will continue indefinitely unless and until the unit holders unanimously agree to terminate it. Second, cl 9.1 is an express recognition of the rule in Saunders v Vautier which as noted earlier requires unanimity of the beneficiaries, but differs from it in that the qualification to the beneficiaries’ entitlement under the rule in Saunders v Vautier identified in CPT Custodian would not apply to the right conferred by cl 9.1. This is because the Trustee is entitled under cl 19.2 to implement the winding up of the Trust by realising the trust property and distributing the net proceeds (ie. after allowing the trustees right of indemnity and exoneration) to the unit holders.

38. [160]

    To construe 2.1 in conjunction with cll 9, 15 and 16 does not conflict with the requirement of cl 2.3 to give cl 2.1 and 2.2 paramountcy. There is nothing in cl 9, 15 and 16 looked at in this way which is contrary to anything stated in cl 2.1 and 2.2.

39. [161]

    Critical to the competing arguments in the present case as to the operation of cl 2.1 is the meaning to be given to the expression ‘the unit holders’ in the chapeau of cl 2.1 and at the beginning of cl 15.1 and 16.1.

40. [162]

    The Rules do not include a provision that the singular includes the plural and vice versa (in contrast to the trust deed at issue in Sayden, as noted by Gzell J at [54]). However, s 181(1) of the Conveyancing Act 1919 (NSW) provides:

41. [163]

    The plaintiffs contend that cl 2.1(b) and/or cl 16.1 confer an entitlement on each unit holder to call for its proportionate share of the capital of the Trust at any time. It was submitted that this construction of those clauses was supported by five considerations. First, it was contended that s 181 of the Conveyancing Act applies so that the plural ‘unit holders’ should be read as including the singular ‘each unit holder’ in each clause. Second, it was said that the plaintiff’s construction was supported by the approach taken in Sayden to the trust deed before the Court in that case, noting that Gzell J applied a clause in that trust deed similar in effect to s 181: see Sayden at [54]. Third, it was contended that the heading to cl 2 and the congruence between cl 2 and s 3A(3B) of the LTMA indicate that cl 2 is intended to implement the ‘relevant criteria’ in s 3A(3B). This is a further reason for construing cl 2 in the same way as the similar clause in the trust deed before the Court in Sayden. Fourth, cl 2.3 gives paramountcy to cl 2.1 and cl 2.2 and to the extent that cl 9 is inconsistent it will fall away. Fifth, the Trust Deed appears to have been intended to make the Trust a ‘fixed trust’ for the purposes of the trust loss rules in Schedule 2F of the Income Tax Assessment Act.

42. [164]

    I will address each of these contentions in turn.

43. [165]

    The plaintiffs’ submission is that through the operation of s 181 of the Conveyancing Act, the words ‘the unit holders’ in cl 2 are to be understood as a reference to each of the unit holders (not them acting together unanimously or by majority): Defendants’ Opening Submissions [39]. In effect, this requires that cl 2 be read as: ‘The Unit Holders or each Unit Holder are or is: (a) presently entitled to the income of the trust…; (b) presently entitled to the capital of the trust and may require the trustee to wind up the trust…’.

44. [166]

    There are a number of difficulties with this argument. First, s 181 permits a reading of ‘the unit holders’ in cl 2 (and also in cll 9, 15 and 16) as including the singular but not the reworking of the provisions so that it refers to unit holders in the singular and not in the plural. As was said by Russell J in Re A Solicitors’ Arbitration [1962] 1 WLR 353 in relation to s 61 of the Law of Property Act 1925 (UK) which is in the same terms as s 181, it is a provision merely designed to shorten the drafting of deeds by avoiding verbosity and not to enlarge the party’s rights and obligations: Re A Solicitors’ Arbitration at 356-357; AIB Group (UK) Ltd v Martin and Another [2001] UKHL 63 at [8] per Lord Millett. Further, it would create a commercial nonsense in that, without the addition of further words to cl 2, the provision would entitle each unit holder to the income and capital of the trust without any qualification as to the proportion of the entitlement. Treating the expression ‘the unit holders’ in cl 2 as a reference to the unit holders collectively avoids that issue because cl 15.2 and cl 16.1 identify the proportionate entitlement to income and capital of each unit holder.

45. [167]

    Second, as submitted by the defendants, the Rules carefully delineate between a unit holder and the unit holders. Where the Rules intend to refer to a single unit holder the reference is to ‘any unit holder’ (cll 6.2, 11.26, 11.27, 11.30, 11.31, 14.1, 14.4, 14.10 and 19.3), ‘a unit holder’ (cll 6.3, 7.1, 11.28, 11.29, 14.6, 18.1 and 19.3) or ‘the unit holder’ (cll 7.3, 14.7, and 19.3). In contrast, where the Rules intend to refer to the unit holders collectively, the reference is to ‘unit holders’ (cll 6.1 and 14.1), ‘the unit holders’ (cll 2.1, 3.1, 3.2, 6.1, 9.2, 11.9, 13.1, 14.2 and 14.3) or ‘every unit holder’ (cl 6.1). The different references to the singular and the plural appear to be deliberate and designed to indicate when a reference to the unit holders individually or collectively is intended. That, of itself, is a strong indication of a contrary intention so that s 181 does not apply.

46. [168]

    Third, to construe cl 2.1(b) as conferring a present entitlement to capital on each unit holder severally is difficult to reconcile with provisions of the Rules dealing with the transfer of units (which is subject to a pre-emptive rights regime) and the winding up of the Trust (which requires unanimity). Each would be essentially otiose if a unit holder could, acting individually, call for the Trust to be wound up under cl 2.1(b).

47. [169]

    As noted above, Gzell J in Sayden construed a clause in another trust deed having a similar purpose to cl 2.1 of the Rules to confer a right on the unit holders individually on the basis that the reference to ‘registered unit holders’ was a reference to each of them. The plaintiffs’ reliance on this aspect in the decision of Sayden is in my view misplaced.

48. [170]

    First, as the defendants submitted, the decision in Sayden regarding the proper construction of the trust deed in that case is of no precedential value in determining the proper construction of the Trust Deed and the Rules: Dreamstreet Lending Pty Ltd v Weiss (No 2) [2023] FCA 684 at [155].

49. [171]

    Second, the trust deed before the Court in Sayden was subtly different to the Trust Deed and the Rules here in a number of respects. The structure of cl 2(c) differed from cl 2 of the Rules both in the division of the rights into separate subparagraphs and the inclusion in cl 2(c)(i) of an express reference to the proportionate entitlement of registered unit holders to income and capital (in contrast to the Rules where this is dealt with separately in cll 15 and 16). Further, important to the reasoning of Gzell J was that cl 1(1) of the deed before the Court in that case ‘provides that words importing the singular shall include the plural and vice versa’ (see [54]). His Honour does not say that the clause contained a qualification that its operation would be subject to a contrary intention (in contrast to s 181 of the Conveyancing Act). It cannot be assumed that the clause did contain such a qualification given that his Honour makes no mention of it. It is not uncommon for interpretation clauses to operate without such a qualification e.g., Callide Power Management Pty Ltd v Callide Coalfields (Sales) Pty Ltd (No 5) [2016] QSC 199 at [87].

