Tomanovic v Global Mortgage Equity Corporation Pty Ltd

CAMPBELL JA :

Mr Zoltan Tomanovic and Mr Ken Sayer were in what the trial judge described as "a kind of business marriage from about 1999 to December 2004" . That "marriage" involved some complex legal relations between, or in, various companies and trusts, some of which were effectively controlled by Mr Tomanovic alone, some of which were effectively controlled by Mr Sayer alone, and some of which were jointly owned. For many purposes relevant to this appeal it is not necessary to distinguish the precise entities involved, so I shall refer to them collectively as "Tomanovic interests" or "Sayer interests" .

In late 2004 Mr Tomanovic and Mr Sayer agreed in principle to go their separate ways. By 2008 they had still not agreed on all aspects of a basis for separating their interests.

In anticipation of agreement being reached, the Sayer interests had caused payments totalling $1,341,750 to be paid to the Tomanovic interests. The last straw precipitating the proceedings from which this appeal is brought came on 16 December 2008, when the Sayer interests served a notice on the relevant Tomanovic interests demanding repayment of that money (the " Notice of Demand ").

The Tomanovic interests then began the two sets of proceedings in the Equity Division of the Supreme Court (" the Equity Proceedings ") from which this appeal is brought. One proceeding related to Global Mortgage Equity Corporation Pty Ltd (" GMEC "), one of the companies that was jointly owned by the Tomanovic and Sayer interests. The other proceedings related to Argyle HQ Pty Ltd (" Argyle HQ "), another of the companies jointly owned by Tomanovic and Sayer interests. In each proceeding, the Tomanovic interests sought, in relation to the company that was the subject of those proceedings, either an order that the Sayer interests buy out the Tomanovic interests at a fair value determined by the Court (either through a referral to an Associate Judge, or appointment of a referee), or an order for winding up.

In the orders appealed against, the primary judge ordered that each of the Equity Proceedings be dismissed with costs: Tomanovic v Argyle HQ Pty Ltd; Tomanovic v Global Mortgage Equity Corporation Pty Ltd; Sayer v Tomanovic [2010] NSWSC 152.

Following the Notice of Demand, the Sayer interests began proceedings in the Common Law Division of the Supreme Court, seeking repayment of the $1,341,750 ( " the Common Law Proceedings " ). Those proceedings were transferred to the Equity Division, and the primary judge heard the Common Law Proceedings at the same time as he heard the Equity Proceedings. He held that the Tomanovic interests were obliged to repay the $1,341,750, and entered judgment for that sum plus interest, a total of $1,765,004.64. No appeal is brought from the judgment in the Common Law Proceedings. However, that judgment has been stayed pending the determination of the appeal from the Equity Proceedings, and some of the circumstances in which the $1,341,750 came to be paid to the Tomanovic interests need to be taken into account in the present appeal.

In the course of attempting to establish a basis on which the separation of interests could occur, two documents (discussed in more detail below) known as the First Heads of Agreement and the Second Heads of Agreement had been executed. The Tomanovic interests filed a cross-claim in the Common Law Proceedings, contending that those documents were contractually binding, and seeking judgment for sums of money payable in accordance with their terms, or alternatively an order for specific performance of those documents. One basis on which the cross-claim contended that the documents were binding was that the Tomanovic interests were estopped from denying that the documents were binding. The judge dismissed that cross-claim. No appeal is brought from his decision in that respect.

I have concluded, contrary to the decision below, that there are circumstances that justify the making of compulsory buy-out orders. I agree with the judge that an order for winding up is not appropriate.

The judge found that Mr Tomanovic and Mr Sayer established "some form of commercial relationship in 1994", and that in 1999 they began a "loose partnership arrangement". Mr Tomanovic has at all relevant times controlled Australian Financial Services Corporation Pty Ltd (" AFSC "). Mr Sayer has at all relevant times controlled One Australia Pty Ltd (" One Australia "). These were the respective corporate vehicles that the men largely (though not exclusively) used to structure their loose partnership.

Mr Sayer had, prior to 1999, operated a business under the name "Mortgage House of Australia" . It was sometimes referred to as "MHA".

During the time relevant to the proceedings the business was divided into finance and non-finance sides. The finance side operated through several companies, of which Tomanovic interests and Sayer interests were shareholders, and Mr Tomanovic and Mr Sayer were both directors. The business of the finance side was explained by Mr Sayer, in evidence not contested by Mr Tomanovic, as including a retail business, and a wholesale and third party business. The retail business involved the sale of home loan products directly to customers. The wholesale business involved lending funds through the sale of home loan products to a small mortgage manager, which would re-brand that product with its own name and provide it to its own customers. The third party aspect of the business involved the payment of commissions to mortgage brokers who referred loans to the retail business.

It was agreed between the two men, from about 1999, that Mr Sayer would be "top boss and ultimate decision maker in control of the money side of business." On 28 July 2000, when Mr Sayer agreed to Mr Tomanovic becoming a director of the various companies, they both signed a letter that included: "It must also be noted that Kenneth James Sayer, has the final say and decision making process of the Mortgage House of Australia group, however Zoltan Tomanovic will be consulted on every decision made."

Mr Sayer gave evidence, that was not disputed by Mr Tomanovic, as follows: "Zoltan and I regularly had informal discussions in relation to both the MHA Retail Business and the MHA Mortgage Management System Business. These discussions took place in the stairwell, in my office or upstairs in Zoltan's office, and occurred roughly every 2 weeks or so, and lasted for about 20 to 30 minutes. As to these meetings: (a) It was my practice to advise Zoltan of developments that had occurred in the MHA Finance Business including: (i) the changes to the finance products the MHA Finance Business were offering customers; (ii) the new services the MHA Finance Business could provide to customers; (iii) any developments in the advantages offered by the funding institutions to the MHA Finance Business; (iv) openings of new MHA Branches; (v) growth of the MHA Finance Business; (vi) profitability; (vii) competition in the market place (vii) marketing initiatives; and (ix) cashflow, and the deficit in cash position, and the need for funding. ... (c) it was not my general practice to seek the agreement of Zoltan (or advise him in advance) of proposals for future action in relation to the MHA Finance Business. Rather, it was my practice to inform him of developments which had already occurred in that business. I can not presently recall any exceptions to that general practice;"

The non-finance side of the business involved the provision of mortgage management systems to customers. This involved providing investment advice to customers in order to encourage property investment, minimise mortgages and increase the investment portfolio of its clients. Another aspect of the non-finance side of the business was the ownership of two properties located in Argyle Street, Parramatta. Apart from activities of the retail part of the finance business that were conducted through branches, the activities of both the finance side and the non-finance side of the business were carried out from those buildings. The buildings were owned by Argyle HQ (though under a name different to its present one), which held them as trustee of the 9 Argyle Street Unit Trust. Apart from the issue of one B class share to Tomanovic interests in October 2003, the shares in Argyle HQ have at all relevant times been held as to 50% by Tomanovic interests, and 50% by Sayer interests. Mr Tomanovic and Mr Sayer were the sole directors prior to 20 January 2005. The unit holders in the unit trust have at all times been AFSC and One Australia on a 50:50 basis. The case both at first instance and on appeal has proceeded as though Argyle HQ was a company of real value, not a company all of whose assets were held on trust.

Mr Sayer gave evidence, that Mr Tomanovic accepted was "substantially correct" : "The bulk of our discussions in these regular informal meetings addressed the operations of the MHA Mortgage Management System Business. As to this: (a) it was the practice of Zoltan to inform me about both the state of the business, of the MHA Mortgage Management System Business, and proposals and prospects for future growth; (b) it was not Zoltan's practice to seek my agreement or consent in relation to those proposals; (c) it was my practice from time to time to emphasise the need for growth in the MHA Mortgage Management System Business. However, it was not my practice to make specific proposals in relation to the growth or operations of the MHA Mortgage Management System Business. I understood that Zoltan had effective management autonomy in relation to the MHA Mortgage Management System Business."

In the nomenclature used in Mr Sayer's affidavit the Mortgage Management System Business did not include the business of owning the properties in Argyle Street.

No dividends were paid by any of the companies through which the partnership arrangement was implemented from the time the partnership began to the date of the trial before the primary judge. Mr Sayer said that paying dividends "wasn't our procedure. Intercompany loans was the going thing." As well, each man received what was in effect a salary. There was no finding about whether there were any distributions from the trust, and the evidence did not address that topic.

Negotiations had been underway from at least November 2002 for Macquarie Bank, or a company associated with it, to acquire 10% of the shares in the finance group for a single payment of $2 m. A list of terms proposed by Macquarie in November 2002 included that a new group holding company be established with 100% ownership of the group, and that Mr Sayer be the sole director of that company.

By May 2003 negotiations were well advanced for Macquarie Bank to acquire that interest.

The records of the companies had indicated that Sayer interests held 75% of shares in companies in the finance group, while Tomanovic interests held 25%. Grant Thornton is an accounting firm instructed by the Sayer interests at all relevant times, and which also provided services to companies in the MHA Group. The minutes of a meeting held at the offices of Mortgage House on 4 June 2003, attended by both Mr Sayer and Mr Tomanovic, record the manner in which that shareholding was to alter prior to the entry of the Macquarie group company: 1. Beneficial Interests in FG ZT and KS have an equal, ie 50/50 beneficial interest in the FG that MSL is purchasing a 10% interest in This interest in these FG companies has always been 50/50 This interest is not formally documented, but was & is agreed by both ZT and KS in a 'handshake' agreement Therefore when MSL purchase their 10% interest in the FG, the remainder 90% interest will be beneficially owned 45% by KS and 45% by ZT, whatever the legal ownership may be. For example 90% may be owned by One Australia, but that is then equally owned beneficially by KS and ZT ZT would therefore get 50% of the capital value of the FG business over time 2. Legal / Shareholding Interest in FG Was 75 to KS/ 25 to ZT Then when it was realised that the equity interest was worth more with the growth of the FG, and was not offset equally by wages paid, it was decided to change the shareholding in MHA to 50/50 (but KS gets a higher salary for his role managing the FG) MT to check with Gabriel Abdallah, KS's accountant, that he has now recorded the legal ownership as 50/50 with ASIC. (But first we will receive correspondence sent jointly by KS & ZT stating their agreed decisions on the issues discussed in this meeting, to be sent within a day) 3. Non-Finance Group (NFG) The interests of ZT and KS in the NFG will not change with the MSL investment in the FG The beneficial interests in this group are equally shared, 50/50, by both KS and ZT ZT expects in future to have reduced interest in the FG, but to retain 50% interest ZT is starting a new company in the NFG, that MSL is aware of

A new company, GMEC, was incorporated in June 2003 (though under a different name to its present one), and became the holding company of existing companies in the finance group. Mr Tomanovic was a director of it for only a matter of days.

In anticipation of the arrangement with Macquarie Bank proceeding, Mr Tomanovic resigned as a director of the various companies in the finance group (including GMEC) on 27 June 2003.

On 2 July 2003 a Subscription and Participation Agreement (" SPA ") was entered into between GMEC, One Australia, AFSC and Macquarie Bank. Under it, Macquarie Bank agreed to subscribe for shares in GMEC, that would after issue of those shares amount to 10% of the issued capital, for $2 m. The effect of the share issue was warranted to be that, after the issue, 45% of the issued capital would be held by One Australia, 45% would be held by AFSC, and 10% would be held by Macquarie. One clause of the agreement required GMEC to ensure that Mr Sayer was the sole director, and the sole secretary. Another clause provided that no matters needed to be referred to the shareholders for approval. No party to the agreement could carry out any of the actions on a long list, without the prior written consent of Macquarie Bank. One of the items on that list was "the appointment or removal of any director" of GMEC.

There was a provision prohibiting any party to the agreement from disposing of any equity security in the company without the prior written consent of each other shareholder (which could not be unreasonably withheld), and pre-emptive rights for any shareholder to acquire the shares of another shareholder who wished to sell.

The agreement required GMEC and Mr Sayer to enter into a service agreement under which Mr Sayer was to be employed as Chief Executive Officer on a salary of $500,000 per annum.

In around 2004 a group of companies each bearing a name that included "Multiown" was established, in part to take over the running of the non-finance side of the business. At least some of those companies carried out their operations through being trustee of a unit trust. Those companies and trusts were to provide specialised mortgage strategies, loans and investments to clients. I will refer to the operations of these companies and trusts collectively as "the Multiown business" . It was initially established as an equal partnership between Mr Tomanovic, Mr Sayer and a Mr Gabriel Baca. The Multiown business operated from a floor of the Argyle Street building on a basis that did not involve the payment of any rent or any payment for telephone, internet, cleaning or electricity. As well, the Multiown business used for the purpose of its own operation the database of clients that had been set up and maintained by the MHA business. Mr Tomanovic or one of the entities in which he was interested from time to time wrote loans through MHA, on each of which a commission was paid. The Multiown business continued to occupy the Argyle Street premises on that basis for much, and perhaps all, of the time until proceedings were instituted.

From around mid-2004 negotiations commenced for the Sayer interests to buy out the Tomanovic interests in various of the group companies. On 22 December 2004 Mr Sayer and Mr Tomanovic met at Kirribilli. They both signed a brief handwritten document entitled "Heads of Agreement" . Its text was: "MH Group Bus sold to Ken Sayer. Date after the holiday Zoltan in Europe before Ken going to USA 04 subject to contract for total of $6 mil net of taxes price to be determined about"

Also on 22 December 2004 Mr Sayer sent an email to Mr Noel Dona (copying in Mr Tomanovic) saying: "Zoltan & I have come to agreement. Business is sold as at a day or two before I left for the US this year. (Agreement Signed) All drawings since that date, to be netted out of his 6 mil. Can u arrange for transfer of AFS shares, resignation of directorship & POA for AFS."

In that email "AFS" refers to AFSC, and "POA" is an abbreviation for power of attorney.

Prior to that time the Tomanovic interests had received payments of $3602.50 per week from the Mortgage House Group. After 22 December 2004 they did not receive any more such regular payments. However, the first of the payments that ultimately made up the $1,341,750 that was the subject of the Common Law Proceedings was made on 23 December 2004. Mr Derek Angel, who had responsibility for the accounts of the finance side of the business, wrote to Mr Tomanovic on 23 December 2004: "I have been advised by Ken Sayer that an agreement has been reached by the two of you with a signed acknowledgement to be delivered to me in due course. Ken has advised that the sum of $6,000,000 (Sixmilliondollars) is the agreed amount. All future payments to you will be deducted from this amount. Deductions will also be made from this amount in due course which represents payments made to you from the agreed date of sale. To ensure you are up to date with the reducing indebtedness of Ken to you, I will supply a monthly update of the current balance outstanding and amounts paid in that month. To initiate the process, I understand you require the amount of $150,000 to be paid today. In regard to this transaction the balance owing will be as follows: The amount of $150,000 was duly paid on 23 December 2004.

On 20 January 2005 Mr Tomanovic tendered his resignation as a director of the four companies, other than the Multiown companies, through which the non-finance side of the business was conducted. One of the companies from which he then resigned as director was Argyle HQ. Since 20 December 2005 Mr Sayer has been the sole director of Argyle HQ, except for the period from 9 June 2005 to 5 October 2006, when Derek Angel was an additional director. Bearing in mind that Mr Tomanovic had already resigned as a director of the various companies in the finance group on 27 June 2003, the January 2005 resignations had the effect that, of the companies that carried on the finance and non-finance sides of the business, he remained a director of only the Multiown companies. The First Heads of Agreement

Between December 2004 and the end of March 2005 solicitors for the Sayer interests had prepared several drafts of a heads of agreement document relating to the proposed separation of interests. Mr Ken Gunderson-Briggs, of Grant Thornton, accountants, was also acting for the Sayer interests from that time onwards concerning the proposed separation of interests. On 31 March 2005 Mr Tomanovic and Mr Sayer executed a document entitled "Heads of Agreement" , that later came to be referred to as the "First Heads of Agreement" . Its text filled 7 closely typed pages. It commenced by saying: "Except paragraphs 8 and 9, this document is not intended to be a binding contract or give rise to legal rights and obligations (except as set out in the document). The document has been prepared in order to provide instructions to lawyers, accountants and other advisers in relation to the preparation of formal documents ..." Clause 8 was a confidentiality agreement. Clause 9 contained an agreement by Mr Tomanovic to give to the Sayer interests any authority needed to deal with the rights of the Tomanovic interests in the enterprises that the Sayer interests were to acquire.

The First Heads of Agreement contemplated that formal documents would be entered into by 30 June 2005. It also contemplated that payments might be made to the Tomanovic interests, "... in anticipation of execution of formal documents and that these payments are by way of loans which shall: a. convert to payments of the Payment Sum upon execution of formal documents; or b. become immediately due and payable as a debt owing by ZT and other Zoltan Entities to Remaining Enterprises, in the event that formal documents are not executed by 30 June 2005 or such later date as KJS and ZT may agree to in writing."

The balance of the document made provision for the Tomanovic interests to attain sole ownership of all the Multiown enterprises, and for the Sayer interests to acquire the rest of the business enterprises. It contemplated that the payment price would be $6m payable by the Sayer interests to the Tomanovic interests, plus an amount equal to the amount of any tax liability that the Tomanovic interests might incur as a result of receiving that $6 m. As well, Mr Tomanovic would procure a release from any guarantees that Mr Sayer had given concerning Multiown companies, or indemnify him against any liability under such a guarantee, and Mr Sayer would likewise procure a release for Mr Tomanovic from any guarantees he had given concerning the rest of the business enterprises, or indemnify him against any liability under such guarantees.

Thereafter, various payments were made by a company in the finance side of the business to Mr Tomanovic, under cover of a standard form letter that stated, inter alia: "I have been advised that the Heads of Agreement has been entered into with a signed acknowledgement to be delivered to me in due course. I understand that the payment sum under the Heads of Agreement is six million dollars ($6,000,000) ("Payment Sum"). In accordance with clause 9(c) of the Heads of Agreement, all payments to you and your related entities are payments by way of loan which shall: a. convert to payments of the Payment Sum upon execution of formal documents; or b. become immediately due and payable as a debt owing by you and your related entities in accordance with clause 9(c)b. of the Heads of Agreement, in the event that formal documents are not executed by 30 June 2005, or such later date as you and Ken Sayers may agree to in writing. Following execution of formal documents: a all payments to you and your related entities will be deducted from the Payment Sum; and b deductions will also be made from Payment Sum in due course which represent payments to you and your related entities."

On 23 June 2005 Mr Sayer and Mr Tomanovic signed a "Memorandum of Agreement" under which they agreed to extend the date for execution of the formal documents to 31 August 2005.

31 August 2005 passed without the formal documents being entered, and without any agreement extending the time for entry of formal documents. However, payments continued to be made by a company in the finance group to Mr Tomanovic, under cover of exactly the same standard form letter as had been used from the time the First Heads of Agreement was executed. The last of those payments was made on 27 November 2006.

On 6 November 2006, at a meeting at the offices of Grant Thornton, Mr Tomanovic and Mr Sayer signed a document entitled "Memorandum of Understanding" that Mr Gunderson-Briggs handwrote at that meeting. It was common ground that Mr Gunderson-Briggs described it as "an agreement to agree" and that he said it would need to be put into a proper Heads of Agreement form in due course. Mr Tomanovic expressed a wish to have it done as soon as possible, and stated his opinion that it should be done by Christmas. Mr Gunderson-Briggs agreed it should be done as soon as possible, but warned that there were a lot of things to do. The Second Heads of Agreement

On 24 November 2006 Mr Tomanovic and Mr Sayer executed the Second Heads of Agreement. Apart from attestation clauses, its text was a single page. It stated: "This document is not intended to be a binding contract or give rise to legal rights and obligations (except as set out in the document). The document has been prepared in order to provide instructions to lawyers, accountants and other advisers in relation to the preparation of formal documents to give effect to the transactions contemplated by this heads of agreement ('formal documents').

After identifying the parties, it said: "(a) KJS and entities associated with KJS (collectively "Ken Entities") will purchase the assets which Ken Entities on the one hand and ZT and persons and entities associated with ZT including AFSC (collectively "Zoltan Entities") on the other hand own, for the price of $5,000,000.00 (the "Price"). (b) The Price will be paid as follows: (i) forgiving the loan to Zoltan Entities which is presently outstanding and owing in the amounts of $1,245,750.00; (ii) payment of $100,000.00 on execution of this Heads of Agreement; (iii) payment of $1,404,250.00 on completion of the sale under the formal documents; (iv) payment of $1,000,000.00 on the first anniversary of completion of the sale under the formal documents; and (v) payment of $1,000,000.00 on the second anniversary of completion of the sale under the formal documents. (vi) payment of $250,000.00 on achievement of the 20 sales per month performance hurdle. (c) For the avoidance of doubt the sale will exclude any of the Multiown Enterprises."

The "loan" referred to in (b) (i) was the total of the amounts of periodical payments that by then had been paid to the Tomanovic interests.

When para (b)(vi) referred to "sales" it was referring to occasions when the Tomanovic interests referred customers to the Sayer interests for obtaining finance.

The value flowing to the Tomanovic interests under this document was considerably less than under the First Heads of Agreement, in several respects. First, the consideration of $5m payable under this document was less than the $6m under the earlier document. Second, the First Heads of Agreement included an indemnity against tax on that $6 m, but there was no corresponding provision in the Second Heads of Agreement. The value of the indemnity concerning tax could have been considerable (see [48] below). Third, the consideration was payable on less advantageous terms, because of the deferral of payment of $2m under (b) (iv) and (v). Further, the payment of $250,000 of it was dependent on a condition, under (b) (vi). Unlike the First Heads of Agreement, the Second Heads of Agreement made no provision for each side to procure releases for the other from any guarantees, or to provide indemnities concerning any guarantees. The document did not say expressly that the Sayer interests would transfer their interests in the Multiown companies to the Tomanovic interests, but that seems to have been what the parties contemplated.

The amount of $100,000 contemplated by clause (ii) was duly paid to Mr Tomanovic on 27 November 2006. It was the last of the payments that made up the amount sued for in the Common Law Proceedings.

Thereafter, Mr Mark Sellars assisted Mr Gunderson-Briggs in acting for the Sayer interests. Mr Geoff Ryan, Mr Tomanovic's accountant, was also involved in seeking to advance the transaction.

Both sides seem to have expected settlement in a matter of weeks. Mr Sellars emailed Mr Angel on 24 November 2006 saying, "we are aiming to have formal documentation executed by 8 December. This will allow sufficient time for the various transfers and payments to be made prior to Christmas/New Year's break" . On 21 December 2006 Mr Tomanovic emailed Mr Gunderson-Briggs and Mr Sellars, saying "looks like we are not achieving as originally planned and agreed before Xmas finalisation of the final docs, as I have not seen any from your solicitors." Attempts to Identify the Transaction Structure

On 8 December 2006 Mr Sellars emailed Mr Ryan, identifying the various entities in which the Sayer interests were proposing to acquire the rights of the Tomanovic interests. He continued: "The consideration payable will be $5,000,000 the payment schedule of which is 'loosely' detailed in the attached copy of the heads of agreement. I say loosely because we are prepared to be flexible on what the components of the end transaction are going to be (I note there is no flexibility on the payment dates) While our preference would be to simply purchase the direct interests in each of the above entities we note this could leave Zoltan in a position where he could conceivably loose [sic] 46.5% of the proceeds in tax. We are therefore open to suggestions as to how the transaction could be structured to achieve the best outcome for Zoltan. As we discussed Grant Thornton had not performed any detailed analysis of how tax leakage could be minimised as we have not been instructed to do so by our client. ... As a potential starting position for Zoltan we would be prepared to structure the transaction along the follows [sic] lines: - Zoltan has currently been loaned $1,345,750 under loan agreement from Global Mortgage Equity Corporation Pty Limited. We would be prepared to forgive this amount. While we are not privy to Zoltan's affairs should he only have CGT assets representing his current or future principle place of residence the debt forgiveness could occur without causing any current or future tax liabilities for Zoltan. - A consultancy agreement under which Zoltan (or an entities of his choice) would receive the $250,000 upon attaining that performance objective - A sale and purchase agreement where the shares in AFS and Mortgage House Corporation P/L are purchased for $3,404,250 to allow Zoltan to access the 50% general CGT discount - 3 distinctly separate agreements documenting each of the above - Pay a portion of the amounts due into superannuation on Zoltan's behalf If you could review Zoltan's position and in due course advise your preferred structure it would be appreciated."

Thus, the commercial objective was that the Sayer interests would acquire control of all the assets that had previously been conducted through the partnership, other than the Multiown shares of the Sayer interests. However, one element of the structure that had not been decided at that stage was the precise assets that were to be sold to achieve this objective. In particular, it had not been decided whether the assets sold should be the Tomanovic's shares in AFSC, or whether AFSC should sell the shares it owned in the commercial entities of which Mr Sayer wished to obtain control. However, the request that Mr Ryan "advise your preferred structure" also went to matters other than that, which were far from inconsequential detail.

Numerous emails passed between people on the two sides of the proposed transaction over the succeeding months, in which those on the Sellars side of the transaction made no fewer than eight written requests to be told the Tomanovic's proposal concerning the structure. The Tomanovic side of the transaction never provided a definitive answer to those requests. The closest to an answer concerning the assets to be sold came in an email from Mr Tomanovic to Mr Sellars of 22 February 2007: "It is almost obvious that ultimately the only item with the discounted CGT ramification which can be sold is AGS corp p/l - 100 shares. That is where all my holdings are ultimately funnelled into anyway. Geoff would ultimately have the final say in that though, as it is the area of his expertise."

However, by the end of March 2007, and after two more written requests for a proposal on the structure, there was no indication that Mr Ryan had had his "final say" , and no decision on the structure was communicated from the Tomanovic side. Notwithstanding that, from 25 January 2007 to 15 March 2007 there was a stream of emails from Mr Tomanovic to the Sayers' side, complaining that he had not been paid the purchase price. The April 2007 Draft Documentation

On 27 March 2007 Mr Sellars emailed Mr Tomanovic, saying: "As we had not heard from you to [sic] by 16 March we proceeded to have the various documentation for the sale of your AFSC shares drafted. The lawyers drafting the documents have subsequently informed us that there is a fixed and floating charge over all the assets of AFSC that has been in place since 1999, which has never been disclosed to us! Prior to being able to complete on the transaction this charge will need to be removed from the company/over the assets. Your urgent comments on how this can be sorted would be appreciated. In the absense [sic] of any plan one pre condition of any settlement will be that the charge is removed."

On 4 April 2007 Mr Sellars emailed Mr Tomanovic again, saying: "In absence of a response to my email last week concerning the charge over the assets of AFSC I have instructed the lawyers to prepare a draft share sale agreement on the basis that settlement cannot occur until the charge has been removed. The draft share sale agreement is attached to this email. Could you please review in conjunction with your lawyers as a matter of urgency and come back to me with any comments you may have. This is the main document which encompasses a significant proportion of the documentation."

The body of a draft share sale agreement, of a kind that would implement the Second Heads of Agreement by selling to the Sayer interests the whole issued capital of AFSC, was attached. The draft agreement provided that a condition of completion was that the Tomanovic side deliver an executed release of the charge. Another condition of completion was that the Tomanovic side deliver to the Sayer interests documents described as the Debt Forgiveness Deed, the Loan Creation Agreement, and the MHC Agreement. Drafts of those documents were provided to Mr Tomanovic the next day. The draft agreement split the purchase price of $5m into several different components. It did not include any element of indemnity against tax liabilities arising from the sale, or one side procuring releases from the other from guarantees or providing indemnities concerning guarantees. It included extensive warranties concerning the affairs of AFSC. There was no provision for some matters of apparent commercial importance that had been included in the First Heads of Agreement but on which the Second Heads of Agreement was silent. These included provisions concerning the basis upon which rental of space, information technology and other services were to be made available to the Tomanovic interests in the future, and for the ongoing Tomanovic interests to continue to obtain loans for their clients from the Sayer interests.

On 19 April 2007 Mr Sellars sent to Mr Tomanovic a draft of the documentation required to remove the charge. No comments on the draft documentation were received from the Tomanovic side, notwithstanding requests that comments be provided.

On 21 May 2007 Mr Roger Williams, a solicitor by then instructed to act for the Tomanovic interests, wrote to Mr Sayer's solicitor saying that he had been furnished with the draft documentation, and was investigating the: "... rather long and complex history of this matter ... and will then seek proper instructions from my clients to enable me to respond to your draft documents, if possible within the next 2 weeks .... There may be additional documents to submit to you covering aspects not included in your drafts. At this stage I do not have enough information to be specific, but it may be that a proper service agreement is necessary to record the basis upon which Mr Tomanovic will continue to service Mortgage House customers via Multiown, as was originally contemplated in para 7 of the first heads of agreement."

On 8 June 2007 Mr Sellars emailed Mr Tomanovic, saying they were happy to include a servicing agreement in the sale agreement as long as it did not delay completion, which they wanted to occur prior to 30 June 2007. Again, he requested comments on the legal documentation already provided.

On 9 June 2007 Mr Tomanovic emailed saying that the "... servicing agreement must state on what basis and money splits we are operating" (but did not say what he wanted so far as those matters were concerned), and said he had appointed a new legal firm in the place of Mr Williams. Mr James Tuite thereafter acted as solicitor for the Tomanovic interests.

Mr Sellars summarised the then current position to his assistant, Lauren Evans, on 26 June 2007: "In summary. Mr Tomanovic wants an agreement covering - Commission to be received by him or his nominated entity for writing loans through MHA - Agreement on rent/electricity/Phone expenses of Zoltan or his entities at Argyle Street - Agreement on commissions from Zoltan's property activities. Zoltan's proposed terms are: - Wants there to be a minimum of paper work required - Zoltan to receive an upfront on loan written through MHA (1% on loans written through funding program, 80% on other) - All trails to MHA - Zoltan pays no rent, electricity, phone etc - Zoltan retains 100% of property deal income (does not want to have to disclose commissions being paid to MHA)"

Late in June 2007 Mr Sayer provided documents tendering his resignation as a director of the various Multiown companies, and transfers of his shares in the Multiown companies. Though the evidence is not altogether clear, it appears that Mr Sayer has also relinquished any interest he had in units of the unit trusts operated by Multiown companies.

Mr Tuite wrote to Mr Sayer's solicitors on 23 July 2007, requesting amendments to the various transaction documents that had been sent in early April. One of the changes requested was payment of interest on the various amounts of the proposed purchase price that had not already been received by the Tomanovic side, for a period from 6 November 2006 to the date of payment. Another change was the insertion of provision for the dates on which those instalments of purchase price that were not payable on completion were to fall due to be earlier than the draft had proposed. Another change was the insertion of provisions that limited reliance on vendor warranties to the extent that circumstances concerning the vendor warranties could not reasonably have been ascertained during the purchaser's period of due diligence, and in any event limiting the total liability under all warranties to $20,000.00, and concerning only breaches that would not have occurred except as a consequence of some fraudulent act by the vendors. Other amendments of potential commercial significance were also proposed.

On 9 August 2007 Mr Sellars emailed Mr Tomanovic, identifying six topics in relation to which Mr Sellars contended the requested changes conflicted with the Second Heads of Agreement. He agreed to a proposal for the draft documentation to include a servicing agreement, but rejected the other proposed changes.

After various further communications whose detail need not be recounted, Mr Sellars sent an email to Mr Tomanovic on 23 August 2007: "We met with our lawyers earlier in the week. Given the extent of your proposed mark-up's, many we simply do not and will not agree with, the lawyers have been drafting a detailed response to yourself and your lawyers for my review. I expect to receive this PM tomorrow. The objective is to get the response issued early next week and then have Jenny Evans organise a meeting between KJS/KGB and yourself to discuss, hopefully late next week."

Mr Tomanovic replied to Mr Sellars the same day: "I'm flying overseas next Tuesday (coming back first week in October). The KGB/KJS meeting will need to be with my lawyers to sort things out and I have already instructed them to do so, with the focus on finalizing it asap. So my absence does not need to delay things and it should speed up the process and finally to bring this to the end some 3 years after the start.!!!! ..."

Mr Sellars immediately replied, enquiring whether Mr Tomanovic's lawyers "have been instructed to finalise the documents in accordance with the agreement Ken Sayer and yourself reached [sic] in November 2006".

The next day, an email from the Sellars to Mr Tomanovic elaborated: "If you have not instructed your lawyers to complete in accordance with the Agreement Ken Sayer and yourself reached there is no point in us or Ken Sayer meeting with them in your absence. We will need to wait until your return to finalise. Ken Sayer has also instructed us to inform you that unless finalisation, in accordance with what has been agreed, occurs in a timely manner he will have no other option but to review the arrangement with the monies loaned to you, ie look for repayment of the $1,341,750 and the business arrangements with your entities including charges for rent/utilities and payments for access/restriction of access to the MHA client database."

Later in the day, after Mr Tomanovic had not answered Mr Sellars' question, but had accused him of "blackmail or threats" , Mr Sellars replied: "Zoltan I am surprised by your 'blackmail or threats' comments below. How you have come to this conclusion is beyond me. Given that your actions clearly show you do not want to honour the agreement Ken and yourself reached there should be no reasonable expectation on your part that the benefit of the loan and business arrangements KJS has given you (on the basis a deal would be done by now) should/would continue. Ken loaned you about $1.4m and agreed to business arrangements on the basis you were selling to him as agreed last November. To date your actions (or inaction) since January have contradicted everything you have said on the issue of wanting a speedy settlement in accordance with what was agreed. Your proposed changes to the Agreements finally showed why. You have attempted to change the agreement you shook on and signed to 'get a better deal for yourself'. You are now hiding behind your lawyers to try to achieve this. It is simple, if you instruct your lawyers the documents are the [sic] reflect what was agreed by Ken and yourself in the memorandum of understanding we can finalise with them in your absence. As I previously advised we will respond to your lawyers next week. Their response to our letter will dictate whether we meet with them or await your return." The September 2007 Draft Documentation

On 24 September 2007 Mr Sayer's solicitors wrote to Mr Tuite, enclosing a redrafted set of documents to give effect to the Second Heads of Agreement, together with those of the changes requested by Mr Tuite that the Sayer interests had agreed to. The various changes requested by Mr Tuite were listed seriatim, with a statement in relation to each as to whether it was agreed, not agreed, or in what precise manner it was responded to. The letter stated: "As a general overview, many of the amendments you have requested seek to significantly alter the commercial arrangement our respective clients have come to in respect of the AFSC Agreement. As a result, many of these requested amendments are not agreed."

The letter concluded: "Should you have any queries or comments please contact Stephanie Redmond or Simon Griesz of our office. We await your reply."

On 5 October 2007 Mr Adam Field, of Grant Thornton, received a copy of the terms on which St George Bank was prepared to make some financial accommodation available to Argyle HQ. Mr Field forwarded it to Mr Sellars, with a covering email that said: "Another hurdle for us is that Zoltan's & his company, are g'tors to this facility. What's do you think is prospect of him agreeing to this without an argument. All the more reason we need to revisit the Zoltan strategy & prepare an update of current situation for him. Can you pls draft some bullet points on the issues we should be rasing [sic] and the things that GMEC needs him to do to assist it given its current position, including loan account repayments etc."

Mr Sellars replied to Mr Field on 5 October 2007: "Seems like there are a few hurdles to overcome with St George, however that said it is promising to see that additional facilities are available. In respect of Zoltan, in absence of KJS being able to come up with money to fund the present agreement with Zoltan that deal is dead. In any event Zoltan appeared to be hanging out for a better deal and did not want to execute any documentation which reflected what was agreed about a year ago. Generally Zoltan will not do anything unless he sees a benefit in it for himself. If Zoltan could be shown there was a benefit in him agreeing to sign the St George docs then he would be very willingly [sic] to do so. This leaves us with three positions we can take. The first two, while achieving either a short term or long term objective for KJS, are in conflict when looked at in isolation. They are: 1. Demand repayment of the ~$1.4m already advanced to Zoltan and demand Zoltan and his entities pay for all facilities and utilise they currently use at MHA. ie rent, electricity, phone & fees for access to MHA's database. 2. Push for closure of the deal on the basis Zoltan will get to keep the $1.4m he currently has plus a profit share from the sale of Argyle Street while Ken will use his best endeavours to remove all personal guarantees Zoltan has previously provided and if he is unable to do that will indemnify Zoltan for any loss in the event those personal guarantees are called upon. ... The third position is a mix of point 1 & 2. We renegotiate the deal with Zoltan and get him to tip some money back into the group while getting his agreement to sell the shares in GMEC. If presented to Zoltan correctly this would provide KJS with the best chance of Zoltan tipping some money back into the group while agreeing to a sale of his GMEC shares. Once Zoltan understands the full picture and the potential exposure he has, especially if he is being required to tip some money back in to save his personal guarantees from being called upon my feeling is that he will want to untangle himself as quickly as possible. We need a plan to do this which while achieving the immediate and long term objectives of KJS is also fair for Zoltan given the 'current GMEC sale' deal and his potential downside."

On 6 October 2007 Mr Sayer emailed Mr Gunderson-Briggs, under the heading "Zoltan & X", saying "... please stop all work & applicable fees on & for the above effective today".

A letter of offer from St George Bank, dated 11 October 2007 and addressed to Mr Sayer, stated the terms on which a facility of $5.749m would be available to Argyle HQ. It required execution by Mr Tomanovic and AFSC as guarantors. On 17 October 2007 Mr Sayer emailed Mr Tomanovic, under the heading "St George approval" , saying: "Hi mate, can I have it this am? > very tight, hedging return of 300K due in November...."

An email from Mr Sayer to Mr Tomanovic on 21 November 2007 included "NB: Company starving for Cash NOW".

Another email from Mr Sayer to Mr Tomanovic, dated 22 October 2007, under the heading "St George facility" said: "The goahead is very important for company survival & repayment of hedging deals... Failure at this stage = we lose everything. Can you sign please asap?"

Ultimately the facility agreement was entered with St George, on the basis of guarantees from the Sayer interests alone.

On Mr Sayer's own evidence, his attitude to the buyout proposal changed around October 2007: "In or around October 2007, I was coming to the view that the price was no longer appropriate, in light of certain developments in the MHA Finance Business. These developments included the losses on the St Peters Development ... in 2006 and 2007, the MHA Finance Business not going as well in 2007, and subsequently the unfolding global financial crisis in 2008 which further reduced the value of the MHA Business. Zoltan seemed committed still to the retention of the sale price at $6 million." The St Peter's development there referred to was a property development that had been carried out by a company in which Mr Sayer, Mr Tomanovic and Mr Noel Dona were equal shareholders. It is common ground that Mr Sayer had caused some funds from the MHA finance business to be applied towards the St Peter's development. Mr Sayer's change of attitude is consistent with his being unable to "come up with the money to fund the present agreement with Zoltan" , with the result that "that deal is dead" ([71] above), and with his withdrawal of instructions from his advisers in October 2007.

Mr Sayer was asked in cross-examination, with respect to the period September 2006 to October 2007: "Q. In order to pay Mr Tomanovic at that time were you prepared to liquidate assets? A. I don't think so."

On 24 October 2007 Mr Tuite replied to Mr Sayer's solicitors' letter of 24 September 2007: "As you are aware, there has been protracted and costly negotiation in relation to this matter. Given that paper negotiations have been unsuccessful, we propose an urgent conference take place between the parties. We consider that the relevant topics for discussion include: 1. Your client's financial capacity to continue to negotiate and to complete the separation of interests in the Multiown and Mortgage House Entities. We therefore consider that a new Heads of Agreement should be discussed and a preliminary draft agreement agreed upon at the conference; 2. The proposed sale of the 9-11 Argyle Street and 15-17 Argyle Street; and 3. The future of Global Mortgage Equity Corporation Pty Limited ("Global Mortgage Equity Corp"). We intend these discussions to be preliminary only. Pursuant to the 2003 Mortgage House of Australia Holdings Pty Ltd Macquarie Bank Equity Purchase Agreement, we consider that Macquarie Bank should be involved in the finalisation of any agreements relating to Global Mortgage Equity Corp. Please confirm that your client is available to attend a conference this week."

The Sayer solicitors replied on 25 October 2007, saying: "We are instructed to advise that Grant Thornton and our firm are no longer acting for MHA or Sayer on this matter and that all correspondence should be directed to Sayer."

On 13 November 2007 Mr Sayer wrote to AFSC, enclosing the audited accounts for the GMEC group of companies as at 30 June 2007: "A review of the attached will confirm the need for new capital. During the last 6 months it has been necessary for GMEC to borrow more than $3 million from my companies to meet its financial obligations as and when they fall due. The 'Going Concern' note contained in the GMEC Group audited accounts confirm that without my continuing support the ongoing viability of the Group may come into question. Given the above I have decided to convert up to $2 million of my recent loans to the company to equity - at a nominal price of 1c per share. The price of the new shares being a function of the current net assets position of the Group confirmed by the audited accounts. You are invited to subscribe on a similar basis up to you pro-rata entitlement. Any entitlement not taken up will be offered to the other shareholders via a second or third round. If all shareholders contribute their full entitlement - $4.4 million will be raised. This additional capital will be sufficient to allow the Group to access opportunities that are expected to become available in the future. Please find attached a subscription form. Please complete the attached at your earliest convenience - noting the number of shares you wish to subscribe. Please attach a cheque made payable to GMEC Pty Ltd for the resultant subscription amount - and return to Charles King as soon as possible. The finalization date for this matter being 14 days time - (27 th November 2007)."

Mr Tuite wrote to Mr Sayer on 15 November 2007, referring to the 13 November 2007 letter, and continuing: "We note your allegation that Global Mortgage Equity Corporation Pty Ltd ("GMEC") has 'borrowed more than $3 million from [your] companies'. We further note that you intend to 'convert up to $2 million of [your] recent loans to the company to equity.' Please provide us with the following documents and information: 1. Copies of all loan agreements substantiating the allegation that GMEC has borrowed money from your companies; 2. Copies of all loan agreements substantiating the allegation that GMEC has borrowed money from you personally; 3. All documents evidencing the alleged debt owed to you and your companies; 4. Copies of all notices given to, and written consent received from, GMEC's shareholders prior to you forwarding your letter dated 13 November 2007 to our client; and 5. Copies of the consents obtained in respect of the loan the subject of your letter dated 13 November 2007 pursuant to clause 2.2 of Schedule 3 of the Mortgage House of Australia Holdings Pty Ltd Macquarie Bank Equity Purchase Agreement ('the 2003 Agreement'). We note your stated intention to convert $2 million of the $3 million debt allegedly owed to you and your companies into equity by the issuing a further 200 million shares That proposed share subscription is in breach of clauses 2.2(c), 6.2, 7.1 [of] Schedule 3 of the 2003 Agreement. If the proposed share subscription were to take place as described in your letter dated 13 November 2007, it would amount to a fraud on the minority shareholders. Please confirm in writing prior to 1:00pm on Friday, 16 November 2007 that: 1. The proposal contained in your letter dated 13 November 2007 will not be proceeded with; 2. That no additional shares will be issued to any shareholder other than in accordance with the provisions of the 2003 Agreement; and 3. That GMEC will not issue shares as described in your letter dated 13 November 2007. If we do not receive written confirmation from you prior to that time, we intend to take all such actions as they are permitted at law to prevent the shares being issued."