50. [172]

    The absence of any discussion of the question whether there was a contrary intention in the trust deed before the Court in Sayden makes the decision distinguishable, particularly as the Trust Deed and the Rules here contain the various indications of a contrary intention referred to earlier.

51. [173]

    While it is not in dispute that cl 2 of the Rules is intended to implement the relevant criteria in s 3A(3B) of the LTMA, for the reasons explained above, in my view the relevant criteria do not require that unit holders each have an individual right to call for their share of the capital of the Trust. A trust deed will comply with s 3A(3B) if the unit holders collectively are presently entitled to the capital to the Trust. In any event, if I am wrong in that view, this would not be relevant to the proper construction of the Trust Deed which must be undertaken before the determination of whether the Trust Deed satisfies the relevant criteria.

52. [174]

    While cl 2.3 of the Rules gives cll 2.1 and 2.2 primacy, it only does so to the extent that another provision of the Rules is contrary to cll 2.1 and 2.2 properly construed. In my view, once cll 2.1 and 2.2 are properly construed, there is no inconsistency which engages cl 2.3

53. [175]

    The plaintiffs point out that in order for the Trust to be able to carry forward a loss for tax purposes, the Trust Deed needed to be drafted so as to comply with the requirements for a ‘fixed trust’ for the purposes of the trust loss rules in Schedule 2F of the Income Tax Assessment Act which turns on whether the unit holders have a fixed entitlement to all the income and capital of the Trust, being a vested and indefeasible interest in income and capital: Sch F, ss 272-5. However, as is clear from the passage from Harmer quoted in Sayden at [147] above, having a vested and indefeasible interest in income and capital is but one of two requirements for a unit holder to have a present entitlement to income and capital. In any event, whether the Trust is a fixed trust for income tax purposes does not assist with the proper construction of cl 2.1 and the associated provisions dealing with the entitlements of the unit holders to income and capital.

54. [176]

    For these reasons, none of the contentions raised by the plaintiffs require the conclusion that cl 2.1(b) and/or cl 16.1 confer an entitlement on each unit holder to call for its proportionate share of capital or to wind up the Trust.

55. [177]

    A critical provision of the Trust Deed which the plaintiffs did not address is cl 17.1 which provides that the trust property is held on trust for the unit holders ‘as tenants in common in proportion to the number of units held’.

56. [178]

    The expression ‘tenants in common’ has a legal meaning and it is presumed that it is used in its legal sense there being no indication of a contrary intention: Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Lawbook Co) at [20.60]. The nature of a holding of property as tenants in common was explained by the High Court in Nullagine Investments Pty Ltd v Western Australia Club Incorporated (1993) 177 CLR 635; [1993] HCA 45. Brennan J said at pp 643-644 (footnotes omitted):

57. [179]

    I note that the plaintiffs do not seek a partition or sale of the land held by the Trust under s 66G of the Conveyancing Act, on the basis that the unit holders are equitable tenants in common in that land.

58. [180]

    It is apparent from cl 17.1 that each unit holder has an undivided 50% share in the assets (ie corpus) of the Trust, but not an entitlement to any particular part of any asset (or corpus) of the Trust. The entitlement of a beneficiary of a trust with such an interest was summarised by Walton J in Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 at 889-890:

59. [181]

    Hence, a unit holder has no entitlement to call for the Trustee to account to it for its share of any land, and in the case of personal property which is divisible the entitlement is subject to the Trustee’s right of indemnity and exoneration for liabilities incurred by it in execution of the Trust: see Beck v Henley [2014] NSWCA 201 at [37]-[39].

60. [182]

    It is necessary to construe cl 2.1(b) and cl 16.1 in a coherent manner with cl 17.1 and this can be done by reading cl 2.1(b) and cl 16.1 as conferring a collective right on the unit holders to the capital of the Trust and to wind up the Trust. This does not contravene cl 2.3 because it is entirely consistent with the construction of cl 2.1(b) suggested by the other matters referred to above.

61. [183]

    This approach does not cut across the present entitlement of a unit holder to the distributable income under cl 2.1(a) and cl 15. The distributable income is not properly characterised as an asset of the Trust; it is separate from the trust corpus and the unit holders have a right to demand payment of their proportionate share of it as it arises at the end of a financial year. That is a right which they each hold severally (cl 15.2).

62. [184]

    In my opinion, for the above reasons, DRCH is not entitled to call for its proportionate share of the capital of the Trust or to wind up the Trust under cl 2.1(b) and/or cl 16.

Third issue: Oppression

1. [185]

   Section 232 of the Corporations Act provides:

2. [186]

   The orders which may be made under s 233 include an order that the company be wound up and an order for the purchase of any shares by any member.

3. [187]

   Section 53 of the Corporations Act provides that for the purposes of, relevantly, s 232 and s 233, the ‘affairs of a body corporate’ include:

4. [188]

   The persons who have standing to apply for an order under s 233 are set out in s 234 and are limited to, relevantly, a shareholder in the company. Hence, the only plaintiff with standing to seek relief under s 233 is Mr Carr.

5. [189]

   Section 232(d), which concerns conduct which is contrary to the interests of the members as a whole, operates independently of s 232(e), and consequently is not limited to conduct involving commercial unfairness: Turnbull v National Roads and Motorists Association Ltd [2004] NSWSC 577 at [32]. Whether conduct of a company’s affairs is contrary to the interests of the members as a whole is to be determined objectively, having regard to accepted standards of corporate behaviour and how reasonable directors would act when attending to the affairs of the company: Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640 at [41]. The focus is on the interests of an individual hypothetical member and not the actual members for the time being: Goozee at [42].

6. [190]

   In relation to s 232(e), the phrase ‘oppressive to, unfairly prejudicial to, or unfairly discriminatory against’ is to be viewed as a compound expression, rather than identifying discrete alternatives and is directed at whether there has been conduct which is commercially unfair: Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168 at [75]. The relevant principles to be applied in relation to s 232(e) were summarised by Stevenson J in Munstermann v Rayward [2017] NSWSC 133 at [22]:

7. [191]

   The objective test of ‘commercial unfairness’ can be expressed in a variety of ways. In Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692, Young J at 704 said that the question was whether the conduct, viewed objectively by a commercial bystander, ‘is so unfair that reasonable directors who consider the matter would not have thought the decision fair’. In Re Ledir Enterprises Pty Ltd [2013] NSWSC 1332 at [178], Black J said that the concept of ‘commercial unfairness’ is directed at ‘a departure from the standards of fair dealing, or where 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’.