The "2003 Agreement" there referred to was the SPA. Clause 2.2(c) and (d) of it forbad any party from issuing or agreeing to issue any Equity Securities, or from certain (but not all) borrowings without the prior consent of Macquarie Bank. Clauses 6.2 and 7.1 set out a mandatory procedure for raising additional funding from shareholders.

Mr Sayer's personal assistant replied on 16 November 2007, saying that so many items were requested that it was absurd to expect delivery by 1:00pm. It continued: "We advise that Mr Sayer and Mr Tomanovic met this morning, and are on a path towards final settlement. Mr Sayer would be pleased to meet with you and/or your client in order to finalise negotiations on this matter. To this end we propose a meeting at 3pm on Tuesday 20 th November in your Castlereagh Street offices."

On 15 November 2007 Mr Tuite wrote a second letter to Mr Sayer seeking his confirmation that an unsigned undated form purporting to record transfer of shares in GMEC from AFSC to One Australia had not been lodged with ASIC.

On 23 November 2007 Mr Tuite wrote again to Mr Sayer, referring to his letter of 15 November 2007, and again requesting confirmation that the transfer form had not been lodged with ASIC, and would not be lodged.

On 27 November 2007 Mr Sayer's personal assistant notified Mr Tuite that the fundraising would not proceed before Macquarie Bank had had an opportunity to respond.

On 27 November 2007 Mr Tuite wrote again to Mr Sayer: "We refer to our letters dated 15 November 2007 and 23 November 2007 to which we have not received a response. In your letter dated 13 November 2007 and addressed to 'The Directors, Australian Financial Services Pty Ltd' you state that the finalisation date for this matter is 27 November 2007. We note your stated intention to convert $2 million of the $3 million debt allegedly owed to you and your companies into equity by the issuing a further 200,000 million shares would amount to a breach of clauses 2.2(c), 6.2 and 7.1 of the Mortgage House of Australia Holdings Pty Ltd Macquarie Bank Equity Purchase Agreement ('the 2003 Agreement') and may constitute a fraud on the minority shareholders. If you do not confirm in writing that the proposed capital raising through share subscription will not go ahead by 12:00pm on 27 November 2007 , we are instructed to take all such actions as they are permitted at law to prevent the shares being issued."

On 29 November 2007, after Macquarie Bank had given its written consent, Mr Sayer wrote again to AFSC to confirm a capital raising by GMEC: "The process to be followed in relation to this capital raising being: GMEC invites MBL and Australian Financial Services Corporation Pty Limited (AFSC), to subscribe for shares in MHA in accordance with their shareholding percentage - ie 10% - MBL; 45% AFSC and 45% One Australia Pty Limited The issue is to be for up to 444,444 million shares at 1c per share - to raise $4,444,440 The offer period being 20 working days and is therefore scheduled to close at 5pm - Thursday the 3 rd of January 2008. In the event GMEC does not receive sufficient acceptances of the offered shares GMEC may then offer these shares via the process set out in the Share Purchase Agreement."

In the course of December 2007 each side made an offer to the other, on terms more favourable to itself than the terms of the Second Heads of Agreement. Neither was accepted.

Also in the course of December 2007 Mr Sayer raised the topic of regaining his interest in the Multiown companies. On 12 December 2007 he emailed Mr Tomanovic, under a heading referring to Multiown, saying: "Since the MHA sale has fallen over & you're returning the 2.4 mil can we reinstate my shares?"

Mr Tomanovic's immediate response was not to answer the question directly, but to accuse Mr Sayer of inconsistency and not knowing what he wanted.

On 14 December 2007 Mr Tuite wrote to Mr Sayer, requesting again the documents he had requested on 15 November 2007: "We refer to our letters dated 15 November 2007, 23 November 2007 and 27 November 2007. We have not received the documents requested in those letters. Without the material requested in those letters as well as updated audited post June 2007 financial records, our client is unable to consider GMEC's proposal and will resist any attempt on GMEC's part to finalise the matter on 3 January 2008."

On 31 December 2007 Dibbs Abbott Stillman (" Dibbs "), the solicitor for Macquarie Bank, wrote to Mr Sayer seeking information concerning the proposed capital raising: "... our client is concerned at the large value of inter-company loans where the cash assets of GMEC have apparently been used to fund the projects of companies controlled by you. As a condition of our client accepting the share offer, our client will require that you arrange for the repayment of ALL inter-company loans currently owed to GMEC. Please provide to us detailed timeframes for repayment, or, in the event where you assert that a loan is not able to be repaid, please provide full details supporting your assertion that the loan is to be written off by GMEC. Further, our client is not prepared to allow the governance of GMEC to continue in its current form. On the information provided to our client, it is evident that the requirement for a substantial capital injection to GMEC has been created by its current management, in particular, the expenditure of GMEC capital to fund private ventures. These ventures appear to be unrelated to GMEC and have resulted in significant loss to GMEC. Our client considers this a very serious matter, and potentially a breach of your obligations to the company as its director. Accordingly, our client requires the restructure of the current management of GMEC, including the addition of, at minimum, a further director of GMEC and a further signatory to the accounts of the company. Our client is prepared to meet with you to discuss the form of new management for the company. Our client welcomes your comments on the above."

The letter stated that the bank considered itself to have "numerous bases upon which it is entitled to withdraw its consent to the share issue."

On 5 February 2008 Mr Sayer wrote to Mr Tomanovic seeking the following information: " Confirmation in writing that Ken Sayer (or related entities) holds at least a 50% interest in the income and the capital of the Multiown business. Details of all entities that comprise the structure of the Multiown business. (Including but not be limited to all trusts, trustee companies, joint ventures and partnerships). A structure diagram detailing the relationship of all entities and the owners of those entities. Details of all owners of the entities including shareholders, unit holders, joint venturers and partners including both legal and beneficial owners, as well the number and type of securities held. Copy of the underlying documents specifying the rules and governance of each entity, including constitutions for companies, trust deeds for trusts, joint venture and partnership agreements. Details of the rights attaching to each and every class of security, in particular but not limited to shares in companies and unit holdings in trusts, including a copy of the shares and unit certificates, as well as the minutes detailing the issues. All financial statements to date including management accounts Further, it is our understanding that some changes may have been made to the ownership structure, effectively removing ownership of shares in the trustee companies from Ken Sayer (or related entities). We request that these shareholdings be reinstated immediately."

The letter requested the information be supplied no later than close of business on Friday, 8 February 2008, and threatened litigation if it was not provided.

The letter was clearly written on professional advice. Notwithstanding its peremptory tone, the two men continued to talk to each other and exchange emails about the basis for a possible buyout.

On 19 February 2008 Mr Tuite wrote to Mr Sayer: "Despite our client's many attempts, negotiations between our client and yourself with respect to the separation of your interests have not effected the proposed separation. Rather the parties have incurred substantial costs, which you confirmed in conference on 10 December 2007 have been funded by Global Mortgage Equity Corporation Pty Ltd ('GMEC'). Our client reserves it's [sic] rights in relation to the enforcement of the separation agreements. We are instructed and you admitted in conference that throughout separation negotiations you have continued to draw a salary from GMEC. As you are aware our client resigned as a director of GMEC in accordance with the 2003 Shareholders agreement. We further understand that GMEC's current financial problems which have culminated in your recent purported attempt to capital raise by issuing equity shares, are directly attributable to your management of the company in the role of Chief Executive Officer. Furthermore, we note your assertion that ('GMEC') has 'borrowed more than $3million from [your] companies' . You have not provided our client with any documentation substantiating these assertion [sic], despite our client's repeated requests for such information. We refer to our letter dated 15 November 2007 and Macquarie Bank's solicitors [sic] letters dated 17 December 2007 and 31 December 2007. The financial information requested has not been provided and accordingly our client has no appreciation of the financial status of GMEC. As a result, our client intends to resume his active involvement in the company, which would involve a reinstatement of his directorship on an equal salary to yourself. We note that in their letter dated 31 December 2007, Macquarie Bank noted that it required the restructure of the current management of GMEC and a further signatory to the accounts of the company. We therefore anticipate that Macquarie will support the appointment of our client as director. Our client recognises that GMEC may have serious financial problems and his appointment will be subject to various warranties on your part in relation to the solvency of the business. Our client as a shareholder reserves his rights in relation to your possible breaches of director's duties until such time as our client gains a full understanding of the financial position of GMEC. Your repeated failures to provide the relevant financial records sought by the shareholders is completely unsatisfactory.

On 19 February 2008 Mr Tuite wrote another letter to Mr Sayer inviting him: "... to finalise your intended purchase of our client's interests in the MHA group of companies and effect a total separation of interests within 5 business days of the date of this letter. Such separation must be effected on or before 1 March 2008."

In a third letter on 19 February 2008, Mr Tuite requested Mr Sayer to provide: "1. A copy of the funding agreement with Commonwealth Bank of Australia Limited ('CBA'); and 2. A copy of the loan agreement for $11million from CBA to Global Mortgage Equity Corporation Pty Ltd."

On 22 February 2008 Mr Sayer replied to Mr Tuite's three letters of 19 February. Concerning the first, he said: "Your client's request is declined" . Concerning the second he said: "It is our desire and intention to reach an amicable resolution without delay. We request that you respond to our correspondence dated 05/02/08." Concerning the third, he said "As a pre-condition to our reply, please act on our letter dated 05/02/08."

On 22 February 2008 Mr Tomanovic emailed Charles King, a GMEC executive, with a copy to Mr Sayer: "Being the 45% founding shareholder please prepare the relevant ASIC paperwork for my appointment as director starting next week. Please advise Ken Sayer's current total annual remuneration package including - drawings, commissions, salary, bonuses, superannuation, all fringe benefits - car, driver, etc including gst."

Mr Sayer's reply, sent two minutes after Mr Tomanovic's email, was: "Under no Circumstances ever Zoltan ads NO value"

A rapid exchange of emails between the two men ensued that day. Mr Tomanovic's first response was: "If and when you will own the business outright, as your private company, then you can exclusively decide who, what and when.... till [sic] that time and while I'm an equal 45% founding shareholder I will have my equal say who and how will be involved in management of the business and who ads value or not And I will not let you or your favourite former or current employees to be the exclusive decision makers who may mismanage the business (which is equally mine as well) even further, than it has been so far!!!!

Mr Sayer replied: "Our original agreement was exactly that ie I run the show Had you delivered on your false promise > we would not have had to borrow all that money You're so clever - your underhanded techniques don't work any more Let's talk about the 2.4 mil & Multiown shall we?

Various proposals and accusations went to and fro that day, but the exchange included Mr Tomanovic asking, "is the buy out proceeding" and receiving the answer "Yes" . Mr Tomanovic's question "do you want us to service clients" received the answer "Yes" . Mr Tomanovic's question "do you want us to sell your products" also received the answer "Yes".

Notwithstanding the angry tone of some of those exchanges, on Monday 25 February 2008 the men had an exchange of emails headed "Sorry about Sunday" , and continued to discuss the basis upon which the Sayer interests would buy out the Tomanovic interests. Those negotiations continued inconclusively until mid-March 2008.

On 17 March 2008 Mr Tuite wrote to Mr Sayer: "We refer to your letter addressed to our client dated 5 February 2008 and your letter dated 22 February 2008. We are instructed that our client will not consider your request until we have received the information sought in our letters dated 15 November 2007, 14 December 2007 and 19 February 2008 (copies enclosed). We note your expressed desire to 'reach an amicable resolution without delay' . Given a 'resolution' of the matter will involve a separation of interests in Multiown and Mortgage House, we consider that your request is inconsistent with your stated intention of attempting to speedily resolve the matter. Please advise, as a matter of urgency, when you propose to finalise the matter."

On 4 June 2008 Mr Tuite wrote to Mr Sayer: "We refer to our letters dated 15 November 2007, 23 November 2007, 27 November 2007, 14 December 2007 and other unanswered correspondence. To date, you have failed to co-operate with any of the requests made by our office, on behalf of our client, for audited accounts. Our client has proceeded with the utmost caution so as not to compromise the financial viability of the MHA Group. Our client has at all times reserved its rights against the MHA Group, GMEC and the directors of both companies. The payments of $5,000 per week under the original Heads of Agreement ('HOA') ceased in June 2006 without our clients [sic] consent and in breach of HOA. We note in conference at our office on 20 November 2007 you provided an undertaking to James Tuite and Zoltan Tomanovic that weekly payments would recommence in July 2008. We refer to your letter of 22 February 2008 and confirm your 'desire and intention to reach an amicable resolution without delay'. The balance owed to our client pursuant to the progressive payments under the HOA is $4,665,250. To compensate our client, a weekly payment of $12,942 (being the original $5,000 per week plus the interest at MHA Home Loan Plus rate from 15 October 2006 as per the HOA) is required. Review of the matter to date discloses breaches of your obligations as follows: 1. Failure to honour the original Heads of Agreement; 2. Failure to make weekly payments from June 2006 resulting in arrears of over $400,000; 3. Failure to pay interest from 15 October 2006 resulting in losses of over approximately $600,000; 4. Failure to honour the second Heads of Agreement; 5. Refusal to provide business related paperwork; 6. Refusal to reinstate our client as a director of the company; 7. Refusal to permit our client's return to the business to rebuild the branch network; and 8. Refusal to provide audited accounts for Mortgage House and the associated group. Our client considers that there are breaches of the June 2003 Shareholders Agreement and ASIC regulations and the company constitutions. We are instructed that there is evidence of abuse of company funds which has resulted in large and unnecessary losses and that company monies have been expensed to pay for your personal legal and accounting matters. Our client reserves its rights in relation to any and all breaches of any agreements and any and all breaches of the Corporations Act Cth (2001) . We are instructed to: (i) Demand the reinstatement of weekly payments of $12,942 commencing Tuesday, 1 July 2008; and (ii) Obtain your proposal concerning the repayment of the arrears referred to at points 2 and 3 herein. Please provide your response to (i) and (ii) above prior to 12:00pm on 13 June 2008 ."

Neil Sayer replied to Mr Tuite's letter on 15 July 2008. He denied paragraphs 1 and 2 and suggested that other parts were inaccurate. Concerning some specific allegations, he said: " Response to letter dated 4 Jun 2008 - Alleged Breach of Obligation 5 and 8 Any accounting information requested was provided. We have been available at any time to run through any accounting information that your client has required. Specifically your client has had the following dealings with Charles King CFO. Provided Zoltan with the audited GMEC accounts during the first weeks of November 2007 Met with Zoltan shortly after to provide explanation in relation to the accounts Emailed Zoltan the June 2008 Budgets on 29 November 2008 Met with Zoltan shortly after to discuss budgets Response to letter dated 4 Jun 2008 - Alleged Breach of Obligation 6 Your client is not eligible to be appointed as a director of the company. If further clarification is required, we will require a further 21 days to detail a response. Response to letter dated 4 Jun 2008 - Alleged Breach of Obligation 7 There is no obligation to permit your client's return to the business to rebuild the branch network. Whilst there is no obligation, there were two prohibiting factors to consider such a proposal: 1) Originally, your client insisted that the equity resolution was a prerequisite. 2) Your client has detailed his proposal in various meetings. The primary beneficiary of his proposal is the property division of Multiown. Your client's objectives conflict with the direction of GMEC and related companies and resulted in his services not being required. Having said this, we are happy to consider any proposal which: a) Is profitable for all parties and; b) Is 100% transparent and; c) Does not undermine the GMEC group's direction and; d) The group is renumerated fairly for it's [sic] input." He expressed a desire to "reach an amicable resolution without delay". The November 2008 General Meeting Called

On 23 October 2008 NOT Lawyers, for the Tomanovic interests, sent to One Australia and to Macquarie Bank, what purported to be a notice of a general company meeting of GMEC and its subsidiaries, set for 14 November 2008 at the NOT offices. The proposed resolutions were: "That the Company and the related entities: 1. Appoint Zoltan Tomanovic as a director of the Company and related entities immediately, and approve his appropriate remuneration at $75,000 per annum only; 2. To employ a third party independent person as chief executive officer to the Company and the related entities, and approve his/her total remuneration package up to a maximum of $250,000 per annum only. The new chief executive officer is to commence as soon as possible; 3. To remove Kenneth James Sayer as chief executive officer of the Company and the related entities, and to provide the immediate written notice of termination of three months, (notice period pursuant to Executive Service Agreement dated 2 July 2003), or earlier based upon the findings of the independent auditor (refer to clause 5 herein); 4. To approve total remuneration package of Kenneth James Sayer, as director of the Company and related entities, at $75,000 per annum only, upon his termination as chief executive officer; 5. To immediately appoint Steve Zabeti of Accru Chartered Accountants, Level 6, 1 Chifley Square, Sydney as independent auditor to: a. review the tax returns and all financial and management accounts of the Company and related entities for the last five years; b. report as to solvency of the Company and related entities; c. report on the actions of Kenneth James Sayer, in his capacity as the director, chief executive officer and shareholder of the Company and related entities for the last five years; d. review the total remuneration paid to Kenneth James Sayer, the director and chief executive officer of the Company and related entities for the last five years; e. report on all the monies and or loans, secured or unsecured; i . owed by the Company to its related entities, and or to other third parties; and ii. owed to the Company by its related entities, or by other third parties. f. provide recommendation for referral of actions of Kenneth James Sayer, the director of the Company and related entities, to the Australian Securities and Investments Commission, for review of possible breaches of directors duties and claims for compensation pursuant but not limited to section 1317J of the Corporations Act 2001; g. review possible breaches by Kenneth James Sayer under the Subscription and Participation Shareholders Agreement of the Company dated 2 July 2003; 6. For any shareholder to obtain immediate access, including photocopy access, to all Company and the related entities financial and accounting books and records, including MYOB inputs and bank statements; 7. To insert the following into clause 10.1, Period of Agreement, of Schedule 3 of the Participation Terms of the Subscription and Participation Agreement, dated 2 July 2003; '(d) any shareholder enters into binding agreements to buy out all shares owned by the remaining shareholders of the Company.' " The notice did not purport to call a meeting of Argyle HQ, and at no time was there an attempt to call any analogous meeting of Argyle HQ.

On 6 November 2008 Mr Sayer's solicitors wrote to NOT Lawyers, contending that there were various deficiencies in the notice of meeting, but that, notwithstanding those deficiencies, Mr Sayer and One Australia would attend. Macquarie Sells

Macquarie Bank had made an offer in January 2008, and again in May 2008, to both shareholders in GMEC to sell them its interest for $2 m. Neither offer was accepted.

On 8 August 2008 Dibbs sent to Mr Tomanovic care of Mr Tuite an amended offer, under which Macquarie offered to sell its 10% shareholding in GMEC for $750,000. The offer was said to be open until 22 August 2008. Completion of the sale was to occur on "1 September 2008, or such other date as MBL agrees in its absolute discretion." The letter indicated that a copy had been sent to Mr Tomanovic at an email address, and also to another email address. A similar letter was sent to Mr Sayer.

On 12 August 2008 Mr Sayer, on behalf of One Australia, elected to purchase 5% of the shares in GMEC from Macquarie, and in the event that AFSC did not purchase its 5%, One Australia offered to purchase the full 10%.

On 14 August 2008 Mr Tuite replied to Dibbs' letter of 8 August 2008: "Our client is currently overseas and expected to return in early September 2008. On his return we will seek instructions on your offer."

Dibbs replied to Mr Tuite on 15 August 2008: "As set out in the share sale offer to your client, the offer is open for acceptance until 22 August 2008. Your client has earlier provided to our client two email addresses at which he can be contacted for urgent matters while he is overseas. The share sale offer sent to your office was also sent to those email addresses on 8 August 2008. Receipt was confirmed by your client's daughter, as requested by your client. Our client requires your client's response by 22 August 2008, failing which it will be considered that he has not accepted the offer."

On 18 August 2008 Mr Tuite wrote to Dibbs: "We are instructed as follows: Our client will be travelling overseas and will not be in a position to respond timely to any possible offers or other communication from Macquarie. We are to seek an extension on any offers made in his absence. We are to obtain instructions from our client only and not his family members. On this basis we again seek an extension of the share offer, which is to expire on 22 August 2008 until 22 September 2008 to enable us to seek instructions from our client on his return from overseas."

Dibbs replied to Mr Tuite on 19 August 2008: "Your client is well aware of this matter, which has been in negotiation for almost 12 months. The terms of the offer are straight-forward and the offer was sent to your client in the manner he requested. Further, what MBL seeks is confirmation of your client's intentions, being whether to participate in the share sale or not. Given your client's awareness of this matter for a considerable time, MBL does not understand the basis upon which significant further delay is now sought to determine those intentions. To assist, MBL is prepared to accept a response from you on your client's behalf in respect of the 8 August 2008 acceptance letter. Further, MBL is prepared to extend, for a short period, the timeframe under which your client may complete the purchase. However, MBL is not prepared to further extend the 22 August 2008 timeframe for acceptance of the offer. In the event that we do not receive your client's response by 22 August 2008 MBL will consider that your client has not accepted the offer."