8. [192]

   As Black J noted in Re Ledir at [182] whether particular conduct is commercially unfair must be assessed in the context of the particular relationship in issue and will not infrequently involve a balancing exercise between competing considerations. His Honour quoted with approval the following observations of Richardson J in Thomas v HW Thomas Ltd [1984] 1 NZLR 686 at 694-695:

9. [193]

   The Court must also exercise caution when determining an application under s 232 not to take on ‘an unwarranted assumption of the responsibility for management of a company’: Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 at 467. As Emmett J said in HNA Irish Nominees Ltd v Kinghorn (No 2) (2012) 290 ALR 372; [2012] FCA 228 at [507]:

10. [194]

    The mere breakdown of the relationship between the members and a loss of trust between them is not, of itself, sufficient to establish oppression but may be of several matters leading to the conclusion that there has been oppression: Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104 at [199]; (2011) 288 ALR 310. For example, if the breakdown of the relationship between the members is accompanied by a consequential inability to manage the company’s affairs in the proper manner, that may constitute oppression: Beaumont v Peel [2018] NSWSC 95 at [13]; Re Wyndham Park Estate Pty Ltd [2019] VSC 92 at [35]-[37].

11. [195]

    The purpose of granting relief under s 233 is to bring oppressive conduct to an end: Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588 at 620. Consistently with that principle, if the oppressive conduct has ceased that would be a matter weighing against the exercise of the discretion under s 233: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [182]; Re Ledir at [183]; Exton v Extons Pty Ltd (2017) 53 VR 520; [2017] VSC 14 at [34].

12. [196]

    Each case must be considered on its own facts and circumstances and by reference to the conduct as a whole: Re Ledir at [184].

13. [197]

    The plaintiffs’ pleaded case in paras 43-44 of the Amended Points of Claim (APOC) is as follows (excluding the words in bold):

14. [198]

    In closing submissions, Senior Counsel for the plaintiffs’ applied to amend para [43] by adding the words included above in bold. The application was opposed by Counsel for the defendants. I indicated that I would rule on the amendment in this judgment.

15. [199]

    Mr Wood submitted that the amendment should be refused due to its lateness and the prejudice to the defendants. In their defence, the defendants had denied paras 43 and 44 and in their opening outline of submissions had put the plaintiffs on notice that paras 43 and 44 were defective in that only Mr Carr had standing to seek relief under s 233 of the Corporations Act. The plaintiffs raised for the first time in their closing written submissions that they relied on oppression of Mr Carr in his capacity both as a member of Darbalara Holdings and also as a discretionary object of the CFT.

16. [200]

    The defendants suffered prejudice in a number of ways, including: (a) they would have sought discovery of documents to establish whether there had been any distributions from the CFT to Mr Carr (or any other discretionary object) during the period from 2010 to date to test whether Mr Carr had been adversely affected in his capacity as an object of CFT; (b) the cross-examination of Mr Carr and Mrs Carr had been framed on the basis of the pleaded case, in particular, no questions were directed to whether Mr Carr was affected in some capacity other than as a member; and (c) had Mr Carr’s other capacity been at issue, the defendants may well have called Mr Tim Pilkington as a witness whose evidence was potentially relevant to the propriety of the conduct of Mr Carr, which was a relevant matter to the exercise of the discretion to grant relief under s 233 because the plaintiff must come to the Court with clean hands: see eg. Morgan at 706.

17. [201]

    In my view, the amendment should not be allowed. It is important that the alleged oppression be clearly pleaded so that the defendant knows the case it has to meet: Shelton v National Roads & Motorists’ Association Ltd (2004) 51 ACSR 278; [2004] FCA 1393 at [24]. The plaintiffs are solely responsible for the failure to plead, in a timely fashion, the dual capacity sought to be relied on in respect of Mr Carr, the only plaintiff who is a member of Darbalara Holdings. I am satisfied that the defendants will potentially suffer prejudice in each of the ways identified and that prejudice could have been cured only by an adjournment with attendant cost and delay. In all the circumstances, taking into account ss 56-59 of the Civil Procedure Act 2005 (NSW), allowing the amendment would not be in the interests of justice.

18. [202]

    It is not in dispute that ss 232(d) and (e) can apply to the affairs of a company which is a trustee: see Tzavaras at [62].

19. [203]

    I will proceed on the basis that this is the correct approach. The fact that Darbalara Holdings is a trustee will be relevant to how the question of oppression is approached (as well as the choice of appropriate remedy under s 233 if s 232 is satisfied) because a company which acts as a trustee has obligations both under the trust instrument and the general law which bind the manner in which it operates, which do not apply to a company which is not a trustee. In particular, by virtue of assuming the role of a trustee, it has the obligation to get in the trust property, protect it and vindicate the rights attached to it (subject to the terms of the trust instrument): CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174; [2010] HCA 26 at [36]. That obligation includes the irreducible core obligation to perform the trust honestly and in good faith for the benefit of the beneficiaries: Armitage v Nurse [1998] Ch 241 at 253-254.

20. [204]

    The defendants say Mr Carr’s standing is limited to alleged oppression of him in his capacity as a member of Darbalara Holdings and none of the pleaded matters have any oppressive effect on him as a member; in particular the realisation of the value of the units in DPT has no effect on Mr Carr as a member of the trustee, Darbalara Holdings. I do not agree that merely because Mr Carr’s standing is limited to oppression of him qua member of the trustee, none of the pleaded instances of alleged oppression could enliven s 232. For example, deadlock in the management of the trustee which meant that the trustee could not properly function to discharge its duties as trustee would be oppressive of Mr Carr qua member because Darbalara Holdings was established to perform the role of trustee of DPT. Mr Carr’s capacity as a member should take into account that his role as a member is to protect the interests of the entity which holds the 50% interest of his family in DPT. I propose to address each of the various pleaded instance of oppression, and consider the question of standing should it become necessary to do so.

21. [205]

    The difficulty for the plaintiffs is the lack of clarity in the drafting of para 43 where it refers to ‘as either a member of Darbalara Holdings and/or in relation to the capacity as a unit holder in DPT’ and, in para 44, ‘and further and in the alternative the membership of DRCH, as trustee for CFT, of DPT’. The words ‘as either a member of Darbalara Holdings and/or in relation to the capacity as a unit holder in DPT’ indicate that the relevant capacity of the plaintiffs is being identified, but in fact only one plaintiff (Mr Carr) is a member of Darbalara Holdings; it is only in his capacity as such a member that he is identified because he is not a unit holder in DPT.

22. [206]

    Second, the reference to ‘the membership of DRCH, as trustee for CFT, of DPT’ does not assist the plaintiffs because if the expression ‘the membership of DRCH, as trustee for CFT, of DFT’ refers to the 50% unit holding which DRCH has in DPT, then, again, that is irrelevant to s 232 and s 233 because they are concerned with persons who are members of the relevant company, here Darbalara Holdings. The inadequacy in the drafting of paras 43 and 44 of the APOC ought to have been apparent to the plaintiffs before the hearing commenced.

23. [207]

    The pleaded instances of oppression in paras 43-44 of the APOC, read with the affidavits of the Carrs of September 2020, which are identified in para 21 of the APOC as providing details of the disputes over management of DPT and the plaintiffs’ oral closing submissions, can be conveniently grouped as follows:

    1. (1)

       Since December 2019, the directors of Darbalara Holdings have been deadlocked regarding the following matters: (a) the long-term goals of DPT; (b) whether the Brungle Road property should be sold; (c) the conduct of board meetings; (d) CACM’s role as farm manager and finding a replacement farm manager; (e) the Carrs having sole control of Darbalara Holdings’ bank accounts; (f) the use to be made of the Homestead property; (g) finalising the 2020-2021 budget; (h) staff communications and stability.

    2. (2)

       The Carrs believe that the assets of DPT ought to be realised and distributed to the unit holders in proportion to the units held, whereas the Ritossas believe that no steps should be taken to wind up the affairs of Darbalara Holdings and that DPT should continue to trade indefinitely.

    3. (3)

       A disagreement between the Carrs and the Ritossas as to whether Darbalara Holdings should repay unit holder loans and make income distributions to unit holders.

    4. (4)

       The mutual trust and confidence between the Carrs and the Ritossas has irretrievably broken down.

24. [208]

    I will deal with each of the alleged areas of oppression in turn.

25. [209]

    In relation to the long-term goals of DPT, the Carrs say that there has been a disagreement on this issue because the Ritossas see or saw the strategy of DPT as being to acquire further properties with further equity injections by the unit holders, whereas the Carrs do not wish DPT to make any further acquisitions.

26. [210]

    While it is true that up to December 2019, there were discussions between Mr Carr and Mr Ritossa regarding the purchase of further properties by DPT, there is no suggestion in the evidence that either the Carrs or the Ritossas wish to make further acquisitions through DPT. Mrs Ritossa gave evidence in cross-examination that she did not anticipate DPT in the future seeking to expand and purchase any further properties, and had not looked at any further properties for purchase in the last two years and Mr Ritossa said in cross-examination that it would be a legitimate strategy for DPT to continue on indefinitely into the future with just The Junction and Bogolara (T354). The disagreement on strategy appears now to be that the Carrs wish to wind up DPT by selling all of its assets, whereas the Ritossas wish to keep DPT as a long-term investment. This disagreement is dealt with below.

27. [211]

    In my view, there is no deadlock over the strategy for DPT. As Mr Ritossa said, DPT can continue its operations with just two farms, The Junction and Bogolara. In any event, the decision whether to expand the operation of DPT, should it arise in the future, is a matter of business judgment for the directors of Darbalara Holdings at the time.

28. [212]

    In relation to the Brungle Road property, this was originally purchased in June 2019, for use to provide staff accommodation. Once it became vacant in April 2021, the Carrs formed the view that it should be sold as it was surplus to the requirements of DPT’s business. The Ritossas initially resisted selling it because they wanted to wait until a new asset manager was appointed. Ultimately on 17 January 2024, the Ritossas finally agreed to the sale on the basis that ‘the proceeds of sale be used to address any shortfall to trade creditors and if there is any money left over, it should be used to try to improve the profitability of the business’.

29. [213]

    In my view, the question of whether the Brungle Road property should be sold, and the delay in resolving that question falls into the category of a legitimate difference of opinion on a matter of business judgment. Each party acted in good faith in relation to the resolution of that issue.

30. [214]

    In relation to the conduct and cost of board meetings, the complaint of the Carrs is that in the period from inception of DPT until December 2019, the decisions of Darbalara Holdings were made informally by Mr Carr and Mr Ritossa following discussions between them, including by telephone, email and text with no formal board meetings being held. This changed following the falling out which occurred in December 2019, and since February 2020 formal board meetings have been held either monthly or every six weeks. The Carrs find the board meetings unpleasant and stressful.

31. [215]

    The Carrs sought to reduce the frequency of board meetings, but the Ritossas refused. Under the Constitution of Darbalara Holdings, any director can call a meeting on giving reasonable notice to the other directors and a quorum for a meeting is two directors. Hence, if the Ritossas call a directors’ meeting and the Carrs do not attend, the meeting could proceed and make decisions in the absence of the Carrs, if they did not attend. However, there is no evidence that this has occurred and on the one occasion where the Carrs failed to attend a meeting, the Ritossas did not proceed to propose or pass any resolutions. The meeting was reconvened on 13 October 2021.

32. [216]

    In relation to the costs of the board meetings, this relates to the expense incurred in having the company’s accountant, who was the secretary of Darbalara Holdings, attend the meetings. When the Carrs asked that this practice cease due to the costs, the Ritossas agreed, and this practice ceased in around June 2020.

33. [217]

    From the time of the first board meeting on 28 February 2020, all directors’ meetings have been recorded and transcripts of the meetings are in evidence. While at various times the Carrs have objected to the meetings being recorded, the practice of recording the meetings was proposed by Mrs Carr to the Ritossas on 25 February 2020, stating ‘we agree to holding the meeting electronically by Skype but, in the interests of certainty, only if the meeting can be fully recorded’. The practice of recording meetings, while unusual, is explained by the fractious nature of the relationship between the Carrs and the Ritossas from early February 2020 and also that they were from late 2020 involved in these proceedings.

34. [218]

    I have read the transcripts of the meetings. While it is apparent that the Carrs find the meetings unpleasant, as they say in their evidence, looked at objectively they indicate an attempt by the directors to resolve the various issues which arose, the most significant of which was the replacement of CACM as farm asset manager. In relation to that issue, it is clear that the Carrs found the discussions unpleasant because there was much discussion involving the Carrs’ reporting on the management activities of CACM on behalf of DPT, and answering questions by the Ritossas. Following the replacement of CACM with SouthernAg in June 2023, it is Mr Pilkington, on behalf of SouthernAg, who attends board meetings, reports and answers questions in a management role.

35. [219]

    While it is clear that many of the discussions over the period from February 2020 to date have been tense and may well have involved unpleasantness from the perspective of each of the participants, they do not indicate that the board was unable to function. To the contrary, all of the issues which came before the board in this period have been resolved, apart from the Carrs’ proposal that the trust be wound up, and the Carrs’ wish for repayment of unit holder loans and distributions of income to unit holders, which are dealt with separately below.

36. [220]

    In relation to the role of CACM, the Ritossas informed the Carrs that they wished CACM to cease acting as farm manager at the meeting on 7 December 2019. This followed advice given by Mr Bert Glover as to the state of The Junction and Bogolara and CACM’s performance. The Carrs resisted CACM being replaced and Mr Carr explains in his affidavit that he resisted the replacement of CACM because he did not accept the criticisms made by Mr Glover and had grave reservations about appointing an external manager to run the properties (particularly in light of problems with external managers retained by Darbalara Holdings in the past) and his view that it was beneficial to have a manager with an ownership stake in the business (i.e., CACM).