Argyle HQ already had a commercial bill acceptance facility on foot with St George Bank. On 7 November 2008 Mr Sayer, as an authorised officer of Argyle HQ, requested a drawdown of $754,500 on that facility. An amount of $750,000 was paid as the purchase price of the Macquarie shares, and $4,500 as stamp duty on the transfer of those shares. On 11 November 2008 Macquarie signed a share transfer form in favour of One Australia for its 10% shareholding. It also gave what was stated to be an irrevocable proxy to vote on its behalf concerning all its shareholding: "... at any General Meeting of the Company and at any adjournment of that meeting, including without limitation at the General Meeting of the members of the Company on 14 November 2008 and at any adjournment of that meeting, as the Proxy thinks fit."

On 12 November 2008 NOT Lawyers wrote to Dibbs, making various allegations against Mr Sayer, and contending "that Mr Sayer's reckless indifference to the (other) shareholders over the past 5 years has had an adverse impact on the shareholders' equity, the Companies' very existence and its future growth potential." The various alleged deficiencies of Mr Sayer's management were itemised. It ended by saying: "Finally, please note that if resolution 5(f) and (g) are passed at the 14 November 2008 Shareholders Meeting, depending the outcome of the independent auditor, and his recommendations of actions in respect of breaches of section 1317J of the Corporations Act and the Subscription and Participation Agreement of July 2003, we are instructed our client will recommend that the Company intends to press for compensation as a consequence of all the breaches of Mr Sayer."

On 13 November 2008 Mr Tomanovic emailed a Macquarie executive concerning the shareholders meeting. She replied that day: "Please note that Macquarie is no longer a shareholder in GMEC. A letter will be sent to your solicitors advising this. As such Macquarie is no longer required to be notified of any shareholders meetings, nor will Macquarie attend same." The November 2008 General Meeting

The meeting, that purported to be a meeting of GMEC and five of its wholly owned subsidiaries, was held on 14 November 2008. As the sole director of GMEC, Mr Sayer appointed himself chairman. The Macquarie Bank had provided a proxy in respect of its 10% shareholding in favour of keeping aligned with the Sayer interests. Mr Tomanovic objected to the Macquarie Bank proxy being recognised, on unspecified grounds. Mr Sayer, also on unspecified grounds, found it valid. Each resolution was put, and lost. The voting of each was by showing of hands. Each resolution was lost by a margin of 2:1, as the proxy appointed by Macquarie Bank was a different person to the person appointed as proxy for One Australia. There was no call for a poll. The topic of the Macquarie Bank proxy was returned to in general business. The minutes record: Zoltan questioned why MBL is able to vote. The Chairman asked Zoltan to put the question in writing, and he would undertake to respond within a reasonable period of time. Zoltan asked the Chairman whether he was declining to answer the question. The Chairman responded that if Zoltan were to put the question in writing to him he would undertake to respond within a reasonable period of time. However, reiterated that the proxies have been reviewed and considered valid by the chair."

In cross-examination Mr Sayer accepted that the proxy from Macquarie Bank was under his control. The Lead-Up to the Litigation

On 18 November 2008 NOT Lawyers wrote to Dibbs, contending that Macquarie had not complied with the SPA: "We are instructed that there has been a number of offers to sell shares put forward by your client, the latest had a settlement date of 1 September 2009. Neither Founding Shareholder (one being our client) settled the offer at that time. We are instructed that our client has not since received any other offers from your client for his consideration."

Dibbs replied on 20 November 2008, pointing out that the completion dated had been 1 September 2008 "or such other date as MBL agrees in its absolute discretion" .

On 3 December 2008 NOT Lawyers wrote to the Sayer lawyers, requesting a variety of corporate documents of GMEC.

Before that letter had been replied to, Mr Sayer served on Mr Tomanovic a Notice of Demand dated 12 December 2008, requiring payment of the $1,341,750.00. On 18 December 2008 the Sayer solicitors replied to NOT's letter of 3 December 2008, saying, "our client wants to co-operate and we have done our best to interpret your request." It identified various relevant provisions of the constitutions of the companies in question, and of the Corporations Act 2001 (Cth) . The only companies in which Mr Tomanovic or AFSC was a shareholder were GMEC and three companies (one of which was Argyle HQ) on the non-finance side of the business. The letter stated that there was thus no right to inspect documents of subsidiaries of GMEC. It said that Mr Sayer was the sole director of GMEC and the companies on the non-finance side, and as such had the right under the constitutions of those companies to determine to what extent records of the company should be open to inspection by members who were not directors, or to non-members. He expressed a concern about allowing access to some of the documents requested: "16. Documents that your client is requesting access to, or copies of, contain commercially sensitive information and may also contain information for which there are privacy concerns under the Privacy Act . 17 Your client runs the Multiown businesses and part of the operations of the Multiown businesses are in competition with the business of some of the companies in the Finance Group and the Non-Finance Group. 18 Our client is concerned that your client may use commercially sensitive information obtained to the detriment of the businesses of some of the companies in the Finance Group and the Non-Finance Group. For example, our client has reason to believe that Mr Tomanovic is contacting business partners of the Finance Group, to try and get those business partners to deal with Multiown businesses as well and thereby reduce the amount of business flowing from those business partners to the Finance Group."

It offered the following access to documents: "(a) Mr Tomanovic to have access to and copy the following documents ('Access'): (i) copies of the constitutions of each company in the Finance Group and the Non-Finance Group, as requested in point 1 of Your Letter. (ii) the audited financial statements of the companies in the Finance Group (a copy of the audited financial statements for the year ended 30 June 2008 will be provided when finalised) and copies of the unaudited financial statements of the companies in the Non-Finance Group; (iii) bank account details, tax returns and annual returns for companies in the Finance Group and the Non-Finance Group; (iv) any documents held by our client referred to in paragraph 5 of Your Letter - we are instructed that our client only has a couple of documents in this category and believes that MBL would hold any other documents in this category; and (v) the documents referred to in bullet points 1, 2 and 3 of point 6 of Your Letter, subject to obtaining any consent that may be required from MBL; (b) Access is to be subject to the following conditions: (i) Access is to be given only to Mr Tomanovic and AFSC; (ii) Mr Tomanovic and AFSC undertaking to: A keep confidential, at all times, all information obtained pursuant to Access; B only provide information obtained pursuant to Access to their legal advisors; and C ensure that their legal advisors keep confidential, at all times, all information obtained pursuant to Access; and (iii) Mr Tomanovic, as a former director, acknowledges that the provisions of Section 183(1) of the Act will apply to him in relation to all information obtained pursuant to Access."

The Tomanovic interests began the Equity Proceedings on 18 December 2008.

In the course of Mr Sayer's cross-examination on 9 February 2010, the second-last day of the hearing, he gave the following evidence: "Q. ...Can I take it you do not wish Mr Tomanovic to be reinstated as a director of GMEC at this point in time? A. I am more than happy for Zoltan to be reinstated. Q. You are more than happy for him to be reinstated? A. I think both Zoltan and I are very aware of directors' responsibilities. If Zoltan wanted to return as a director, he may do so. Q. That is not something you are just saying for the purpose of these proceedings? A. I don't have to. I just tell you the way it is."

So far as the evidence disclosed, that was the first time he had indicated his preparedness to have Mr Tomanovic reinstated as a director of GMEC since the refusal to reinstate him at the general meeting in November 2008. There was no offer at that time to reinstate him as a director of the companies in the non-finance group. There was no attempt at the trial to make clear whether the expressed willingness to reinstate Mr Tomanovic extended to any company beyond GMEC. There was no attempt to put the offer to reinstate in any more formal way, such as by proffering an undertaking to the court.

On the second and final day of the hearing of the appeal, counsel for the Sayer interests proffered to the court, over the objection of counsel for the Appellants that it amounted to giving fresh evidence without leave to do so, an undertaking in the following terms: "Mr Ken Sayer and One Australia Pty Ltd, through their counsel, undertake to the Court that (if requested by Mr Tomanovic in writing) they will cause or permit: 1. The appointment of Mr Tomanovic (or his nominee) to the board of Global Mortgage Equity Corporation Pty Ltd ('GMEC'), subject to Mr Tomanovic providing a written undertaking that in the first Directors meeting of GMEC which he attends, he will vote in favour of a resolution to appoint Mr Sayer as Chairman for the period expiring when Mr Sayer notifies GMEC in writing of his intention to resign as Chairman; 2. The appointment to the board of Argyle HQ Pty Ltd (formerly known as Mortgage House Corporation Pty Ltd) ('Argyle HQ'), subject to: a. Australian Financial Services Corporation Pty Ltd first voting in favour of a resolution to amend the constitution, by which the present clause 68(2) is deleted, and the following clause is substituted for that clause: "In the case of an equality of votes, the chairman of the meeting, has a casting vote in addition to any vote he may have in his capacity as Director" b. Mr Tomanovic providing a written undertaking that at the first Directors meeting of Argyle HQ which he attends, he will vote in favour of a resolution to appoint Mr Sayer as Chairman for the period expiring when Mr Sayer notifies GMEC in writing of his intention to resign as Chairman; c. Mr Tomanovic being willing and able to provide any guarantee which is required of directors of GMEC and Argyle HQ, by any bank or financial institution which provides finance facilities to the companies." ( white folder - bright green post it )

Sections 232 and 233 Corporations Act appear in Part 2F.1 of that Act. Section 233 Corporations Act empowers the Court to "make any order under this section that it considers appropriate in relation to" a company, including (relevantly) that it be wound up or for the purchase of any shares by any member. Section 232 Corporations Act sets out the circumstances in which such an order can be made as (relevantly) if: "(a) the conduct of a company's affairs; or (b) an actual or proposed act or omission by or on behalf of a company; or (c) a resolution, or a proposed resolution, of members or a class of members of a company; is either: (d) ... or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company."

Section 53 Corporations Act provides that for the purpose of (amongst other sections) sections 232 and 233 the affairs of a body corporate include: "(a) the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with any other person or persons and including transactions and dealings as ... trustee), property (... including property held as ... trustee), liabilities (including ... liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the body; and (b) in the case of a body corporate (not being an authorised trustee corporation) that is a trustee (but without limiting the generality of paragraph (a))-matters concerned with the ascertainment of the identity of the persons who are beneficiaries under the trust, their rights under the trust and any payments that they have received, or are entitled to receive, under the terms of the trust; and (c) the internal management and proceedings of the body; and ... (e) the ownership of shares in ... the body; and (f) the power of persons to exercise, or to control the exercise of, the rights to vote attached to shares in the body ...; and ... (h) the circumstances under which a person acquired or disposed of, or became entitled to acquire or dispose of, shares in ... the body; ..."

There is no dispute that the Tomanovic interests, who were plaintiffs in the Equity Proceedings in the court below, had standing to apply for such an order concerning each of the companies to which the Equity Proceedings relate.

It is possible for section 232(e) to be satisfied by any conduct that falls within that statutory description. The history of the development of the section is summarised by Young CJ in Eq (as his Honour then was), in Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 at [321]-[346]. That history of development from eg section 186 Companies Act 1961 (which was triggered only if "the affairs of the company are being conducted in a manner oppressive to one or more of the members" ) shows an evident intention to confer on the court a wider jurisdiction than to relieve against conduct which is oppressive, simpliciter. It is, however, convenient to have a shorthand way of referring to any conduct that falls within para (e). I shall use "Oppressive" or "Oppression" to refer to such conduct.

Another basis upon which the Court has power to order the winding up of a company is that established by section 461(1)(k) Corporations Act , namely that: "...the court is of opinion that it is just and equitable that the company be wound up."

In the court below, the primary judge set out at [39]-[53] some principles by reference to which the court decides whether to grant a remedy under either section 233, or 461(1)(k). Neither party questions, on this appeal, any part of that statement of principle. In those circumstances it is unnecessary to set it out in full in this judgment. It is common ground that the three phrases, "oppressive, unfairly prejudicial, or unfairly discriminatory" are construed as "a composite whole and the individual elements mentioned in the section should be considered merely as different aspects of the essential criterion, namely commercial unfairness" : Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 704 per Young J (as his Honour then was).

Early in his judgment, at [9], the judge said that he agreed with the overview submission of the Sayer interests that: "(a) the Heads of Agreement upon which the proposed separation of interests was based were never legally binding, whether by contract[,] estoppel or otherwise, and the proposal was subject to legal and accountancy advice; (b) the Sayer Interests generally acted in good faith in relation to the negotiations of the Heads of Agreement; (c) there is no basis for the invocation of the oppression remedy to impose on the Sayer Interests a compulsory buy-out, by reason only of the failure to consummate the separation of interests; (d) there is no basis for a finding of oppression in relation to the other miscellaneous allegations that were pressed at the trial; ..."

In the court below both parties made submissions by grouping the Oppression claim into four categories, that the judge described as: "(a) failure of the Sayer interests to complete the separation of interests envisaged by the First Heads of Agreement (as amended by the Second Heads of Agreement) and the buy-out of the Tomanovic interests by the Sayer interests while excluding Mr Tomanovic from management; (b) diversion of money and assets of GMEC for the benefit of the Sayer interests; (c) reduction in equity in Argyle HQ assets for the benefit of the Sayer interests, without the consent of Mr Tomanovic, and unauthorised assumption [of] voting control of Argyle HQ; (d) oppressive conduct generally, including failure to make books and records available, failure to provide information, failure to maintain books and records, failure to convene annual general meetings, failure to pay dividends to AFSC since December 2004, failure to reinstate Mr Tomanovic as a director, attempts to dilute the shareholdings of the Tomanovic interests, and a complete breakdown in the relationship between Mr Sayer and Mr Tomanovic." The judge followed that structure in his own judgment.

I shall recount the judge's reasons only to the extent that they bear upon the grounds of appeal. In recounting the reasons, I shall use (as did the judge) headings related to the four categories of oppression by reference to which the submissions were made.

The structure and emphasis of the judgment below was strongly influenced by the way the Tomanovic interests put their case. At the forefront, they put the claim that one or other of the Heads of Agreement was legally binding. The judge first dealt with the various actions that had been performed, on both sides, in anticipation of the buyout occurring, in the context of considering a submission that those actions resulted in the Sayer interests being estopped from denying that one or other of the Heads of Agreement was binding. Concerning the significance of Mr Tomanovic resigning in January 2005 as a director of the various companies in the non-finance companies, the judge rejected, at [131], the submission that the resignation was in reliance on the First Heads of Agreement (an impossible submission, when the First Heads of Agreement were not entered until March 2005). The judge also there found that Mr Tomanovic could not have believed the Kirribilli Agreement was legally binding, and "... the resignation was not a material source of detriment, in that it did not have any practical effect on the operations of the Mortgage House group (or Mr Tomanovic's role within it). It is common ground that prior to these resignations in January 2005, Mr Tomanovic had already resigned his directorships in the finance companies in June 2003, there were no directors' meetings, Mr Sayer had the final say, and it was not Mr Sayer's practice to advise Mr Tomanovic in advance of proposed courses of action."

It was also in the context of that estoppel allegation that the judge considered the significance of Mr Tomanovic not receiving his salary of $3,602.50 per week after mid-December 2004 (at [139]): "(i) the discontinuance of salary did not relevantly constitute an act of reliance by Mr Tomanovic: rather, it was a decision taken by Mr Sayer; (ii) the discontinuance preceded the execution of the First Heads of Agreement, and logically could not be consequential upon any mutual assumption that the First Heads of Agreement (entered into in late March 2005) was contractually binding; Mr Tomanovic conceded ... that he "played no active part in the finance group business since December 2004", and so the discontinuance of salary is consistent with the discontinuance of the provision of any service by Mr Tomanovic to the business. Moreover, it is common ground that Mr Tomanovic thereafter dedicated his efforts to the Multi-own business, and there is no obvious basis for the inference that he suffered financial detriment by dedicating his time to Multi-own."

After finding that no estoppel had been established, the judge then dealt with a submission that there was oppression in the Sayer interests not buying the Tomanovic interests out even if the Heads of Agreement were neither contractually binding, nor binding through an estoppel. The judge dealt with that argument in two stages. The first stage involved concluding (at [143]): "(a) the statutory grounds for intervention under Part 2F.1 generally concern some element of unfairness in the conduct complained of; (b) if the Sayer Interests were neither contractually bound to acquire Mr Tomanovic's interests, nor estopped from denying they were so bound, there can be no basis for the Court to find any unfairness arising out of the failure to consummate the separation of interests. As counsel for the Sayer interests submitted, the Sayer interests are free to walk away from negotiations, or modify their position, at any time; and Mr Tomanovic may be bitterly disappointed that his ambitions for a sale were not realised, but such frustration does not equate with oppression. It is well established that the oppression remedy is not simply a 'free ticket' for a forced sale of an interest."

The second stage involved the judge saying (at [144]): "To the extent that counsel for the Tomanovic interests might have had in mind the defeating of 'legitimate expectations', I agree with counsel for the Sayer interests that: (a) there is no basis for the finding that there was a 'legitimate expectation' at the time of the formation of their business arrangement in 1999, or the incorporation of GMEC that Sayer would buy-out Mr Tomanovic from the Mortgage House group (let alone buy him out on particular terms); and (b) there is no basis for the Court to make any finding to the effect that the mere fact of protracted negotiations generated a 'legitimate expectation' that the Sayer Interests would buy-out Mr Tomanovic on the particular terms of the Heads of Agreement (indeed, such a finding would be inconsistent with the findings that the Heads of Agreement were not legally binding)."

At the hearing below the Appellants relied on four types of alleged wrongful diversions of money and assets from GMEC as the basis of the second category of oppression. For the appeal they rely on only one. It (ground 13) relates to cash taken from the MHA business by Mr Sayer. The judge recorded, at [173], that there was no dispute that: "(a) In the ordinary course of its business, the MHA Finance Business received cash from time to time, relating to application fees for home loans; (b) There was a practice by which Ms Dye (on instructions from Mr Sayer) provided such cash to him; (c) There was no accounting by the MHA Finance Business for the cash paid to Mr Sayer in that manner."

Ms Dye gave evidence, evidently accepted by the judge at [174], that she was involved in the accounting of the business in the period before July 2003, when GMEC became the holding company. Mr Derek Angel came to be in charge of accounts "in or around 2004" , and Mr Charles King was CFO from December 2006 to December 2007. There is no evidence of cash being received by the company and passed to Mr Sayer during the time Mr Angel and Mr King occupied their respective offices.

There was a dispute about the amount of cash that was involved. Mr Sayer said that the amount of cash was of the order of $1,800 to $3,600 per annum. Ms Dye's evidence was that significantly more cash was involved, of the order of $10,000 to $18,000 per month.

The judge noted that Ms Dye gave evidence that she did not think there was anything unusual at the time about Mr Sayer's receipt of cash, and noted that that gave rise to a suggestion that her present recollection may be faulty. He also noted that Ms Dye gave evidence in cross-examination that, at least on some occasions when cash came in, Mr Sayer would ask her to bank it. The judge concluded that, "her evidence is consistent with Sayer's assertion that he only received $1,800 to $3,600 per annum " (at [177]).

There was also a conflict of evidence on whether Mr Sayer split the cash with Mr Tomanovic. Mr Sayer asserted he did, while Mr Tomanovic asserted he did not. The judge's conclusion on this matter (at [179]) was that the: "... state of the evidence does not permit me to resolve the question whether the money was shared with Mr Tomanovic. Plainly there was a practice of Mr Sayer taking cash deposits during a period up to some time in 2004, but it has not been established to my satisfaction that the amounts involved were large. The Sayer interests submitted that the practice of receiving and sharing cash payments without making appropriate accounting entries is irregular and improper. But [ at ] the question before me is not whether Mr Sayer has contravened the law, but rather whether he has caused the relevant companies to act unfairly or oppressively. Given the evidence [I have] accepted as to the state of accounts between Mr Sayer and [the] companies, indicating the extent to which he has funded them over the years, I would not regard the siphoning of relatively small amounts of cash as establishing an oppressive or unfairly prejudicial course of conduct [ is ] sufficient of itself to ground remedial orders." The square brackets indicate amendments I have made to the text of the judgment as published, to correct an evident lack of proofreading and insert what I take to be the intended sense of the judge's decision. The judgment was delivered on the last day of the judge's term of office. The judgment as handed down, and as contained in the appeal books, contained numerous proofreading errors, some of which have now been corrected in the version of the judgment now to be found in Caselaw. Some of those corrections are recognised in the list of amendments at the end of the Caselaw version of the judgment, some are not. I am in some doubt about whether the date "2004" in the second sentence I have quoted from [179] is another proofreading error, as the evidence that the judge accepted seems to lead to a conclusion that there was a practice of Mr Sayer taking cash deposits during a period up to some time in 2003. However, that doubt does not need to be resolved to dispose of the appeal.

I take it that the reference to evidence as to the state of accounts as between Mr Sayer and the companies is a reference back to [16], where the judge said: "From 1999 the finance arm of the business has pursued a strategy of rapid growth, which has involved both the reinvestment of profits and the need to raise substantial additional capital and finance. According to Mr Sayer's evidence, the Sayer interests have born the overwhelming financial burden of supporting the operations and growth of the finance business (and see Mr Tomanovic in cross-examination at T 214). From 1999 the Sayer interests have advanced very substantial sums to the business and the Tomanovic interests have not made corresponding contributions. Mr Sayer asserts that the net level of funding provided by the Sayer interests was $3,035,764 in 2003, and as at 30 June 2009 the Sayer interests were owed over $4 million. That is generally supported by Mr Gunderson-Briggs' affidavit, at [43], and the audited GMEC accounts at 30 June 2008 .... Mr Sayer says that in addition to bearing the burden of direct funding, the Sayer interests have provided numerous guarantees to support financing and business operations, in circumstances where no corresponding guarantees were provided by the Tomanovic interests ..."