37. [221]

    Ultimately, the Carrs agreed to have CACM replaced in June 2020 and this occurred in June 2023 when SouthernAg was appointed. The substantial delay in finding a replacement cannot be blamed on the Ritossas as the Carrs rejected each of the three candidates put forward by Mr Lucas, who was the Carrs’ preferred search consultant (T133), before finally accepting SouthernAg.

38. [222]

    As already noted, it is clear that CACM’s role as farm asset manager has been a significant cause of the tension between the Carrs and the Ritossas at board meetings in the period from February 2020 to June 2023. However, the question whether CACM should be replaced as farm asset manager and who the replacement should be are matters falling into the category of a legitimate difference of opinion as to a matter of business judgment. Each of the Carrs and the Ritossas held different views on that topic, but each acted in good faith in seeking to resolve the dispute and in fact did so. It is clearly appropriate that a business of the significance of that being operated by DPT have an external farm asset manager (as was the position prior to CACM’s appointment) and the decision to replace CACM and appoint a new manager in its place falls within the category of a legitimate difference of opinion on a matter of business judgment.

39. [223]

    One of the three candidates recommended by Mr Lucas was Mr Bert Glover of Impact Ag. The Ritossas wanted to act on that recommendation, but the Carrs objected to him because he had been separately retained by the Ritossas to provide them with advice generally in relation to the operations of the farms.

40. [224]

    Ultimately, the Carrs’ objection to Mr Glover acting as farm asset manager was accepted by the Ritossas. In these circumstances, the consideration of Mr Glover as a potential farm asset manager cannot be regarded as oppressive of Mr Carr, and in any event, it was matter of business judgment over which the Carrs and the Ritossas simply had a legitimate difference of opinion.

41. [225]

    In relation to Darbalara Holdings’ bank accounts, prior to December 2019, the Carrs were the sole signatories to the bank accounts held by Darbalara Holdings with ANZ. In December 2019, Mr Ritossa requested joint control of the bank accounts and in early 2020 there were discussions (principally between Mrs Ritossa and Mrs Carr) to arrange for the Ritossas to become co-signatories to the accounts. Mrs Carr resisted this initially and, on a fair reading of the communications and discussions on this topic, this was because she felt that the Ritossas did not trust the Carrs (bearing in mind that at this stage CACM was still the farm asset manager).

42. [226]

    Ultimately, the matter was resolved by the Ritossas becoming joint signatories and a process was established for a member of each family to review and approve certain expenses rather than this simply being done by the Carrs. This agreement was reached by early August 2020. Again, this matter is properly seen as a legitimate disagreement on a matter of business judgment.

43. [227]

    In relation to the use of the Darbalara Homestead, this property had been purchased by DPT in November 2019 for a cost of $2.1 million. The purchase occurred during the period that Mr Carr and Mr Ritossa were discussing the sale of the assets of DPT, and they agreed that DPT should go ahead with the purchase as it could either help with the sale of The Junction or with DPT’s business (if the sale did not proceed) by allowing the farm manager to occupy it.

44. [228]

    At the board meeting on 6 April 2020, the Carrs and the Ritossas agreed that Mr Scott Dunn, the farm manager at The Junction and his family could occupy the Homestead.

45. [229]

    In early June 2020, Mr Carr sent the Ritossas a copy of a draft lease agreement for the Homestead and this was discussed at the board meeting on 9 June 2020. There were disagreements between the Carrs and the Ritossas regarding some provisions of the draft lease, but ultimately, they reached agreement on the form of the lease and on 31 July 2020 the Ritossas signed a circular resolution to enter into the Homestead lease. The lease was not signed by Mr Dunn until 9 April 2021, but it is apparent from the evidence that the delay was not caused by the Carrs or the Ritossas.

46. [230]

    Ultimately, Mr Dunn and his family lived in the Homestead until he resigned as farm manager for The Junction on 6 May 2022. The directors agreed at the board meeting on 20 January 2023, that the replacement for Mr Dunn as manager of The Junction, Mr James Shubbert and his family, should move into the Homestead. I am satisfied that the few disagreements that there were in relation to the form of the lease fall within the category of a legitimate disagreement about a matter of business judgment and do not constitute the oppression of Mr Carr.

47. [231]

    In relation to the disagreement of the directors concerning a budget for the financial year 30 June 2021, in so far as there was a disagreement on this topic it was resolved at the board meeting on 27 July 2020 when the directors did agree a budget for capital expenditure. Following the appointment of SouthernAg as farm asset manager, it has responsibility for proposing a budget to the board and the directors were able to agree a budget for the financial year ended on 30 June 2023 at the board meeting on 2 August 2022.

48. [232]

    In relation to staff, in their affidavits of September 2020, Mr and Mrs Carr deposed that the deadlock between the directors affected staff stability, with particular reference to the delay in providing a lease to Mr Dunn of the Homestead. While there was a delay in the lease to Mr Dunn being entered into, it is clear that it was not entirely the fault of Darbalara Holdings. Further, Mr Dunn remained as farm manager at The Junction until 6 May 2022. As Mrs Carr accepted in her evidence, Darbalara Holdings has been able to retain staff despite the disputes between the directors. In my view, this complaint is not made out.

49. [233]

    It is clear that since late December 2019, the Carrs and the Ritossas have been in disagreement as to whether DPT should be wound up (as the Carrs desire) or continue indefinitely (as the Ritossas desire).

50. [234]

    The Carrs point to what they say is Mr Ritossa’s erratic and contradictory attitude to winding up the Trust, in that in August 2019 he ‘insisted’ that DPT should sell all its assets and be wound up only to turn around in December 2019 and inform Mr Carr that he wished DPT to continue but with a new farm asset manager in place of CACM. The Carrs say that they are now in the invidious position where their equity is ‘locked up’ in DPT in circumstances where:

    1. (1)

       There is no present prospect of DRCH receiving distributions of income or repayments of unit holder loans other than at the discretion of the Ritossas, contrary to the pre-2019 practice of DPT;

    2. (2)

       There is no real prospect of DRCH’s units in DPT being sold to a third party for a value commensurate with the realisable market value of the assets of the Trust;

    3. (3)

       There is no real prospect of DRCH’s units in DPT being redeemed by Darbalara Holdings for a fair value commensurate with the realisable market value of the assets of DPT;

    4. (4)

       Should DRCH seek to sell its 50% interest in DPT by a sale of its units, this would be at a significant discount to the net asset value of DPT’s assets (as shown by the valuation evidence) and the Ritossas have a right of pre-emption which they have not waived, which will allow them to acquire DRCH’s 50% interest at that discounted price.

51. [235]

    There are a number of difficulties with this submission. First, the question of whether the Trust should be wound up or continue is a matter for the unit holders and not the Trustee: see cl 9.1 of the Trust Rules.