The reference to Mr Tomanovic in cross-examination at T 214 is to a passage that includes: "Q You agree, don't you, that relative to you, you knew that Mr Sayer had invested more money into the company than you, or lent more money? A. Never been quantified, but I would say that was the understanding, yeah."

The particulars of oppression concerning Argyle HQ that the Tomanovic interests gave include the following: "A. In September/October 2007 mortgages over properties 9 and 15 Argyle Street (registered proprietor Argyle HQ as trustee of 9 Argyle Street Unit Trust, Sayer = sole director) with St George Bank are increased by $900,000.00 without Tomanovic's consent (Tomanovic, VT and AFSC = guarantors): (i) Tomanovic is requested to consent to increase and to sign documentation but refuses; (ii) increase proceeds anyway without Tomanovic's consent; (iii) $900,000.00 is advanced by St George Bank to Argyle HQ, then transferred to MHA; (iv) ultimately bulk of funds ($750,000.00) are used one year later in November 2008 to fund acquisition by One Australia of MBL's 10% shareholding in GMEC without Tomanovic's knowledge (also is breach of clause 3(g)(c)(ii) FHA)."

The Sayer interests did not contest any of those facts. They contended that in the evaluation of the facts additional matters should be taken into account. The judge set those out seriatim at [184]: "(a) the Argyle Street Trust owned the Mortgage House business premises; (b) the 9 Argyle Street Trust procured a facility from St George Bank on 28 August 2003 for $4.9 million; (c) in October 2007, there was an extension of the facility to $5,749,000 (ie, an increase of $849,000); (d) at around the time of the increase in the facility, MHA had a critical shortage of working capital; (e) Mr Sayer first negotiated draft terms for an extension of the St George facility, on the basis that each of Mr Tomanovic and Mr Sayer would be co-guarantors; (f) Mr Sayer sought the agreement of Mr Tomanovic to the extension of the facility, explaining the criticality of obtaining additional funding; (g) in the course of cross-examination, Mr Tomanovic candidly acknowledged the business' need for cash, and the need to increase the facility (T242.41). Indeed, his recollection was that when Mr Tomanovic inquired of the CFO (Mr King) whether the increase in the facility was needed, King stated: "MHA needs money to pay many bills and to avoid trading while insolvent" (although King denies saying that). Notwithstanding the needs of the business, Mr Tomanovic refused to provide his consent to the extension, otherwise than on terms that Sayer cause all (or some) of the funds to payments to Mr Tomanovic; (h) Mr Sayer proceeded to secure the increase in the facility, without securing a guarantee from Mr Tomanovic for the increase; (i) The additional $900,000 funding was applied almost immediately to the MHA Business during the first months of the calendar year 2008, according to the evidence of the CFO, Mr King, and thereafter, the extension of the facility was used as an overdraft, and the balance fluctuated from time to time; (j) At the time the increase was obtained, Mr Sayer had no intention of using the facility to fund his purchase of MBL shares; (k) On 10 November 2008, a drawdown was made on the facility in the amount of $754,000 to fund the acquisition by One Australia of MBL's 10% shareholding in GMEC. The transaction was recorded as an advance to One Australia."

At [185] the judge reproduced verbatim submissions of the Sayer interests as to why the obtaining of the facility from St George was not oppression: "(a) the increase in the facility was sought and procured for legitimate business purposes, entirely unrelated to the proposed purchase by One Australia of MBL's share of [GMEC]; (b) far from evidencing any oppressive preference for his own interests over the minority shareholders, the circumstances surrounding the procurement of the extension to the facility constitute a further example of Mr Sayer assuming disproportionate financial burden with respect to the operations of the MHA Finance Business. He alone incurred personal exposure in relation to the guarantee of the facility, in circumstances where the procurement of the extension was necessary for the conduct of the business; (c) it was not improper for Mr Sayer to proceed without the consent of Mr Tomanovic, in circumstances where Mr Tomanovic was not a director, the extension of the facility was necessary for the business, and Mr Tomanovic was opposing the extension only for the purpose of pressuring Sayer to cause payments to be made personally to Mr Tomanovic (and apparently without regard to the interests of the business)."

The judge's decision concerning this aspect of the case was, at [186], "I agree with this reasoning" .

At [187] the judge reproduced, with deletion only of reference to the location of evidence, the submission of the Sayer interests: "As to the drawdown of $754,000 to make an advance to Ken Sayer Investments Pty Limited ATF Sayer Family Trust, which in turn on lent that money to One Australia: (a) at the time of the advance, Argyle HQ Pty Ltd (ATF 9 Argyle Street) was itself indebted to One Australia in the amount of $465,990.30; (b) at the time of the advance, the Sayer interests were very substantial net lenders to the MH Finance Business generally: as at 30 June 2008 the audited GMEC group accounts record the GMEC group as having a liability to Mr Sayer for $3,040,000.00 in respect of employment services; (c) as at 30 June 2008 Argyle HQ owed MHA $7,543,458 and GMEC $1,856,346, being a total amount of $9,399,804 owing from Argyle HQ to the GMEC Group; (d) as at 30 June 2008 the 9 Argyle Street Trust owed Argyle HQ $9,035,866; (e) in other words, to the extent that the loan from the 9 Argyle Street Trust to the Sayer Family Trust exceeded the loan from One Australia to the 9 Argyle Street Trust, that should be seen in the context of the 9 Argyle Street Trust owing $9,035,866 to Argyle HQ which in turn owed the GMEC group $9,399,804 which in turn had a liability to Sayer of $3,040,000.00; (f) the evidence clearly discloses that the companies in the MH group substantially conducted business as a single commercial entity; (g) in all the circumstances, the advance by Argyle HQ Pty Ltd of the sum of $754,000 was not unfair or oppressive."

The judge's decision, at [188], was: "Once again, I agree with this reasoning, given the nature of this corporate group."

The judgment below from [216] to [226] is under the heading: "E Failure to reinstate Tomanovic as director of GMEC and finance group companies after exit of MBL in November 2008 - now no supervision of Sayer"

That heading is taken directly from the Appellants' opening submissions below, as one of the items of "oppressive conduct generally" . It relates only to failure to reinstate Mr Tomanovic in the finance group companies in and after November 2008. So far as Mr Tomanovic's resignation from both the finance and the non-finance companies was relied on as a ground of oppression below, it had been as part of the first oppression ground. This ground concerned failure to complete the buyout, notwithstanding the fact that some steps were taken towards completing it.

Concerning this topic, submissions and findings were made below by reference to the "legitimate expectations" of corporate shareholders. After referring to Mr Tomanovic's resignation of his directorships in GMEC and the finance group companies in around June 2003, and his not being reinstated after Macquarie had sold its stake in GMEC, the judge recorded at length ([217]-[225]) submissions made to him by the Sayer interests: "[217] The Sayer interests submit that failure to reinstate Mr Tomanovic is not oppressive, because Tomanovic has no legitimate expectation of reinstatement, for the reasons set out below. [218] Even at the inception of the business arrangement in around 1999, Mr Tomanovic had no legitimate expectation of an equal management role. Rather, it is common ground that the arrangement between Mr Tomanovic and Mr Sayer was that Mr Sayer would have the 'final say', as noted earlier. [219] Even if Mr Tomanovic had a legitimate expectation of being a director in around 1999, such an expectation would not be immutable. The non-fulfilment of expectations is not oppressive, if there are good reasons for their extinguishment. There are numerous good reasons for the extinguishment of any 'expectation' Mr Tomanovic may once have had to be a director. [220] First, as a matter of fact, Mr Tomanovic never played a significant management role in the MHA Finance Business. There is some dispute about the extent of Mr Tomanovic's role, but he does not dispute that the arrangement was that Mr Sayer had the 'final say'; that Mr Sayer was 'responsible for managing the key elements of the MHA Finance Business'; and that 'it was not [Mr Sayer's] general practice to seek the agreement of Mr Tomanovic (or advise him in advance) of proposals for future action in relation to the MHA Finance Business'. Senior employees affirm the absence of a significant management role of Mr Tomanovic: Derek Angel, the general manager, states in his first affidavit (at [44]) that as far as he was aware 'Tomanovic was not involved in the management of the MHA Finance Business'. Charles King, the CFO who was employed from the end of 2006, stated in his first affidavit (at [18]) he never took instructions from Mr Tomanovic, or observed him giving instructions to others. It is common ground that there was a practice of regular informal discussions between Mr Sayer and Mr Tomanovic in relation to the MHA business, and no formal directors' meetings. In circumstances where Mr Tomanovic acquiesced in the conduct of operations in which he had no significant management role, there is no basis for a continuing expectation of a directorship role. Any expectations with respect to involvement in the companies can be reasonably satisfied without directorship. [221] Second, Mr Tomanovic voluntarily resigned his directorships. There is no basis for the finding that the resignation was procured by unfair conduct by Sayer. The background to the resignation was that Macquarie Bank had expressed a preference for a management structure which excluded Mr Tomanovic from the board (according to affidavit evidence given by Mr Sayer and Mr Gunderson-Briggs). Mr Sayer did not consider that MHA was in any position to negotiate in relation to that preference. Mr Tomanovic contends that he resigned at Mr Sayer's request. Mr Sayer says he has no recollection of that request being made. However, he says, any such request was a necessary consequence of the position expressed by Macquarie Bank, for which Mr Sayer can not be blamed and in which Mr Tomanovic acquiesced. The fact that Mr Tomanovic voluntarily resigned extinguished any residual legitimate expectation to be appointed director. [222] Third, following the acquisition by Mr Sayer of the Macquarie Bank stake in GMEC, Mr Tomanovic no longer had an equal interest in GMEC to Mr Sayer, which further militates against a legitimate expectation of appointment to the Board. Mr Tomanovic cannot reasonably contend that the mere fact that Mr Sayer acquired Macquarie Bank's interest is itself a cause for complaint about the frustration of his legitimate expectations. Whatever was the relationship of the parties when they commenced their 'partnership' in 1999, the relationship ended and was replaced with a new shareholder relationship when the SPA was entered into and Macquarie Bank acquired an interest in GMEC. There was no partnership involving Macquarie Bank. The SPA expressly provided for the disposal of shareholdings, and created the obvious possibility that Macquarie Bank might subsequently dispose of its interests (in which case one or other or both of Mr Sayer and Mr Tomanovic would be reasonably foreseeable purchasers). It cannot reasonably be contended, in the submission of the Sayer interests, that the realisation of that clearly foreseeable consequence could be characterised as a frustration of Mr Tomanovic's 'legitimate expectations'. Further, Mr Tomanovic was given the opportunity to acquire Macquarie Bank's shareholding in GMEC, but declined the opportunity, according to Mr Sayer's evidence. [223] Fourth, since his resignation of directorships, Mr Tomanovic had caused Multi-own to establish a relationship with a company called Reismac for the provision to multi-owned entities of wholesale funding, for the purpose of providing finance to retail customers: T194.44. This is a business competitive with the MHA Retail Business. In those circumstances, there was scope for a conflict of interests if he were appointed a director. [224] Fifth, even if there were a frustration of a legitimate expectation of management (which the Sayer Interests deny), that does not ground a finding of oppression on these facts. The authorities make clear that it is not the mere exclusion from management which supports a finding of oppression; rather, it is the exclusion of [sic] management combined with the failure to make a reasonable offer to 'buy-out' the minority interest. On these facts there were two concrete and unimpeachably reasonable offers to effect a buy-out as envisaged by the Second Heads of Agreement. Those offers eliminate exclusion from management as a ground for oppression. [225] Notwithstanding those matters, Mr Sayer gave sworn evidence that he is now willing consent to the appointment of Mr Tomanovic as a director."

Every one of paras [218]-[225] of the judgment is, apart from removal of references to evidence and the occasional minor stylistic change, a verbatim reproduction of written submissions made by the Sayer interests.

The judge's decision concerning those submissions was (at [226]): "This is a matter of some difficulty but in my view the basic components of the contentions of the Sayer interests are persuasive, assuming the factual basis for their contentions is correct. The proposition that Mr Tomanovic voluntarily left the board because of the attitude of Macquarie Bank is supported by the evidence of Mr Gunderson-Briggs, whom I regarded as an impressive witness. I am also influenced by the evidence at the trial concerning the management operations of the Group when both men were directors, the fact that the shareholding balance changed when Macquarie Bank sold out, and the fact that Mr Tomanovic is engaged in other ventures, particularly Multi-own. My conclusion is that no Part 2F.1 ground has been shown."

At the outset, I should explain the term "legitimate expectation" . In O'Neill v Phillips [1999] 1 WLR 1092 Lord Hoffmann considered the application of the then English section that was broadly analogous to sections 232 and 233. The English section was not identical - it did not use the criterion of "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" , but rather a single criterion of "unfairly prejudicial to" . Earlier, in Re Posgate & Denby (Agencies) Ltd [1987] BCLC 8 as a first instance judge, then in Re Saul D Harrison & Sons Plc [1995] 1 BCLC 14 at 19 in the Court of Appeal, his Lordship had used the term "legitimate expectation" in connection with the oppression remedy. In O'Neill v Phillips at 1102 his Lordship said he had used "legitimate expectation" : "... as a label for the 'correlative right' to which a relationship between company members may give rise in a case when, on equitable principles, it would be regarded as unfair for a majority to exercise a power conferred upon them by the articles to the prejudice of another member. I gave as an example the standard case in which shareholders have entered into association upon the understanding that each of them who has ventured his capital will also participate in the management of the company. In such a case it will usually be considered unjust, inequitable or unfair for a majority to use their voting power to exclude a member from participation in the management without giving him the opportunity to remove his capital upon reasonable terms. The aggrieved member could be said to have had a 'legitimate expectation' that he would be able to participate in the management or withdraw from the company. It was probably a mistake to use this term, as it usually is when one introduces a new label to describe a concept which is already sufficiently defined in other terms. In saying that it was 'correlative' to the equitable restraint, I meant that it could exist only when equitable principles of the kind I have been describing would make it unfair for a party to exercise rights under the articles. It is a consequence, not a cause, of the equitable restraint. The concept of a legitimate expectation should not be allowed to lead a life of its own, capable of giving rise to equitable restraints in circumstances to which the traditional equitable principles have no application."

Earlier, in O'Neill at 1101, his Lordship had agreed with the statement of Jonathan Parker J in Re Astec (BSR) Plc [1998] 2 BCLC 556 at 588 that: "... in order to give rise to an equitable constraint based on 'legitimate expectation' what is required is a personal relationship or personal dealings of some kind between the party seeking to exercise the legal right and the party seeking to restrain such exercise, such as will affect the conscience of the former."

In Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 this Court considered the role of "legitimate expectation" in the application of the statutory oppression remedy. Spigelman CJ said, at [62]: "I note that Lord Hoffmann, who originally introduced the terminology of 'legitimate expectation' into this area of discourse, has accepted that it is not appropriate: see Re a Company (No 00709 of 1992) ; O'Neill v Phillips , above, at 1102. The introduction of a word such as 'legitima te ' before a noun referring to an act or condition, is more a mode of expressing a conclusion than an independent criterion."

Fitzgerald JA at [649]-[650] said: "The concept of 'legitimate expectation' seems to me unhelpful in this context. It tends to distract attention from the central issue, which (oversimplified) is whether or not oppression is established. Circumstances can make it oppressive for one party to use his or her legal power to the disadvantage of another. ... One of the disadvantages of the use of 'legitimate expectation' in this context is that it can lead, as it did in this case, to a debate concerning whether, and if so why, any legitimate expectation which had existed had come to an end. The issue seems to me always to remain whether, in all the circumstances including the conventional understanding on which the parties' relationship was based, conduct engaged in was oppressive. That requires consideration of all circumstances, including the material conduct of all parties, including the party alleging oppression."

Priestley JA at [421] was only a little more forgiving: "It is a convenient shorthand term, so long as Lord Hoffmann's caveat about its proper significance is kept in mind, namely that it is a consequence not a cause of equitable restraint upon legal rights. It seems to me to be a useful label for describing the result of the way in which equitable considerations operate. It is difficult to find a short counterpart for it. I will therefore use it, as counsel did, in the sense defined by Lord Hoffmann."

Some of the submissions of the parties below and on appeal, some of the grounds of appeal, and some of the findings of the judge, were cast in the language of "legitimate expectations" . That requires me to continue to use that language in this judgment. For the reasons given by Spigelman CJ and Fitzgerald JA in Fexuto v Bosnjak , I do so reluctantly. An additional reason for my reluctance is that one of the propositions of law that the primary judge set out, and that is not challenged in this appeal, is the statement said to be of Giles JA in Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; ( 2008) 66 ACSR 359 at [181], that unfairness for the purpose of section 232 is assessed by reference to whether "objectively in the eyes of a commercial bystander, there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the decision fair . " (In fact [181] was in the judgment of Basten JA.) Using the language of "legitimate expectations" might suggest, contrary to that proposition, that it is the subjective expectations of a party that are of importance for the Oppression remedy. It should not be thought that by using the term I am doing any other than referring to the benefits or practices concerning the operation of a company that fail to materialise when there is conduct that meets the description in section 232(e) Corporations Act .

A decision about whether any of the conduct identified in section 232(a)-(c) Corporations Act is "oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member or members" involves the making of a judgment by reference to an evaluative standard: cf Beneficial Finance Corporation Limited v Karavas (1991) 23 NSWLR 256 at 262, 279; Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [30]-[41] per Spigelman CJ; Certain Lloyds Underwriters v Giannopoulos [2009] NSWCA 56 at [89]-[111] per Campbell JA (with whom Giles and Ipp JJA agreed). The standard for appellate review is therefore that found in Warren v Coombes (1979) 142 CLR 531, and is not confined to the circumstances in which House v R (1936) 56 CLR 499 will permit an appeal court to reverse or alter a trial judge's decision.

The grounds of appeal that remain live in the Further Amended Notice of Appeal relating to the Oppression remedy are numbered 1 to 6, and 10 to 14. It is convenient to deal with those grounds in a different order to that in which they were presented, and to deal with some of them collectively.

The Appellants criticised the first sentence of (b) of [143] of the judgment ([146] above). That criticism is the subject of ground 2 of the Amended Notice of Appeal. It provides: "The trial Judge erred in focussing on whether or not the Heads of Agreement as amended was or was not legally binding and enforceable; and in holding (Jmt [143]) that unless Sayer was bound to act in a particular manner, then there was no basis to find that the failure so to act could be unfair within Part 2F.1 of the Corporations Act 2001 (Cth)."

As to the first part of this ground, the trial judge is hardly to be blamed for focusing on whether or not the Heads of Agreement were or were not legally binding and enforceable, when that was the contention at the forefront of the Appellants' case below.

The second part of this ground correctly identifies an error in the judgment. It is perfectly possible for there to be the type of commercial unfairness that generates a remedy under section 233 even if no breach of contract is involved, and even if there is no departure from a position to which a party is bound by an estoppel: see Fexuto v Bosnjak at [4] per Spigelman CJ ( "... the jurisdiction should not be confined by technical distinctions..." ), O'Neill v Phillips at 1098-1101. As Lord Hoffmann said in O'Neill , at 1098, the legislative history of the corresponding English provision shows that Parliament "chose this concept [of unfairly prejudicial] to free the court from technical considerations of legal right and to confer a wide power to do what appeared just and equitable" , where that notion of "just and equitable" must itself be guided by principle. His Lordship recognised, at 1099, that "unfairness may consist in a breach of the rules" (by which he meant the articles of association or collateral agreements between the shareholders) "or in using the rules in a manner which equity would regard as contrary to good faith" . He also recognised, at 1101, that it was incorrect "that exercising rights in breach of some promise or undertaking is the only form of conduct which will be regarded as unfair for the purposes of s 459." He recognised, at 1099-1100, that "the notion of fairness in s 459 does not mean that conduct will not be unfair unless it would have justified an order to wind up the company" .

It is not necessary to consider in any detail whether Lord Hoffmann has here stated the full extent of the circumstances in which section 233 can apply. The (correctly) agreed basis upon which this appeal is being conducted, namely that Oppression is commercial unfairness, suggests that his Lordship's concentration on "just and equitable" , and how the equity court would regard the conduct in question, unduly narrows the section. Indeed, it would be very strange if Parliament had enacted the provision, using language different to that in which equitable principles are expressed, but for the section to be construed as though it was nothing more than familiar old equity, dressed up in new clothes. Situations concerning which a court of equity would provide a remedy may well provide a significant sub-class of situations where Oppression is established, but cannot be assumed to exhaust the scope of the term.

An evident concern of Lord Hoffmann was to identify a basis of principle upon which the norm of behaviour that the section imposed could be applied. However in other situations where a statute has given a court power to enforce a broadly worded norm of behaviour, the words stating the norm are construed, like any legislation, beginning with the text itself, with reference if necessary to context and surrounding circumstances. Examples of such situations include "conduct that is in all the circumstances, unconscionable" in section 51AC Trade Practices Act 1974 (Cth), "conduct that is misleading or deceptive" in section 52 Trade Practices Act , "unjust in the circumstances relating to contract at the time it was made" in section 7 Contracts Review Act 1980 , concerning which "unjust" is defined in section 6 to include "unconscionable, harsh or oppressive" : Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47], [51]. Relevantly for present purposes, the words of the text are not confined by reference to categories created by existing case law. However, Lord Hoffmann's statements show that it is incorrect to say that if there is neither a contract nor an estoppel then there cannot be the type of unfairness that attracts section 233.