52. [236]

    Second, the proposition in (1) is not correct for the reasons explained under the next heading.

53. [237]

    Third, the proposition in (2) is a consequence of the structure adopted by the parties to hold their interest in the assets of DPT, (that is by way of a unit holding in the unit trust), rather than a direct 50% interest in the underlying assets of the Trust. That choice of structure was made by the parties, and the resulting disadvantage in value does not involve oppressive conduct. Hence, the complaint by the Carrs that the Ritossas have refused to buy DRCH’s units in DPT for the price offered by DRCH (which reflected a percentage of the value of the net assets of the Trust) is not surprising or relevant to any question arising under s 232. The Ritossas have no obligation to purchase DRCH’s units for a price other than that reflecting the market value of the units.

54. [238]

    Fourth, the proposition in (3) may be correct, but it would be a matter for the directors of Darbalara Holdings at the time of a redemption request to determine whether it was appropriate to redeem the units of DRCH at their net realisable value. No doubt a relevant matter would be whether a new unit holder was prepared to subscribe for units for an amount equal to the proposed redemption amount. I note there is no evidence that any such proposal for redemption of DRCH’s units has been put forward for consideration by the directors.

55. [239]

    Fifth, in relation to (4), Mr Ritossa gave evidence that the reason he has not waived the right of pre-emption conferred under the Trust Rules is that he wants to have control over who comes in as a 50% co-owner with the Ritossas in DPT. I accept that evidence. However, I note that a decision not to waive the pre-emption right is not oppressive conduct because it is a decision of the unit holder, not conduct of Darbalara Holdings to which s 232 could apply.

56. [240]

    There is no evidence to suggest that the Ritossas are seeking to force the Carrs out of DPT and secure a 50% interest (held through DRCH) at a discount. In particular, the Carrs have significant other assets and are not forced sellers for financial reasons. Their desire to sell comes about, on their case, because they no longer wish to be in business with the Ritossas. However, as already indicated, while the personal relationship between the Carrs and the Ritossas appears to have broken down, the working relationship has not.

57. [241]

    Part of the complaint made by the Carrs in relation to the Ritossas’ unwillingness to wind up the Trust is that the Carrs say it is inconsistent with Mr Ritossa’s insistence during the period between 31 August 2019 to 7 December 2019 that the assets of DPT be sold and DPT be wound up. In my view, the evidence does not support the proposition that Mr Ritossa insisted on DPT’s assets being sold or that the Carrs purchase his half share.

58. [242]

    In Mr Ritossa’s email of 4 September 2019, he explains why he wants to sell his interest and then goes on to say: ‘I’m happy for you to buy my half share if we can agree on a price. Is that something you would consider and able to do?’. There followed further discussions about a possibility of the Carrs purchasing the Ritossas’ half share, although the Carrs’ preference was that The Junction would be sold, and the Carrs would purchase Bogolara.

59. [243]

    Ultimately, Mr Ritossa changed his mind and informed Mr Carr of this in December 2019. He explains in his evidence the reason for changing his decision to sell his interest in DPT. In my view, Mr Ritossa’s change of approach to selling his interest in DPT has no bearing on the disagreements which arose from December 2019 regarding the management of DPT’s farm assets and Mr Ritossa’s decision not to agree to wind up DPT. It is to be explained by his decision that with a change of farm asset manager, the operations of DPT would be likely to improve.

60. [244]

    It is not in dispute that prior to 2019, DPT made three payments to unit holders by way of repayment of unit holder loans: in 2014, $90,000 per family; in 2016, $250,000 per family; and in 2017, $300,000 per family. The Carrs say that since December 2019 there has been an intractable disagreement between them and the Ritossas as to whether any distribution of income or repayment of unit holder loans should be made by Darbalara Holdings to unit holders.

61. [245]

    The Carrs also say that Mr Ritossa behaved erratically on this issue because he had originally raised with Mr Carr in November 2019 that each family should withdraw their unit holder’s equity by borrowings from ANZ. Mr Ritossa accepted in cross-examination that a strategy of ‘de-risking’ the Trust was wrong and that he completely ‘muddled myself up’ in suggesting that (T374).

62. [246]

    The outstanding balance of unit holder loans for DPT as at 30 June 2019 was $1,870,733 for each unit holder. There has been no increase or reduction in the amount of the unit holder loans since that time, with the financing requirements of DPT being met by borrowings from ANZ.

63. [247]

    The borrowings from ANZ include drawdowns of $430,000 on 9 April 2024 and $230,000 on 5 July 2024.

64. [248]

    It is clear that under the terms of the Subordination Deed, no unit holder is entitled to the repayment of any part of a debt owing to it by Darbalara Holdings to that unit holder without the prior written consent of ANZ: Subordination Deed, cl 3.2. There is no evidence that ANZ has given that consent. Without it, a payment in reduction of a unit holder loan would be a breach of the Subordination Deed by both the unit holder and Darbalara Holdings, and would constitute an event of default under the ANZ facility: ANZ Letter of Offer dated 19 July 2018, Sch 4, para (a). The decision by the directors of DPT not to reduce unit holder loans cannot, in these circumstances, be oppressive conduct.

65. [249]

    In so far as the plaintiffs suggest that there has been a refusal to pay income distributions to unit holders, this again is not supported by the evidence. A unit holder is presently entitled to its share of the income of the Trust: Trust Rules, cll 2.1, 15.1 and 15.2.

66. [250]

    The financial statements for DPT are in evidence for the financial years to and including the year ended 30 June 2023. These disclose that the net distributable income for DPT for the 2020 to 2023 financial years was as follows: (a) 2020 year, $695,396, which was applied to the reduction of the accumulated loss at the beginning of the year of $1,114,293 leaving an accumulated loss of $418,897; (b) 2021 year, $98,877, which was applied against the accumulated loss to leave a carry forward loss of $320,020; (c) 2022 year, loss of $6,262; (d) 2023 year, a loss of $736,723. Given that the financial statements record no distributable income in any of these years, the unit holders had no present entitlement to income for each year. Consequently, the failure of Darbalara Holdings to make income distributions to the unit holders since December 2019 simply reflects the operation of the business of DPT and the provisions of the Trust Deed.

67. [251]

    Accordingly, in my view, no oppression has been established in relation to this matter.

68. [252]

    The mere fact that the mutual trust and confidence between two shareholders of Darbalara Holdings (Mr Carr and Mr Ritossa) has broken down does not constitute oppression: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97 at [89]. As the defendants submitted, relief under s 233 is not available where the parties merely have irreconcilable differences, as the remedy does not provide for ‘no fault divorce’: O’Neill v Phillips [1999] 2 All ER 961 at 972-973. Importantly, the working relationship between the Carrs and the Ritossas has not broken down as indicated by the many decisions which have been made by the board of Darbalara Holdings, despite the breakdown of the personal relationship between the directors.