In my view, the error identified in Appeal Ground 2 vitiates the reasoning below concerning Oppression. The judge's finding at [144] (b) that the mere fact of protracted negotiations did not generate a legitimate expectation that the Sayer interests would buy out Mr Tomanovic on the terms of the Heads of Agreement and that "such a finding would be inconsistent with the findings that the Heads of Agreement were not legally binding" illustrates the extent to which the judgment was influenced by the error identified in Appeal Ground 2.

However, this error does not suffice to show that the conclusion at which the judge arrived was incorrect. Deciding whether the judge's conclusion was wrong will involve consideration of some of the other grounds of appeal, and this Court making its own assessment of whether Oppression is made out.

Both parties accept that if the Court were to decide to set aside the judgment below, it had power to resolve the matter for itself, rather than involve the parties in a new trial. Given the significant time, cost and effort that would be involved in a new trial, it is desirable for this Court to resolve the matter if at all possible.

Ground 1 of the Amended Notice of Appeal contends that the judge erred in failing to find that in all the circumstances Mr Tomanovic had a legitimate expectation either to be bought out along the lines of the Heads of Agreement as amended, or to be reinstated to management of the group companies, and that it was Oppressive to both deny that expectation and refuse to reinstate Mr Tomanovic to management of the group companies.

Ground 3 (other than 3(b), dealt with separately at [279] below) alleges that the judge erred in failing to have adequate regard to the steps that both parties had taken towards the Sayer interests buying out the Tomanovic interests, and to Mr Sayer's refusal to reinstate Mr Tomanovic to directorship in the group companies, and in holding at [144] (set out at [147] above) that mere protracted negotiations did not give rise to a legitimate expectation.

My reluctance to use the notion of "legitimate expectation" as an analytical term means that I would not uphold these grounds in their terms. However, the factual matters to which they point feature largely in my conclusion that the present is a situation where Oppression is made out.

Exposition of the law concerning Oppression often occurs by reference to a list of types of circumstances in which Oppression can occur. Ford's Principles of Corporations Law , 13th edition (2007) provides such a list at [11.460], containing items such as "improper diversion of business" "payment of excessive remuneration to controller or associate" , "failure to prosecute an action" , "unfairly restricting dividends" and "improper exclusion from participation in management" . Such lists are undoubtedly helpful as reminders of matters that can be relevant to whether Oppression is made out, and to assist in identifying similarities and differences between the situation that obtained in a decided case and the situation that obtains in the case that falls for decision. However they do not provide a substitute for the application of the statutory test directly to the fact of the case in issue.

The present is not the fairly common situation in Oppression litigation, where a small company is formed on the basis that the shareholders will all participate in the management of a single business enterprise conducted by the company, and the Oppression starts when one of them is excluded from management. One way in which the present situation does not fit that pattern is that the basis upon which the arrangement between Mr Tomanovic and Mr Sayer was entered was that they would operate a group of companies, for their common benefit, but in circumstances where each had his own special skills and area of primary responsibility. Mr Sayer explained their different roles as "Zoltan was the strategy expert and I was the financier" . Notwithstanding those primary areas of responsibility, each kept the other informed about activities within their respective spheres. Even though their arrangement was initially one whereby Mr Tomanovic "will be consulted on every decision made" ([13] above), well before the events giving rise to the present dispute they had consensually moved to a situation where each was informed of events in the other's domain after those events that happened. Further, the group was operated as a single financial entity, notwithstanding the existence of separate corporations within it. In all these ways, the finance and the non-finance sides of the business complemented each other. The judge's analogy of a marriage was apt in these respects. Though they were a comparatively late development during the time that the two men were co-operating together, the Multiown businesses were part of that joint enterprise.

Another way in which the present case differs from the familiar model where there is exclusion from management of a jointly managed company is that there has been no exclusion from management (at least prior to 2008), and exclusion from management in 2008 was not the start of any Oppression.

Concerning the companies in the finance group, Mr Tomanovic voluntarily relinquished his post as director rather than being excluded from it. The terms of the SPA meant that Mr Tomanovic could not regain his position as director while Macquarie was a shareholder, unless Macquarie consented. Mr Tomanovic's resignation of his directorship of companies in the finance group, and the consequent loss of legal rights associated with the position of director, put him in a position of some potential commercial weakness, so far as those companies were concerned. However, at the time of his resignation that was unimportant because of the trust that existed between the two men. Even after the change in the formal structures of the finance group arising from Macquarie becoming a shareholder, Mr Sayer's account was that "Zoltan and I continued to regularly meet or have 'catch ups' in his office, or my office or in the stairwell of the First Argyle Property, as we had done prior to the MBL Acquisition and I would update Zoltan on what was happening with the MHA Finance Business" . In that time, Mr Tomanovic had as much involvement in the management of the finance group companies as he had ever had. However, (at [5]), the judge has identified December 2004 as the end of the "business marriage" and (at [22]) found that "Mr Tomanovic has not played an active part in the finance group business since at least about December 2004, in consequence of the separation of interests ... " . It was December 2004 that marked the time at which Mr Tomanovic ceased to draw a salary, and began to receive payments as loans that could become payments on account of the purchase price. Thus, it was the reaching of the agreement in principle in regard to separation of interests, rather than resignation from directorships in the finance group, that provided the substantial reason for the cessation of such practical involvement in the affairs of the finance group as Mr Tomanovic had ever had.

Mr Tomanovic's resignation from directorships in the companies in the non-finance group (other than Multiown) occurred on a different basis to his resignation from directorships of the companies in the finance group - it related directly to the hope and expectation that the separation of business interests that the two men had agreed upon would come to fruition. Again, however, it could not be said that, at that time, he was excluded from management of those companies.

During the months from February to November 2008 Mr Tomanovic's requests to be appointed a director were rebuffed, and after the November 2008 general meeting the substantial reason why Mr Tomanovic was not a director of GMEC was because Mr Sayer had voted against the resolution that Mr Tomanovic be appointed a director. However by 2008 there had been so many events connected with the buy-out proposals that even the failure of Mr Tomanovic's efforts to become a director in 2008 are vastly different to the common situation of exclusion from management.

Nor is this a case where a shareholder has made a unilateral decision that he wants to leave a company, and uses the Oppression provision as a litigious tool to try to enforce that unilateral decision. Rather, there was a mutual decision by the two men that they should separate their business interests, on the basis that Mr Tomanovic should receive a substantial net payment.

The separation of business interests had happened by the end of January 2005 in the day-to-day operation of the businesses, and (to the small extent it mattered) in the directorships of companies in both the finance and non-finance sides of the business. However it has not been reflected in the shareholdings of those companies or in any payment of capital to Mr Tomanovic.

When that separation happened, Mr Tomanovic ceased to receive the regular and not insubstantial income that he had previously received from the companies, and instead received periodical payments on the basis that they were loans, that could convert to being, in effect, payments on account of the purchase price. Receiving the payments on that basis put him in a situation where he might be prejudiced significantly if the buyout did not go ahead. That prejudice has now come home, in the form of the judgment given against him in the Common Law Proceedings. The fact that he ceased to be involved in the day-to-day operations of the company from December 2004 does not provide an adequate explanation for his failure to receive that income stream - it is not suggested that the payments he received were calculated on the basis that they were a fair salary for the effort he put in, and indeed Mr Sayer was taking the position, in February 2008, that "Zoltan ads NO value" . While it is true that since December 2004 Mr Tomanovic has been devoting his time to the Multiown businesses, he has also been receiving no return on the equity of the Tomanovic interests in the group companies.

The value of the shareholding of the Tomanovic interests can be inferred, on the evidence, to be significant. The prices that the Sayer interests agreed to pay under the First Heads of Agreement, and under the Second Heads of Agreement, are both indicative of that.

While it could not be taken as proof of the current value of the equity of the Tomanovic interests in the companies, or indeed the value at any time (because Macquarie acquired its interest in association with entering an arrangement to provide funds to the group, and at the time it sold it appears to have been an anxious seller) the $2m that Macquarie paid in 2003 for its 10% stake in GMEC, and the $750,000 that Mr Sayer paid for that same 10% stake in 2008, provide other indications that the value of the shareholding of the Tomanovic interests in GMEC is not trivial. Breakdown in Personal Relations

Another relevant matter is that the trust between the men has broken down.

The judge found, at [5]: "The relationship became very sour when differences emerged between them as to the separation arrangements, and frustration mounted upon frustration as attempts to finalise a concrete separation agreement did not bear fruit."

The judge also found, at [235] that: "... there has been and is a breakdown and lack of trust between the two shareholders in this corporate group. The difficulty has been manifest since late 2004 but seems to have escalated in the months after the Second Heads of Agreement failed to mature into a formal transaction." There is no appeal against that finding.

The emergence of irreconcilable differences has been held not to be sufficient to establish Oppression: McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603 at 614, Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 at [89]. That does not mean that breakdown in personal relations cannot be one of several factors that together lead to a conclusion that Oppression is made out. Saleability of the Tomanovic Shares

In October 2003 Mr Sayer caused to be issued to himself or One Australia, a B class share in Argyle HQ and three other companies (Direct Mortgage Solutions Pty Ltd, Mortgage House of Australia Pty Ltd, and Mortgage House Developments Pty Ltd). Each B class share conferred a vote, but no significant right to return of capital. There was a factual dispute, that the judge did not resolve, about whether the B class shares were issued in consequence of an express arrangement between Mr Tomanovic and Mr Sayer. The point, for present purposes, is that, by reason of the issue of the B class shares, the Tomanovic interests are minority shareholders in each of the companies in which they were issued. While the shareholding in GMEC was equal between the Sayer interests and the Tomanovic interests prior to Macquarie Bank selling its shares in November 2008, the acquisition of Macquarie Bank's shares by the Sayer interests has made the Tomanovic interests a minority shareholder in GMEC as well. Thus the Tomanovic interests are minority shareholders in both of the companies concerning which relief under section 233 is sought.

The judge made no express finding about the saleability of the Tomanovic's shares in these two companies. Counsel for the Tomanovic interests below said in his final submissions that his clients were "locked in" (para [248] below), and that submission was not contested. During counsel for the Respondents' closing submissions in the court below the following exchange occurred: HIGGS: ... there is no evidence that he is not able to go out and sell those shares on the open market, I accept - HIS HONOUR: What open market? HIGGS: I accept you might - sorry, I interrupted your Honour. HIS HONOUR: What open market? HIGGS: Did I say 'open market'? HIS HONOUR: You did. HIGGS: If I said that was a flourish I should not have indulged in. If on the market your Honour may draw the inference that market is not that open or wide. The evidence is silent on that. I can understand your Honour can draw the inference the market would not be all that wide. I understand your Honour can draw the inference if is be likely to be buying 45 percent of the shares, probably Mr Tomanovic will buy Mr Sayer out or vice versa, or interests associated with it. This is something that may be available on the evidence. It is just a matter of how much and when. While that is not express acceptance of the practical unsaleability of the interests, it comes quite close.

The judge's statement of legal principles at [40] included: " Inability to sell shares 'The mere fact a person is unable to regain capital or dispose of his or her shares is not a matter of oppression': Lucy v Lomas [2002] NSWSC 448, at [43], citing Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193, at 199."

Dealing with that topic at all would have been irrelevant if the judge had not been assuming the Tomanovic interests were for practical purposes unable to sell their shares at something like a fair price.

If the judge did not implicitly do so, I infer that the shares of the Tomanovic interests in the various group entities would probably not be saleable to anyone other than the Sayer interests at a fair price. It is not only being a minority shareholder that would make the shares unattractive. As well, the complex intra-group dealings, dealings of group entities with entities associated with Mr Sayer but not Mr Tomanovic, and the informality with which the affairs of the group have been conducted for many years, would be significant deterrents to a potential purchaser.

Important elements of the commercial unfairness in the situation are that the Sayer interests seek to keep the value of the equity of the Tomanovic interests locked up in the companies, in circumstances where: (a) the income that the Tomanovic interests used to receive on the basis that it was theirs to keep has stopped being paid; (b) there is no present prospect of the Tomanovic interests receiving income from their shareholding other than at the discretion of the Sayer interests, regardless of how the companies fare; (c) there is no real prospect of the Tomanovic interests selling to anyone else for a fair value; and (d) resumption of the former basis on which the two men co-operated is no longer possible.

Further, all that occurs when (e) the Tomanovic interests have significantly prejudiced themselves by incurring, with the acquiescence of the Sayer interests and in the mutual expectation that a buyout would occur, a very significant debt, that the Sayer interests are intent on recovering. It occurs when (f) the Sayer interests, since December 2004, have been running the companies as though they were totally their own, including the making of loans to and from entities associated with Mr Sayer. Since December 2004 Mr Tomanovic has not had the regular provision of information about the activities of the companies that he formerly had. Significance of No Distribution of Dividends?

In Thomas v HW Thomas Ltd [1984] 1 NZLR 686 the New Zealand Court of Appeal found that there was no contravention of the then New Zealand oppression provision when a family company continued its long-adopted policy of having a very conservative approach to dividend distributions. In that case, it was relevant that the petitioner had inherited the shares, that various members of the founder's family continued to work in the company, and that there was no basis for concluding that the petitioner had contributed in any way to the value of the company's assets. By contrast, here the value of the corporations at the time Mr Tomanovic ceased to be actively involved in them had arisen in part from the efforts of Mr Tomanovic. Unlike the situation in Thomas , the historical practice of the companies in the group of not paying dividends occurred in a context where income was made available to both of the two men from the companies in other ways and, so far as Mr Tomanovic is concerned, there has been a departure from that historical practice. Significance of Position as Director?

While the submissions of the parties have spent considerable time on Mr Tomanovic's directorship of the companies, I do not think that is a topic of particular importance. Both Mr Tomanovic and Mr Sayer were directors of companies in the group before Macquarie became a shareholder in GMEC. However the reality of the way in which the companies operated was that there were informal conversations rather than directors' meetings, and the position of director was little more than a formality. It was trust that mattered, not strict legal rights.

Mr Muddle, counsel for the Appellants, submits that holding the position of director gave Mr Tomanovic legal rights to be consulted and informed about the operations of the company, and to participate in management, that he was capable of invoking should he wish. He submits that his resignation has deprived him of those rights, and (at least until the second-last day of the trial) Mr Sayer was refusing to let him have those rights back. Mr Higgs, counsel for the Respondents, concedes that the right to be a director of a company is a valuable right.

However, Mr Tomanovic's resignation as a director in the companies within the finance group was occasioned by the desire of both men to have Macquarie as a shareholder, and Macquarie's insistence that Mr Sayer should be the sole director of GMEC.

In my view it is a distortion of the enquiry required by section 232(e), to ask (as Ground 4, considered later in these reasons, does) whether Mr Tomanovic's resignation as a director removed any legitimate expectation on his part to be a director. It is likewise a distortion of that enquiry to ask (as Ground 5, considered later, does) whether the fact that the Tomanovic interests were at all times after October 2003 minority shareholders in Argyle HQ, and at all times after November 2008 minority shareholders in GMEC, meant that he no longer had any legitimate expectation to be appointed as a director. The enquiry that section 232(e) calls for is whether, overall, the conduct of the affairs of the two relevant companies is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the Tomanovic interests. The circumstances in which he ceased to be a director, and the circumstances in which, from 19 February 2008 (para [ 99 ] above) Mr Tomanovic's requests to resume position as director were rebuffed are relevant matters to take into account in that enquiry. However, the enquiry involves considerably more than whether he had a "legitimate expectation to be a director" , and in any event the "legitimate expectations" of a shareholder, in the sense used in Oppression litigation, can be identified only once a finding of Oppression has been made. Reinstatement Offer

The surprise offer that Mr Sayer made in the course of cross-examination to reinstate Mr Tomanovic as a director in GMEC, and the undertaking that was proffered at the hearing of the appeal, would need to be approached with considerable caution, given the adamant opposition that Mr Sayer expressed from February 2008 onward to Mr Tomanovic's repeatedly made proposal that he become a director. The lateness of the offers is in itself a cause for suspicion. As well, I have no confidence that appointment of Mr Tomanovic as a director would enable the companies to operate with the board as an effective unit of corporate governance. While there has continued to be some business relationship between the Multiown companies under Mr Tomanovic's leadership, and the companies now controlled by Mr Sayer (judgment [236]), it has involved activities like referring clients; not the sort of activity requiring a willingness to listen, discuss, and give bona fide consideration to proposals that is involved in a board of directors that actually operates as a decision-making organ of a company.

Part of the reason for the undertaking to reinstate that was proffered at the hearing of the appeal taking the form it takes ([134] above) is that GMEC presently has a provision entitling the chairman to a casting vote at a directors' meeting in the event of an equality of votes, but Argyle HQ lacks such a provision. Mr Higgs submits that that proffered undertaking does nothing more, in this respect, than give formal effect to the arrangement that the two men had from the outset ([13] above) that Mr Sayer would have the "final say" .

However that arrangement was entered in very different circumstances to the present ones. Now, as the judge has found, the basis on which the two men worked together has broken down.

Even if the court were to accept the undertaking, and even if Mr Tomanovic were to agree to the conditions to which the undertaking is subject, it would not cure the commercial unfairness that results from the factors I have earlier identified. There is no offer to pay him a director's fee, interest continues to accrue on the loans/prepayments that are the subject of the judgment in the Common Law Proceedings, and the only thing that now stands in the way of the Sayer interests enforcing that judgment is the stay that this Court has ordered pending the determination of this appeal.

In all these circumstances I do not propose to accept the proffered undertaking. Good Faith of the Sayer Negotiations

The judge found that the Sayer interests generally acted in good faith in negotiations concerning the terms of the buyout. That finding is not challenged. No doubt there would be occasions where a finding of lack of good faith assisted a court in reaching a conclusion that Oppression had occurred. However, even action that is carried out in good faith can sometimes constitute, or be part of, conduct that amounts to Oppression.

In Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459, the decision of the Board of the New South Wales Rugby League to exclude one club from the League competition was held not to infringe section 320 of the Companies Code . Section 320 resembled the presently applicable Oppression sections in making the court's power to intervene dependent upon a circumstance or action that was "oppressive or unfairly prejudicial to or unfairly discriminatory against" a member or members. Mason ACJ, Wilson, Deane and Dawson JJ at 466 said it was: "... a point of great importance that the decisions were made in the exercise of a power that is expressly conferred on the Board, a power to determine the nature and extent of the competition that was to take place in 1985 and the clubs that were permitted to participate in it."

Their Honours contrasted that situation with one: "... where the directors of a company, in the exercise of the general powers of management of the company, ... bona fide adopt a policy or decide upon a course of action which is alleged to be unfairly prejudicial to a minority of the members of the company. In that kind of case it may well be appropriate for the court, on an application for relief under s 320, to examine the policy which has been pursued or the proposed course of action in order to determine the fairness or unfairness of the course which has been taken by those in control of the company. The court may be required in such circumstances to undertake a balancing exercise between the competing considerations disclosed by the evidence."

Their Honours there referred to Thomas v HW Thomas Ltd at 695 and 697. In Thomas at 695 Richardson J said that the then New Zealand provision was: "... a remedial provision designed to allow the Court to intervene where there is a visible departure from the standards of fair dealing; and in the light of the history and structure of the particular company and the reasonable expectations of the members to determine whether the detriment occasioned to the complaining member's interests arising from the acts or conduct of the company in that way is justifiable."

At 697, Sir Thaddeus McCarthy said he agreed with Richardson J that: "... it is not necessary for a complainant invoking s 209 to prove a lack of probity or want of good faith in every case, though it may well be so in some. But the powers given by s 209 are ones which in my view should not be lightly exercised, especially so when a lack of probity or want of good faith is not established." (One wonders when it is that a court ever exercises a power lightly.)

In Wayde Brennan J, at 470, said: "... to say that the resolution was adopted in good faith and for a purpose within the power conferred is relevant to but not conclusive of the question whether relief should be granted under s 320." At 471, Brennan J adopted the statement of Richardson J in Thomas at 693 that: "... it is not necessary for a complainant to point to any actual irregularity or to an invasion of his legal rights or to a lack of probity or want of good faith towards him on the part of those in control of the company."

More recently, in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 Gummow, Hayne, Hayden and Kiefel JJ said, at [176]: "Neither is it to be supposed that there cannot be oppression on the part of one who thinks that he or she is acting rightly."

Their Honours refer to a remark made in the course of argument by Kitto J in M Dalley & Co Pty Ltd v Simms (1968) 120 CLR 603 at 606 to the same effect with citation of supporting authority. Kitto J's remark was made concerning section 186 Companies Act 1961 (Vic), which had as its trigger for relief that "the affairs of the company are being conducted in a manner oppressive to one or more of the members" . The present section has expanded the triggering circumstance to include being unfairly prejudicial to or unfairly discriminatory against a member, making it even clearer than it was in 1968 that lack of bona fides is not required before the section can be attracted. See also McMillan v Toledo Enterprises International Pty Ltd at 613 per Beazley J (as her Honour then was); Re a Company [1986] BCLC 362 at 367 per Hoffmann J (as his Lordship then was). Tomanovic Failure to Complete on April or September 2007 Terms

The Respondents submit that there is no Oppression because they made two reasonable offers to buy out the Tomanovic interests, namely submission of the draft documentation in April and September 2007, and those offers were not accepted. The Appellants dispute that submission of those documents amounts to an offer. The Appellants contend that the judge made no finding that the "offers" were reasonable; the Respondents contend the judge did so conclude. As well, the Appellants submit that, even if the April and September 2007 documents are an offer, and if the judge made a finding that they were reasonable, that finding is wrong. The Respondents contend that the Appellants are not entitled to raise on the appeal any argument that the submission of the documents does not amount to making a reasonable offer. The Role of a "Reasonable Offer" in Whether Oppression is Established

Before dealing with those submissions I should consider the role that the making of a "reasonable offer" plays in deciding whether Oppression has been made out.

In O'Neill v Phillips at 1106-7 Lord Hoffmann gave consideration to the effect of an offer to buy shares as an answer to a petition alleging unfairly prejudicial conduct. The offer that was involved in that particular case was made after the petition had been presented. It was in that particular factual context that Lord Hoffmann said, at 1106: "The offer is only material to the outcome at the trial if the court considers that the petitioner is otherwise entitled to succeed. So the fact that he made an earlier offer of the relief to which the court has now held him entitled after trial can logically go only to the question of costs." I suspect that his Lordship was intending those remarks to be confined to the situation of an offer made after the litigation has commenced. If that is so, as the offers involved in the present case were made well before the legal proceedings alleging Oppression were begun, the second sentence in that remark has no bearing on the present case.

If, contrary to the above, Lord Hoffmann's remark at 1106 that "[t]he offer is only material to the outcome at the trial if the court considers that the petitioner is otherwise entitled to succeed" was intended to apply to an offer made before ligation was commenced, and if the remark was taken to suggest that the court should first consider whether the petitioner is entitled to succeed on the basis of facts excluding the offer, and go on to consider the offer only if the answer to that artificial question was "yes", I see no justification for applying the remark to section 232. There is nothing in section 232 that suggests that this sort of a two-step reasoning process should be gone through. Rather, one decides whether the conduct of the affairs of the two relevant companies is oppressive to, unfairly prejudicial to, or unfairly discriminatory against the Tomanovic interests as a single exercise in evaluation.

In any event, the remark I have quoted from 1106 does not apply in the present case, because the relief I propose is not in substance the same as performance of the April or September 2007 documents.

Lord Hoffmann also, at 1107, contemplated that exclusion from management might not be unfairly prejudicial conduct if the respondent "has plainly made a reasonable offer" . There, his Lordship was talking about an offer made before the petition had been presented, because the effect of making a reasonable offer at that time is said by his Lordship to be "the exclusion [from management] as such will not be unfairly prejudicial and he will be entitled to have the petition struck out" (at 1107). The type of offer that his Lordship was contemplating was not necessarily an offer to purchase - he said, at 1107, that where a majority shareholder wants "to put an end to the association ... it will almost always be unfair for the minority shareholder to be excluded without an offer to buy his shares or make some other fair arrangement " (emphasis added). He identified characteristics of a reasonable offer as being to purchase the shares at a "fair value" , and that "the value, if not agreed, should be determined by a competent expert", as an expert not an arbitrator, and in circumstances where both parties have access to information about the company and the opportunity to make submissions to the expert.

All the remarks of his Lordship about the effect of an offer to buy the shares of a minority shareholder related, as his Lordship expressly recognised at 1106, to a point that his Lordship did not need to decide. Those remarks did not even provide an alternative justification for the outcome of the case. Thus, they were clearly dicta.

In Campbell v Backoffice Investments Pty Ltd at [72], French CJ said: "Their language and history indicate that ss 232 and 233 are to be read broadly. The imposition of judge-made limitations on their scope is to be approached with caution."

The test that a judge is to apply in deciding whether Oppression has been established is laid down by the words of section 232 itself, not by a judicial gloss on a somewhat similar, but not identical, English provision. In Owners of the Ship "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 181 CLR 404 at 421, Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ said: "It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words." See also The Commonwealth v SCI Operations [ 1998] HCA 20; (1998) 192 CLR 285 at 301 per Gaudron J; Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270 at 279 [17] per Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ.

Those principles lead to the conclusion that, even if the remarks of Lord Hoffmann about the effect of a buyout offer in Oppression proceedings might sometimes provide some assistance to a judge in seeking to apply section 232, they cannot be treated as either an addition to, or a substitute for, the statutory text. Aspects of the facts of previous cases that have been held to amount to Oppression (or the somewhat, but not completely, analogous concept applicable in the English legislation or earlier versions of the Australian legislation) might assist in drawing a judge's attention to matters that might be relevant in deciding whether Oppression has been established in a particular case. However, the application of section 232 is not properly approached by seeking to create rules containing terms that are not found in the legislation, like "exclusion from management" and "reasonable offer" .

Further, it is not as though "exclusion from management" and "absence of a reasonable offer" are elements of a cause of action, so that a plaintiff in an Oppression suit (or, perhaps, in the sub-species of Oppression suits in which exclusion from management is a prime element in the Oppression alleged) has the onus of proving absence of a reasonable offer. Rather, the making of a reasonable offer is merely one factor that, in some (but not all) types of situations where Oppression is alleged can be relevant to whether Oppression is made out. A party who wished to assert that a reasonable offer had been made would bear an onus of adducing evidence of the making of an offer, and an onus of persuading the court that it was reasonable, and that because it had been made there was no Oppression.

The judge's statement of principles, not challenged on this appeal, included, under the heading " Particular grounds for oppression" , paragraphs headed "Inability to sell shares" , "Mismanagement" and "Exclusion from management" . The latter paragraph, [42], was: " Exclusion from management 'Improper exclusion from a legitimate expectation to participate in the management of the company may be oppressive': Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359 at [401], per Young CJ in Eq. However, unfairness does not lie in the exclusion alone, but in exclusion without a reasonable offer to buy the plaintiff's shares. Consequently, there will be no oppression, if the applicant has refused a reasonable offer to acquire the applicant's shares: O'Neill v Phillips [1999] 1 WLR 1092 at 1104; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343."

I have earlier explained (paras [186]-[190] above) that the present is not a case where there was, prior to 2008, exclusion from management, and even in 2008 and afterwards there were many factors relevant to Oppression besides exclusion from management. Thus, the principles in [42] of the judgment below do not govern the present appeal. (In any event, I doubt that the judge intended them to be immutable rules, rather than aids that might be helpful in the evaluation of particular fact situations.) As well, the remarks of Lord Hoffmann in O'Neill v Phillips about the effect of a reasonable offer are not directly applicable because (apart from the difficulties I have already mentioned) all those remarks concerned a situation where there was exclusion from management. Further, his Lordship seems to have been considering a situation where exclusion from management was the only factor relevant to whether there was Oppression, as shown by his phrase "the exclusion as such will not be unfairly prejudicial ... " . These matters provide a reason why all the arguments that I have mentioned at [225] are not decisive of the outcome of this appeal. However as those arguments took significant time on the appeal I should consider them in more detail, and in their own terms. Any Finding that the Documents are Reasonable Offers?

It is convenient to deal first with whether the judge made any finding that submission of the April and September 2007 documentation amounted to the making of reasonable offers.

In [224] of the judgment the judge said: " ... there were two concrete and unimpeachably reasonable offers to effect a buy-out as envisaged by the Second Heads of Agreement. Those offers eliminate exclusion from management as a ground for oppression."

However, as I have said (at [163]-[164]), paras [221], [222] and [224] of the judgment below are part of a reproduction of the Sayer interests' submissions. The judge in [226] appears to have accepted "the basic components" of those submissions. However, it is not clear what parts of the extensive submissions he had set out, he accepted as being the "basic components" . As well, the judge's acceptance of the "basic components" was done only "assuming the factual basis for their contentions is correct" . The submissions of the parties on the appeal do not attempt to show that the judge had found all of those "basic components" to have been made good. Nothing other than [224] and [226] is relied on as a finding of the reasonableness of the offers. In my view, the judge has not found that the April and September 2007 documents amount to reasonable offers. Not an "Offer" Because Not Contractual?

Mr Muddle initially submitted that neither of the April and September draft documents constituted an "offer" at all, because neither was presented on a basis that the Tomanovic interests were free to accept it, and thereby bring about a binding contract. Rather, he submitted, they were drafts put forward for discussion.

In the course of argument, he accepted that it may not be necessary for an "offer" to be an offer in the sense that is relevant for contract formation before it could be capable of affecting a conclusion about whether Oppression had been made out. In my view, he was right to make that concession. There might be situations in which, for example, a bona fide buyout offer was made, but subject to contract. Such an offer might be held open for long enough to justify a court in concluding that, when ignored or not accepted, any disadvantage that the addressee of that offer thereafter came to be in, concerning the affairs of the corporation to which it related, was not in itself Oppression or the result of Oppression. Other less concrete indications of a preparedness to negotiate and discuss a fair exit mechanism might also bear upon whether Oppression was established. It is, however, very much a matter of the court forming a judgment about the facts of the individual case, and the role that the "offer" plays in them, as to whether that result follows. Whether a statement of preparedness to consider buying out a shareholder takes the form of a contractual offer might affect the weight that is given to it, in deciding whether there has been Oppression. In Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 at [103] Barrett J, correctly in my view, rejected the proposition that a relevant "offer" had to be an offer in the contractual sense.

Notwithstanding that, any significance that the April documentation had is lessened by the fact that it was sent to the Tomanovic interests on the basis that it was a draft, for consideration and discussion ([53] above). Likewise the September 2007 documentation was submitted on the basis that there might be "queries or comments" on it from the Tomanovic interests ([68] above). Not an Offer that was Reasonable?

Mr Muddle submits that at the time that the two lots of draft documents were submitted, the value was not agreed, the documents did not provide for a price found to be fair by the court or by some independent expert, and there was no finding, or basis for finding, that those documents made a reasonable offer. While the buyout price in the draft documents closely approximated the $5m that had been the price under the Second Heads of Agreement, the Second Heads of Agreement was not legally binding, extremely schematic, and self confessedly not complete. Furthermore, the parties entered into the Second Heads of Agreement in circumstances where both parties were anticipating a very quick settlement. Mr Muddle accepts that the fact that Mr Tomanovic agreed to the Second Heads of Agreement is some evidence that it was a reasonable arrangement in November 2006. However he submits that when the draft documentation of April 2007 and September 2007 was more complex, and contained warranties and other terms of commercial significance that were not in the Second Heads of Agreement, and when the Second Heads of Agreement were entered in the expectation that settlement would occur in a matter of weeks, one cannot conclude that the April and September 2007 documents made reasonable offers. Further, he points out that the First Heads of Agreement had provided for a materially higher price, and contained numerous provisions that were not found in the Second Heads of Agreement, and were not reproduced in the draft documents. The judge did not consider the reasonableness of the various changes that Mr Tomanovic was requesting, between the April and September draft documents. Further, the proposal contemplated by the 24 September 2007 documentation could not be carried through - by 5 October 2007 Mr Sellars was writing "in absence of KJS being able to come up with money to fund the present arrangement with Zoltan that deal is dead" . Mr Muddle submits that an offer that is reasonable in its terms, but not able to be performed, could hardly be sufficient to stop a conclusion of Oppression being drawn, if such a conclusion were otherwise appropriate.

As well, Mr Muddle submits that the September 2007 draft documents were sent to Mr Tomanovic's solicitor at a time when Mr Tomanovic was overseas and not due to come back until the first week of October, and the documents were very complex. If the documents amounted to an offer, it became unavailable in early October 2007, and thus was not open for a sufficient time to stop a conclusion of Oppression that might otherwise be drawn. Is the Argument Open?

The Respondents submit that the Appellants are not entitled to put this argument, because it was not put below.

The Respondents' written submissions below contended that "there were two concrete and unimpeachably reasonable offers to effect a buyout as envisaged by HOA 2 ... Those offers eliminate exclusion from management as a ground for oppression."

The Appellants submit that the reasonableness of the April and September 2007 offers was contested below. They rely on a passage in the closing oral address, of counsel for the Appellants at the trial (who did not appear on the appeal). The transcript records that counsel submitted (tp 587) that the thrust of his case was that his client was : "... locked in, no control, and no fair offer. And I don't think I could have got a clearer example of that than in my final question to Mr Sayer this morning, this also deals with remedy, but Mr Sayer was quite prepared to complete and effectuate separation of interests. But price was uncertain, was the word that he used. I think he said precisely, I don't think anybody could calculate price. So that is the evidence and the thrust of where I go on the heads of agreement. There is some support for that, and I will take your Honour to the evidence in a moment, in the surrounding facts and circumstances. I submit that the court can infer from the exchange of draft documentation between the solicitors in the period April 2007 to September 2007 that during that period, draft documents were being prepared. They were being negotiated, for want of a better word argued. But at least by 24 September 2007, the solicitors for Mr Sayer's interests had produced documents which, according to Mr Sellars' evidence, were documents he would have recommended that his client sign at that time. So sofar as Mr Sayer is concerned, and I put that when Mr Sellars was doing that he was doing so with authority - that was the terminal point of that long extended failings, at least by that date. There was a fair offer on the table, but it didn't happen from them, and that is the oppression, first ground of oppression on which my client relies. So it is necessary to understand what happened from 24 September onwards. I am well aware that my learned friend cross-examined Mr Tomanovic, his dealing with accountants, his change of solicitors, and all the events of 2007 . What I put to your Honour is that that is simply not relevant. All of that was superseded by the issuing of draft formal documentation in final form from Mr Sayer's camp. The evidence as to what occurred after September 2007 is also clear. Mr Sayer took over the conduct of negotiations himself. He terminated the retainer of Grant Thornton in earlier October 2007. Nothing further was done about the draft documentation that was between the parties. And he himself attended meetings with Mr Tomanovic and Mr Tomanovic's solicitors, which was a change, because the previous meetings Mr Sayer and his accountants had been there but Mr Tomanovic had been unrepresented."

Counsel for the Appellants went on to specifically put to the judge (tp 588) that by October 2007 the companies in the group did not have sufficient money to enable the Sayer interests to perform the Second Heads of Agreement, and also (tp 589) that "Mr Sayer wasn't willing to put his hand into his own pocket to finance Mr Tomanovic's exit, but was only prepared to utilise the company's assets to the extent that they were available, which at that stage they weren't . "

The "final question to Mr Sayer this morning" , referred to by counsel, and the question preceding it, were: "Q. Mr Sayer, are you prepared to purchase Mr Tomanovic's shares today in GMEC? A. Yes. Q. Is your attitude that it's a question of price to be determined? A. I don't think a price can be determined."

The Appellants submit that the passage "there was a fair offer on the table, but it didn't happen from them" should be read as though its sense was "there was a fair offer on the table, but it didn't come from the Sayer interests" - ie, that Mr Tomanovic had made a fair offer, but the Sayer interests had not.

I do not think that that is the correct way of reading this passage of transcript. One cannot identify any offer that Mr Tomanovic made. I take the sense of counsel's submission to be that when he was saying the Appellants were "locked in, no control, and no fair offer" he was referring to the absence of a fair offer at the time of the hearing. That was the point of his reference to the evidence that Mr Sayer had given that morning.

In its context, it seems to me that there are two possible readings of the passage that the transcript reproduces as "there was a fair offer on the table, but it didn't happen from them" , each of which is similar in substance. One possible reading is that "them" a typographical error for "then" . The other possible reading is that "but it didn't happen from them" has the sense of "but having made the offer the Sayer interests did nothing to advance it" . Regarding the September 2007 documents as making a reasonable offer was consistent with the stance of the Appellants at the hearing; that the Heads of Agreement were legally binding and ought be performed. In its context, counsel was saying there was a fair offer put on the table as at 24 September 2007, but very soon after 24 September 2007 it ceased to be available.

Thus, counsel for the Appellants at the trial did not accept that the April documentation amounted to an offer, because at the time it was made it was envisaged there would be the ongoing negotiation concerning it, and that negotiation in fact occurred. I do not understand his concession that the September 2007 documents were a fair offer to mean more than that the documents set out an offer that was fair in its terms. In the context where he drew attention to the offer then promptly ceasing to be available, and also contested the ability or willingness of the Sayer interests to perform the terms of that offer, he was not accepting that the making of that offer had the consequence that there was no Oppression. Effect of the April and September 2007 Documents on Whether there is Oppre ssion

In my view the Court should not permit departure from the concession that the September 2007 documents amounted to an offer that was reasonable in its terms. However, even on the basis of that concession, I would not conclude that there was no Oppression. The significance of the September 2007 documentation is lessened by its not being an offer that was able to be accepted to constitute a binding contract, by it being submitted on the basis that there might be queries or comments, and it being submitted at a time when Mr Tomanovic was known to be overseas and not returning until early October. I agree with the submission of counsel for the Appellants in the court below that very soon after those documents were made available, Mr Sayer terminated instructions to his advisers, "nothing further was done" by the Sayer interests to advance the proposal in the draft documentation (as opposed to other proposals), and Mr Sayer became either unable or unwilling to carry out the transaction envisaged by the draft documentation.

So far as the April documents are concerned, Mr Muddle's submissions (para [244] above) provide good reason for declining to draw an affirmative conclusion that they made a reasonable offer.

No submission is made that Mr Tomanovic acted in bad faith in the negotiations. However, it must be recognised that his conduct was often not well calculated to bring the negotiations to an end, particularly in the period before Mr Sayer's attitude to the buyout proposal changed in about October 2007 (at [71], [77], [78] above). Nevertheless, that does not lead to a conclusion that there is no Oppression. The situation that the Tomanovic interests now find themselves in concerning the two companies, is in my view a commercially unfair one, even if part of the reason for its existence is the conduct of Mr Tomanovic. There is nothing unusual about recognising that when a marriage has ended one of the parties is left in an unfair situation, even if that party's conduct has partly contributed to the situation arising. Carrying on the activities of the company without remedying that unfairness involves conducting the affairs of the companies in a way that is oppressive to, unfairly prejudicial to or unfairly discriminatory against the Tomanovic interests.

By a Notice of Contention, the Respondents submit that the only "legitimate expectation" that the Tomanovic interests could have had arising from the conduct of the negotiations was that the Sayer interests would negotiate in good faith, and the judge found that the Sayer interests did so. I would not accept that this provides a basis for supporting the judge's decision, because (a) many factors other than the course of negotiation are relevant to whether the situation in which the Tomanovic interests now find themselves amounts to Oppression, and (b) in any event, good faith is not decisive of the absence of Oppression.

Though the reasoning so far leads to the conclusion that Oppression is made out, I should also refer to the other grounds of appeal that were argued.

Appeal grounds 4 to 6 inclusive allege error in paras [221] and [222] and [224] of the judgment below. Those paras of the judgment are set out at [163] above.

Appeal ground 4 alleges that the judge erred in finding, at [221], that the fact that Mr Tomanovic voluntarily resigned his directorships to meet the requirements of Macquarie Bank during its shareholding "extinguished any residual legitimate expectation to be appointed a director".

Ground 5 alleges that the judge erred in finding, at [222], that after the sale by Macquarie Bank of its shareholding to Sayers' company, (using funds drawn down from an external financier by group companies) as "[Mr Tomanovic] no longer held an equal interest, he no longer had a legitimate expectation of appointment to the Board" .

Ground 6 in the Amended Notice of Appeal contends that the judge erred in finding, at [224] that: "... exclusion from management had been 'eliminated' as a ground of oppression by 'two concrete and unimpeachably reasonable offers to effect a buy-out as envisaged by the Second Heads of Agreement' without identifying those offers, without considering the Appellants' submissions and without exposing his reasons."

In considering Grounds of Appeal 4, 5 and 6, there is a preliminary question about whether the judge really made a finding in the terms of paras [221], [222] and [224] respectively: that voluntary resignation of directorships had extinguished any legitimate expectation of Mr Tomanovic to be a director; that inequality of shareholding in GMEC by the time of the annual general meeting meant that Mr Tomanovic no longer had a legitimate expectation of appointment to the Board, and that exclusion from management had been eliminated as a ground of oppression by the two offers. For the reasons given at [240] above, I am not satisfied there was any such finding.

Those matters create a significant difficulty in dealing with grounds 4, 5 and 6 in accordance with their terms. However, the aspects of the facts to which they refer fall within the more general terms of grounds 1 and 3. Thus, I have already dealt with the facts to which grounds 4, 5 and 6 refer in the context of grounds 1 and 3. Ground 6 - Inadequacy of Reasoning re Par a [224]?

There is a specific challenge to the adequacy of the judge's reasoning process (as opposed to his findings) only in ground 6.

The aspect of ground 6 that complains about the judge not identifying the two offers fails. The course of argument on the appeal made clear that there was no real doubt about what was intended by the trial judge's reference to "offers to effect a buy-out" at [224] - they were the two sets of draft documents submitted by the Sayer solicitors on 4 and 5 April 2007 (at [53] and [54] above), and on 24 September 2007 (at [68] above).

In circumstances where I have already concluded (at [240] above) that the judge did not make a finding as to whether the April and September documents amount to reasonable offers and concluded that in any event Oppression is made out, it is unnecessary to deal further with this ground.

Ground 11 relies upon the increase in the St George Bank facility instigated in October 2007 as an element of Oppression.