69. [253]

    There is no doubt that, as a consequence of the breakdown in the relationship the Carrs have failed to get their own way on a number of matters, the most significant of which was the termination of the role of CACM as farm asset manager. However, as the defendants submit, it is not oppressive for a non-controlling shareholder to not get their own way. This has been recognised in many cases where the person claiming oppression is a minority shareholder: Re M Dalley & Co Pty Ltd v Sims (1968) 1 ACLR 489 at 493; Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness (Vic/Tax) Pty Ltd (No 3) [2015] NSWSC 1639 at [94]; Shelton at [24]. In the present case Mr Carr is not a minority shareholder, but rather a 50:50 shareholder with Mr Ritossa under a structure chosen by each of them to protect their interests through the right of veto which each has over the other. This comes about because the parties chose a structure of a unit trust with a corporate trustee, the shares of which were held by Mr Carr (one share) and Mr Ritossa (one share), each representing their respective families, and the directors of which have always been Mr and Mrs Ritossa and Mr Carr, together with his father until he was replaced by Mrs Carr in 2015.

70. [254]

    By resolution made by the directors in 2017, no decisions at the board level can be made unless all directors agree. It is the inevitable consequence of this structure that there will be occasions when each shareholder will not get his way, but through the right of veto each is protected against decisions adverse to the interests of the family group which each member represents.

71. [255]

    I have carefully considered all the evidence regarding the dealings between the directors since December 2019, in particular the transcripts of the meetings of directors in that period, and do not consider that the breakdown in the personal relationship has led to any deadlock or caused Darbalara Holdings to cease to function properly. To the contrary, the board has functioned properly, albeit sometimes after vigorous debate on the issues before it.

72. [256]

    The genesis of the present dispute was a disagreement over whether CACM should continue in its role as asset manager of the Trust, the source of which was a disagreement as to CACM’s management of the drought leading to the Ritossas having a lack of confidence in CACM’s expertise as asset manager. That disagreement was over a matter of business judgment, and has been resolved by the appointment of a new independent manager, SouthernAg. The disagreement and its resolution did not involve commercial unfairness to Mr Carr, as a member or otherwise. The only area of pleaded deadlock which remains unresolved is whether DPT should be wound up. That will be resolved by the outcome of this proceeding because, ultimately, it is a question which turns on the proper construction of the trust instrument. The position now reached is that, if the Carrs fail on that issue (which for the reasons given above, in my opinion, they do) they will only be able to exit the Trust by a sale of their units, which potentially the Ritossas will acquire through the exercise of their pre-emption right.

73. [257]

    In my opinion, that outcome, while unfortunate from the Carrs’ perspective, does not involve commercial unfairness to Mr Carr. Rather, it involves the natural working out of a commercial arrangement which the Carrs agreed to when the Trust was established, with advice which drew their attention to the risks of not having an exit strategy, beyond a transfer of the units. Further, the Carrs are not forced sellers – DRCH can remain in the Trust as a 50% unit holder which can veto any proposal by the Ritossas with which they disagree. If the Carrs wish to cease to be directors of Darbalara Holdings, they can appoint two new directors to take their place.

74. [258]

    For the above reasons, in my view, the plaintiffs have not established oppression under either ss 232(d) or (e).

Fourth issue: Appointment of a receiver

1. [259]

   The plaintiffs seek an order that a receiver be appointed pursuant to s 67 of the Supreme Court Act or the inherent power of the Court, to realise the assets of DPT, discharge DPT’s liabilities and distribute the balance to the unit holders. Section 67 of the Supreme Court Act provides that the Court may, at any stage of the proceedings, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient to do so.

2. [260]

   The pleaded basis for appointing a receiver is that (APOC [26]):

3. [261]

   The evidence relied on for this claim is the same as for the oppression claim.

4. [262]

   It is not in dispute that the Court does not have a general power to order the winding up of a trust. In Re Gaydon [2001] NSWSC 473, Barrett J said (at [29]):

5. [263]

   In Baba v Sheehan [2019] NSWSC 1281, after quoting the above passage, Parker J said (at [75]-[76]):

6. [264]

   See also Rosenbaum v Baidarman (No 2) [2021] NSWSC 574 (Williams J) at [93] to the same effect.

7. [265]

   The Court does have power to appoint a receiver on the application of a beneficiary where that is required to ensure the safety of the trust property: see Yunghanns v Candoora (No 2) [2000] VSC 300 at [64]-[76], [84] (Warren J) and Mir v Mir [2023] NSWSC 408 at [130]-[139] (Ball J). In the former case Warren J (as her Honour then was) said (at [84]):

8. [266]

   In my opinion, there is no evidence that the trust property is in jeopardy. In particular, the directors of the Trustee have agreed on the appointment of a new manager, SouthernAg, and there is no support in the evidence that it is not performing that role satisfactorily. Nor, picking up the third of the matters mentioned by Warren J in the above passage, is the appointment of a receiver necessary to preserve the benefit of a person with an interest in the trust property.

9. [267]

   Recognising the difficulties presented by these authorities, the plaintiffs rely on a line of authorities which Dr Birch SC described in opening as supporting the proposition that an order can be made to wind up a trust where ‘there is a relationship that might be described as akin to a partnership arrangement, where mutual trust and confidence is necessary for the operation of the arrangement or structure, then equity ought to intervene when that substratum has failed, and it ought not to matter whether the formal structure is a corporation, a partnership between individuals or, as in this case, a unit trust’ (T4). The authorities relied on are Basecove Pty Ltd v Dolores Lavin Management Ltd [2009] NSWSC 1315; Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86 and Capelli v Shepard (2010) 29 VR 242; [2010] FSCA 2. In my view the authorities relied on do not support the appointment of a receiver in the present case.

10. [268]

    The first, Basecove, was an ex tempore judgment of Brereton J (as his Honour then was), which concerned the relationship between two individuals who were the sole directors of the trustee and also controlled each of the two unit holders. The trustee was in deadlock and the financial position of the trust was tenuous at best. It was common ground that some step needed to be taken to resolve the deadlock that had arisen, and the dispute between the parties was whether that step should be the appointment of receivers and managers with a view to winding up the trust or the appointment of a new trustee (at [6]). Brereton J held (at [11]) that a number of factors were decisive in favour of the appointment of a receiver, including that the relevant entities if not technically insolvent then were subject to a substantial deficiency of funds and trading at losses; despite the trust and corporate structure involved, the arrangement between the parties was really that of a quasi-partnership, and the relationship between them had broken down; and there was no guarantee that the regime under the trust deed for one unit holder to transfer his units to the other would succeed in breaking the deadlock. His Honour concluded (at [12]) that in the circumstances it was ‘just and equitable, in the conventional sense, that the relationship between these parties be brought to an end, rather than requiring one party, against its will, to leave its assets in jeopardy while the position progressively deteriorates’.

11. [269]

    In Mir v Mir at [131], Ball J explained the decision in Basecove as one where a receiver was appointed because the trust assets were in jeopardy. I agree, and note that it is clear that a key matter in Basecove was that the trust assets were in jeopardy, even though the nature of the relationship between the parties was described as being that of a quasi-partnership. In a later case, Re Austec Wagga Wagga Pty Ltd (in liq) [2018] NSWSC 1476, the same judge who decided Basecove observed that an order or declaration that a trust be wound up or terminated misconceived the nature of a trust.

12. [270]

    Basecove is distinguishable from the present case for at least two reasons. First, the trust property is not in jeopardy. Second, the directors of the trustee are not, for the reasons already given, in deadlock and, in any event, there is a process under the Trust Deed for resolving any deadlock (being for the transfer of units through the regime contained in the Trust Rules).

13. [271]

    In Accurate Financial Consultants the principal issue was whether the appellants, who were minority unit holders in a unit trust, could restrain the trustee (a company controlled by the majority unit holder) from acting on a notice to compulsorily acquire their units. One of the arguments for the appellants was that, on the basis of the principles in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, there was a fiduciary relationship between the investors said to justify an injunction restraining the exercise of the power to compulsorily acquire the minority’s units (at [108]).

14. [272]

    Dodds-Streeton JA (Ashley JA and Forrest AJA agreeing) noted at [109] that the argument was ‘novel’ and then after discussing Ebrahimi said:

15. [273]

    The reference in [120] above to the intended transfer of shares to the minority investors appears to be a reference to the fact that the original arrangement had been that the appellants would receive shares in the corporate trustee (at [94]).

16. [274]

    It is clear from [123] that the ‘novel’ argument based on Ebrahimi was not ultimately pressed. The observations of Dodds-Streeton JA at [120]-[122], which are obiter dictum, appear to be no more than a recognition that mutual fiduciary duties can apply, on the facts of the particular relationship, between persons who are investors in a unit trust notwithstanding that the structure they have chosen is a unit trust, rather than a partnership.

17. [275]

    The plaintiffs have not pleaded that the relationship between the Carrs and the Ritossas was a fiduciary relationship. Nor would such an argument be open on the evidence. A fiduciary relationship requires the assumption of responsibility to act for, or on behalf of, the interests of another, in the exercise of any power of discretion affecting the interests of the principal in a legal or practical sense: Commissioner of State Taxation v Cyril Henschke Pty Ltd (2010) 242 CLR 508; [2010] HCA 43 at [21]. The evidence does not support the suggestion that the Ritossas assumed such a responsibility to the Carrs, or vice versa. Further, the Carrs and Ritossas expressly rejected the use of a partnership in May 2010 and cl 3.1 of the Trust Rules disclaims a partnership relationship.

18. [276]

    The observations of Dodds-Streeton JA also need to be read in light of the decision in Ebrahimi itself, which concerned an application to wind up a company on the just and equitable ground (found in the Australian context in s 461 of the Corporations Act). The case concerned a small private company which conducted a business which had previously been conducted by a partnership between the appellant (a minority shareholder) and one of the majority shareholders. After the appellant was removed as a director by the majority, he brought a petition to wind up the company on the just and equitable ground and succeeded.

19. [277]

    Lord Wilberforce said (at 379) that it is impossible to set out exhaustively the circumstances in which, on the just and equitable ground, the exercise of legal rights will be subject to equitable considerations but said that typically there will be one or more of the following elements:

20. [278]

    Lord Wilberforce then added (at 379-380):

21. [279]

    The application of these principles directly to the present case is not open because the plaintiffs have not brought an application to wind up Darbalara Holdings on the just and equitable ground under s 461 of the Corporations Act. Had they done so, and an order was made to wind up the company, there would have been an argument available to them that a receiver should be appointed to the trust property under s 67 of the Supreme Court Act or the inherent jurisdiction of the court relying on the principles stated in Ebrahimi: see Re Admiral Cove Pty Ltd [2023] VSC 537 at [65]; Re Munja Bakehouse Pty Ltd [2024] NSWSC 6 at [30]; cf Mir v Mir at [121].

22. [280]

    Accurate Financial Consultants was referred to in Re Amazon Pest Control Pty Ltd [2012] NSWSC 1568 at [17] in the context of a discussion of the circumstances in which a court will make a winding up order under s 461 on Ebrahimi principles, and does not support the plaintiffs’ present submission.

23. [281]

    In Capelli v Shepard, the third case relied on by the plaintiffs, the Court made an order to wind up a managed investment scheme under s 601ND(1)(a) of the Corporations Act which permits such an order where ‘the Court thinks it is just and equitable to make the order’. The primary judge made the order because the managed investment scheme was insolvent and this conclusion was affirmed on appeal: see [2010] VSCA 2 at [101], [104].

24. [282]

    The Court of Appeal (Dodds-Streeton and Mandie JJA, Byrne AJA) considered that the case law on the winding up of companies on the just and equitable ground informs the application of s 601ND(1)(a) and said (at [109], footnotes omitted):

25. [283]

    Those observations, directed as they are to s 461 and s 601ND of the Corporations Act, provide no assistance to the plaintiffs’ application for the appointment of a receiver under a different statute or the inherent jurisdiction of the Court.

26. [284]

    For these reasons, in my opinion this is not a case in which the Court can or should appoint a receiver to in effect wind up DPT.

Conclusion

1. [285]

   For the above reasons, I have concluded:

   1. (1)

      The alleged Representation and Ongoing Representations were not made, and accordingly the plaintiffs have not established the alleged oral agreement or estoppel case.

   2. (2)

      The plaintiffs’ construction of cll 2 and 16 of the Trust Rules is not correct. Accordingly, DRCH is not entitled to require the Trustee to wind up the Trust or to call for its proportion of the capital of the Trust.

   3. (3)

      The plaintiffs have not made out their case that the conduct of the affairs of Darbalara Holdings has been conducted oppressively, and no order should be made under s 233 of the Corporations Act.

   4. (4)

      The plaintiffs have not established that a receiver should be appointed to the Trust property and sell it and distribute the net proceeds to the unit holders.

2. [286]

   The parties did not make submissions on costs. As the defendants have been wholly successful, it seems to me that the appropriate costs order is that the plaintiffs pay the defendants’ costs, on the ordinary basis as agreed or assessed. However, I propose to give an opportunity to the parties to make further submissions as to the appropriate order as to costs within seven days. I will also give the parties liberty to apply on 3 days’ notice in the event that an issue arises from this judgment which needs to be raised with the Court.

3. [287]

   Accordingly, the Court will make the following orders:

   1. (1)

      The Amended Summons is dismissed.

   2. (2)

      Unless an application for a different order is made in writing to my Associate within 7 days, the plaintiffs are to pay the defendants’ costs of the proceedings on the ordinary basis, as agreed or assessed.

   3. (3)

      Liberty to apply on 3 days’ notice.