Though it was not withdrawn, virtually no attention was paid in submissions to this ground. In light of the judge's findings ([155]-[158] above), to the effect that the facility was obtained for the general purposes of the group, and promptly expended for the purposes of the group, no specific prejudice is shown to have flowed to the Tomanovic interests from it. In my view, the raising of the facility is relevant to Oppression only in that it provides an example of Mr Sayer running the group as his own. It adds nothing else of substance to other grounds that I have upheld.

Ground 12 relies upon the drawdown on that facility in November 2008 for the purpose of the Sayer interests acquiring Macquarie Bank's shares as an element of Oppression.

No submission is made that there was any unfairness connected with the pre-emptive rights process through which the Sayer interests gained a majority shareholding in GMEC, apart from the manner in which the purchase price was raised. Mr Tomanovic was given the opportunity to purchase the Macquarie shares, but did not avail himself of it. At the time that Mr Sayer made his offer to buy the Macquarie shares, namely 12 August 2008, there were no proposals for an extraordinary general meeting of the company, and he did not know that the Tomanovic interests would not take up their entitlement.

In my view, the fact that the St George Bank facility of Argyle HQ was the source from which the Sayer interests obtained the purchase price to acquire Macquarie Bank's shares is, on balance, a contributor to the Oppression that has occurred. The state of the loan accounts between the Sayer interests and the corporate group (see [159] above) was that Argyle HQ was indebted to One Australia at the time in the amount of $465,990.30, and the whole of the drawdown of $754,500 was used for the purpose of buying the Macquarie Bank shares. Thus, $288,509.70 was, in effect, advanced by Argyle HQ to the Sayer interests to enable them to purchase the Macquarie Bank shares. Mr Muddle submits that, to the extent of that $288,509.70, the Sayer interests have used an asset in which the Tomanovic interests had, in commercial reality even if not in strict legal form, an equal interest with the Sayer interests, for a purpose ultimately harmful to the Tomanovic interests. The Appellants argue that this purpose was shown by the prompt use of the Macquarie shares to defeat the resolutions proposed by Mr Tomanovic at November 2008 meeting.

Whether that submission is accepted depends on both the state of the loan accounts within the group, and the cash resources of the group.

The principal, and perhaps the sole, activity of Argyle HQ Pty Ltd was to act as trustee of the 9 Argyle Street Trust. That Trust owed over $9m to Argyle HQ. It was in its capacity as trustee of that Trust that Argyle HQ owned the two buildings in Argyle Street, Parramatta. It was in its capacity as trustee of that Trust that Argyle HQ established the facility with St George that was eventually drawn upon. Thus, the payment of the remaining $288,509.70 of the borrowing could have been effected by, first, the Trust repaying its loan to Argyle HQ to the extent of $288,509.70. Argyle HQ owed the GMEC group over $9 m, and the GMEC group owed Mr Sayer over $3 m. Argyll HQ could then have repaid that amount of the loan to the GMEC group, which could have in turn repaid that amount of the loan it had from Mr Sayer, who could have in turn caused the money to be paid to One Australia, which then could have paid it to Macquarie. There is no basis in the evidence for believing that the inter-group loans were anything other than payable on demand.

It might appear, from this analysis, that all that would have been necessary for the $288,509.70 to have been paid to the Sayer interests in a way that involved no impropriety was for a few extra cheques to be written to enable the funds to flow in the way I have outlined. If that were so, it could be argued that making the funds available to the Sayer interests did not contribute to any Oppression, because whether there has been Oppression is a matter of the substantial commercial realities of a situation, not of whether accounting proprieties have been observed. That is in substance the argument that the judge accepted ([160] above).

However, writing the extra cheques that I have mentioned would result in the funds flowing only if those cheques would be met on presentation. It has not been established that it would have been possible for the cheques to be met, if they had been written. Indeed, it would be consistent with the evidence that the reason why the loan was obtained from St George is because the amount borrowed from St George was not available elsewhere in the group. When that is not a question that was specifically litigated I would not make a finding to that effect, but it suffices that it has not been established that it would have been possible for the $288,509.70 to be made available to the Sayer interests other than from funds in which the Tomanovic interests had, in commercial reality, a beneficial interest. In those circumstances, I regard the making available to the Sayer interests of the whole of the drawdown from the St George Bank as being a matter that contributes to the Oppression. However, I would have concluded that there was Oppression, without taking that factor into account.

In my view, the remaining grounds of appeal relating to Oppression all fail. I shall deal with them briefly. Appeal Ground 3(b)

A specific contention in ground 3(b) is that the judge failed to have regard or adequate regard to Mr Sayer "unilaterally withdrawing the final and binding documents to give effect to the Heads of Agreement as amended" . In my view the factual basis of this particular contention is not made out - there never were any "final and binding documents" to give effect to the Heads of Agreement as amended. The draft documents that were sent by the Sayer interests to the Tomanovic interests in April 2007 were not sent on the basis that they were final, but rather on the basis that they were drafts, on which comment from the Tomanovic side was invited. Likewise, the draft documents that were submitted in September 2007 were not submitted on the basis that they were final, but on a basis where queries or comments were requested.

To the extent that ground 3(b) alludes to the circumstances of the negotiations ending, rather than to characterisation of the draft documents, the relevant matter is that while Mr Sayer withdrew his solicitors' instructions in October 2007, Mr Sayer continued to negotiate in person, though not with a view to a prompt settlement of the transaction envisaged by the September 2007 documents. The history does not bear out that he ever unilaterally withdrew from the negotiations, let alone withdrew final and binding documents. I would not uphold ground 3(b). Appeal Grounds 10 and 14

The Appellants submit that the trial judge erred by considering seriatim the various matters alleged to be respects in which the conduct of the affairs of the company had been oppressive, deciding with respect to each that there had not been oppressive conduct, but failing to give separate consideration to whether the overall effect of all the conduct complained of, taken together, amounted to oppression. A specific complaint is that the judge failed to have regard to the combined effect of absence of compliance with proper procedures in issuing B class shares in some of the finance companies, and other matters complained of.

The Respondents do not dispute the legal proposition that is inherent in these grounds of appeal, that various acts that individually do not meet the description laid down by section 232 might collectively meet that description. Rather, they point to various passages in the judgment, and submit that they show that the judge had considered the collective effect of the conduct complained of. They also submit that there is some implausibility in the proposition that a judge with the depth of experience in corporations law that his Honour has would have overlooked the need to consider the collective effect of the conduct complained of.

The Respondents point to various passages where the judge refers to considering all the evidence. In his preliminary overview at [8] he said: "Now that I have had the chance to consider the evidence as a whole , I have reached the conclusion that there are no sufficient grounds under Part 2F.1 for any of the relief that the Tomanovic interests have sought. The accumulated evidence has persuaded me that they are unsuccessful on all counts." (emphasis added) At [182] the judge, when discussing the circumstances in which some B class shares had been issued to Mr Sayer in some of the companies in October 2003, in circumstances where correct procedures were not followed, said that that fact "would reinforce other evidence though probably not justifying an order of itself." At [201] the judge considered a contention that the failure of the Sayer interests to hold any annual general meetings in 2005, 2006 and 2007 was indicative of oppression. He said: "Refusal to convene shareholders' meetings is sometimes a very serious matter, when the evidence as a whole shows that the oppressing party is using the machinery of corporate governance to excluded [sic] a minority member from participating in corporate affairs, usually with some additional collateral motives. But that is not the present case. It seems to me that in this case contention about general meetings has arisen as a tool to promote the conflict that has emerged between Mr Tomanovic and Mr Sayer since December 2004. I do not regard the evidence before me as of any significance for making out a Part 2F.1 ground." (emphasis added) At [210] when considering the significance of an alleged inadequacy in maintenance of books and records, the judge said: "As with meetings, failure to keep proper books and records and financial statements can be a matter that the Court will regard very seriously. But in this case I am influenced by all four points made on behalf of the Sayer interests, and I would not regard such non-compliance as is shown by evidence as constituting a ground relief in the Part 2Ff.1 [sic], or as making any significant contribution to such a ground. " (emphasis added) At [232] when considering the effect of some changes made, before the incorporation of GMEC, in the shareholding records of companies operating the finance business, the judge said: "... t his matter is not of any significance for the purpose of assessing grounds under Part 2F.1". At [237], (quoted at para [290] below), the judge stated his conclusion "upon review of all the evidence" concerning the just and equitable ground.

These passages make clear, in my view, that the judge was well aware of the need to consider the evidence as a whole, and stated that he had done so.

We were not pointed to, and my own reading of the submissions below has not found, any specific submission made to the judge about a basis on which he might conclude that the conduct as a whole amounted to Oppression, even if none of its individual components was so classified. In my view, even though the judge's reasons were brief relating to taking into account all the evidence, that fact did not have the consequence that he had failed to deal with the case that the parties presented to him. Appeal Ground 13

Even if one accepts that Mr Sayer was taking cash deposits up to some time in 2004, without making appropriate accounting entries, there is no evidence of that practice occurring after 2004. Section 232 is cast in the present tense - the relevant verb is "is" . The practice of which complaint is made had ceased at least four years before the Equity Proceeding were begun. The judge's finding that what was involved was "relatively small amounts of cash" is not appealed against. There might be situations where misappropriation of a company's assets, that occurred long before proceedings were commenced, but which has not been remedied, leaves the company in an altered condition to such an extent that at the time the proceedings are brought the conduct of the company's affairs is Oppressive to one or more members. In Campbell v Backoffice Investments Pty Ltd in the High Court, Gummow, Hayne, Heydon and Kiefel JJ at [182] observed that "the current form of the oppression provisions in Pt 2F.1 was introduced with a view to making it clear that the Court may make orders even if the act, omission or conduct complained of has yet to occur, or has ceased". While the taking of the cash without appropriate accounting entries is undoubtedly irregular and improper, for it to be "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" Mr Tomanovic, it would need to be an impropriety of which he was not an equal (or perhaps substantial) beneficiary. He has failed to satisfy the judge on that topic. I would not uphold ground 13.

The Respondents filed a Notice of Contention providing additional reasons why, in their submission, Mr Sayer's receipt of cash did not amount to or contribute to a finding of Oppression. In light of the conclusions to which I have come, it is unnecessary to consider those submissions.

In a summary of conclusions early in the judgment the primary judge said at [9]: "(e) there is also no basis for winding up on the just and equitable grounds arising merely from the failure to consummate the separation of interests, and no basis for a finding that there is a justified lack of confidence in Mr Sayer's management of the business; (f) another factor weighing against the making of a winding up order is that the relief would likely compromise the business as a going concern and cause a very substantial loss of shareholder value."

The primary judge's statement of legal principles, not challenged on this appeal, recognised that winding up is a remedy of last resort so far as the oppression ground for relief is concerned, and one which ought not be granted if some less drastic remedy for Oppression is available and appropriate.

The judge turned to consider the application of the principles concerning winding up on the just and equitable ground only after he had dealt with whether either of the Heads of Agreement were legally enforceable and he had dealt with the Oppression claim. The totality of the reasoning directed particularly to the application of principles concerning the just and equitable ground was: "234 'Lack of trust' or 'breakdown' is not a ground of oppression. This allegation is presumably an invocation of the 'just and equitable' ground for winding up. 235 One only has to observe the serious and personal nature of the allegations that the Tomanovic interests have made against the Sayer interests, and (to a lesser extent) the Sayer interests have made against the Tomanovic interests, to realise that there has been and is a breakdown and lack of trust between the two shareholders in this corporate group. The difficulty has been manifest since late 2004 but seems to have escalated in the months after the Second Heads of Agreement failed to mature into a formal transaction. 236 But this is a case where one needs to be cautious about the conclusions to draw from the obvious breakdown in the shareholder relationship at a personal level. First, the breakdown in the relationship has apparently not prevented the business interests associated with Mr Sayer and Mr Tomanovic from co-operating. It appears that the MH group and Multi-own continue to refer work to each other. More importantly, the breakdown in the personal relationship does not appear to have had any significant effect on the business of the MH group in a managerial sense. Because Mr Sayer was already in managerial control of the business before difficulties occurred, he has been able to continue on in much the same fashion. There is no deadlock as Mr Sayer controls 55% of the company. It appears that the business has been operated successfully (subject to the vicissitudes of the credit market) for over 5 years since Mr Tomanovic withdrew from active participation. 237 I have reached the reasonably firm view that grounds for relief under Part 2F.1 have not been established. There remains the question whether the Court should make a winding up order on the just and equitable ground in s 461(1)(k). The possibility that I might do so was very much on my mind during the trial. But I have concluded upon review of all the evidence that the plaintiffs' case in the two equity proceedings is not factually strong. And having considered the submissions of the parties, I have decided that it would be unwise to order the winding up of the viable and now reasonably long-standing business, in circumstances where the breakdown in the shareholder relationship is not materially frustrating the commercially viable and sensible operations of the company."

For the purposes of the appeal, the Appellants do not contest the proposition that: "The winding up GMEC (or other companies in the GMEC group) would cause or facilitate the extinguishment of the rights or practices which sustain the elements described in paragraph 474 of the affidavit of Ken Sayer sworn 7 August 2009."

In that paragraph of his affidavit, Mr Sayer had deposed: "The conduct of the MHA Finance Business as a going concern (and the generation of sustainable income from that business) depends upon the following elements: (a) The continued operation of the Macquarie Wholesale Funding Arrangements (referred to in paragraph 136 above), and the CBA Wholesale Funding Arrangements (referred to in paragraph 229 above). These provide the source of wholesale funds, which are essential for the conduct of on-lending to customers of the MHA Finance Business; (b) Further, the currency of the Macquarie Wholesale Funding Arrangements is necessary for the continued right to earn trailing commission in relation to loans written pursuant to those arrangements; (c) The existence of a working capital facility with the CBA presently in the amount of $7.9 million, which is necessary for supporting the costs of running the MHA Finance Business. The CBA Facility is secured by a series of fixed and floating charges over various entities which are relevant to the operation and conduct of the MHA Finance Business as follows: (i) GMEC; (ii) MHA; (iii) MH Broker; (iv) Paladin Wholesale; (v) Mortgage Loan Company; (vi) Direct Mortgage Solutions ... (d) The maintenance of various regulatory approvals for the conduct of the MHA Finance Business, the most important of which is the Australian Financial Services Licence from the ASIC to Paladin Process ... This licence is required to permit and enable the management and operation of the CBA Wholesale Funding Arrangements; (e) The maintenance of accreditation with lenders pursuant to mortgage origination deeds, relevant to the right to introduce customers to those lenders for the purpose of the lender providing a home loan. This is essential for aspects of the operation of 'mortgage broking' (as described in paragraph 9 to 12 above). Entities conducting the MHA Finance Business which have obtained accreditation include: (i) MHA pursuant to the mortgage origination deed between MHA, Perpetual Trustees Company Limited ACN 000 001 007 in its capacity as trustee of Fidelity Mortgage Trusts and Resimac Limited ACN 002 997 935 ... (ii) Array Home Loans Pty Limited (now known as Mortgage House Broker Services Pty Limited ACN 096 357 596) (' Array' ) pursuant to the mortgage origination deed between Array and St George Bank Limited ACN 055 513 070 dated 8 June 2001 ... (iii) MHA pursuant to the broker agreement between MHA and Westpac Banking Corporation ACN 007 457 141 dated 29 March 2007 ... (iv) MHA pursuant to the commercial origination agreement between Australia and New Zealand Banking Group Limited ACN 005 357 522 and MHA dated 25 July 2005 ... (f) The right to use the 'Mortgage House' trademarks, in respect of which goodwill has developed in a manner which facilitates the generation of new business. As noted in paragraph 118 above, my company KSIPL, in its own right, owns the 'Mortgage House' trademark. There is presently no formal agreement with respect to the licence of the 'Mortgage House' trademark by my company KSIPL to the GMEC Group, which would mandate the continued licence of the mark into the future. In other words, the GMEC Group has no legal right to use the mark for any fixed term into the future. The advertising and marketing expense of the GMEC Group (based on the 'Mortgage House' trademark) was for the years ended: (i) 30 June 2005 - $2,298,160.00; (ii) 30 June 2006 - $2,080,164.00; (iii) 30 June 2007 - $2,673,628.00; and (iv) 30 June 2008 - $747,987.00 (g) The maintenance of a branch network, through which Mortgage House-branded financial products are sold. The branches are operated by independent businesses, which split the income generated from branch with the MHA Finance Business. The relationship with the branches is governed by branch agreements. A copy of an example of which is entitled 'Business Partner Agreement' between MHA, MH Broker Services, Brokerage House Pty Ltd ACN 726 209 054 and Lee Anthony McIntyre (as guarantor) ... The operators who conduct the branch business are at liberty to terminate the Business Partner Agreement on giving 60 days notice without cause."

Both sides in the appeal submit that, if the Court is faced with a choice between a compulsory buyout order and winding up on the just and equitable grounds, the compulsory buyout order would be preferable.

In circumstances where I have concluded that Oppression is made out, and (as appears below) that a compulsory buyout order should be made, there is no reason not to act on that submission. The serious commercial detriment to the companies in the group that the parties agree would arise from a winding up order would in any event make the Court unwilling to follow a course as destructive as ordering the winding up of companies, if any other alternative were available. I will not order the winding up of the companies.

The relief claimed by the Originating Process in each of the Equity Proceedings was an order that the shares of the Tomanovic Interests in GMEC and Argyle HQ be purchased by the Sayer Interests at their fair value, and that it be referred to an Associate Justice to determine that fair value taking into account the oppressive conduct. In my view, a buyout order is the preferable remedy.

However, no submissions were directed to the way in which it was contended that the value of the shares had been affected by the conduct alleged to amount to Oppression. Undertaking a valuation on a counterfactual basis - ie assuming that conduct that has in fact taken place has not taken place - is a difficult process, and gives rise to problems about what should be assumed to be the state of affairs that existed instead of that conduct. In those circumstances, the basis of valuation should be the actual value of the shares bought.

No submissions were made in the court below about the date as at which any such valuation should take place. On the appeal the Court sought submissions on that topic. Mr Muddle pointed out that the possible dates included the date of the start of the Oppression (which he contended was December 2004), and the date of filing of the initiating process, but left the fixing of a date for valuation entirely to the Court (including whether the question of the date for valuation should itself be left to an Associate Judge to determine). Mr Higgs proposed the date as at which the last accounts of the companies had been prepared.

The High Court in Campbell v Backoffice Investments at [178] has made clear that the court has a wide discretion in fixing the date as at which the value of shares should be ascertained for the purpose of a buyout order. In my view it is preferable, on the facts of the present case, to fix a date that is comparatively recent. I recognise that this would have the effect that the Tomanovic interests received both the benefit and the disadvantage of the significant fluctuations that there have been in the mortgage business since 2004. However, no submission is put on their behalf as to why this is inappropriate. The Sayer Interests favour a more recent date of valuation (though it should be recognised that it is more a vote for a recent date than a reasoned submission) and it is often easier to conduct a valuation as at a comparatively recent date. For the want of any better reasoned suggestion, I would order the valuation to take place as at 30 June 2010.

A complication in the granting of relief arises from the fact that the Multiown business was part of the joint enterprise between the Sayer interests and the Tomanovic interests. The original intention to separate their business interests was carried through in part, by the transfer of the Sayer interests' shares in the Multiown companies to the Tomanovic interests, and also by in some fashion the Sayer interests ceasing to hold units in the Multiown trusts. The structure of both the First Heads of Agreement and the Second Heads of Agreement was that the joint interests should be separated by the Tomanovic interests receiving the rights of the Sayer interests in the Multiown business, plus a top-up payment. If there were to be a buyout order that required the Sayer interests to purchase the shares of the Tomanovic interests in GMEC and Argyle HQ for 45% and 50% respectively of the net worth of those companies, without taking into account that the Tomanovic interests have already received the value of the interest in Multiown business that the Sayer interests formerly had, that would not, in the circumstances of the present case, be an order for transfer at a fair value. The fair value must take into account the value of the whole of the consideration that the Tomanovic interests receive. When they have received part of the consideration already, the fair value that the court should order be paid upon transfer of the shares should be 45% and 50% of the value of the respective companies, less the value of the Sayer interest in the Multiown business that the Tomanovic interests have already received.

No attention was paid, at either the trial or on the argument of the appeal, to the way in which the available remedy for Oppression operated in relation to the units in the 9 Argyle Street Unit Trust. Even if the court were to make a buyout order concerning Argyle HQ, that would not have any effect on the beneficial ownership of the assets it held on trust - the beneficial ownership of those assets could be altered only if a buyout order were to be made concerning the units in the 9 Argyle Street Unit Trust. When the Trust has at all times been an important part of the overall commercial group, failure to deal with ownership of units in the Trust would result in any relief granted by the Court not totally resolving the commercial relations between the parties.

There is a question about whether the court would have power to make an order requiring buyout of the interests in the Trust. Various cases seem to lead to the conclusion that there is no such power: Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; Re Bountiful Pty Ltd (1994) 12 ACLC 902; Re Polyresins Pty Ltd [1999] 1 Qd R 599; Surf Road Nominees Pty Ltd v James [2004] NSWSC 61; McEwen v Combined Coast Cranes Pty Ltd [2002] NSWSC 1227; ( 2002) 44 ACSR 244.

However, section 53 Corporations Act has a very wide definition of "affairs of a body corporate" , that extends to matters concerning trustees. It extends to "(a) ... business ... transactions and dealings (... as ... trustee), property (... held as ... trustee)."

In Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428 Davies J at [63]-[69] was of the view that, by virtue of section 53, there was power to grant relief concerning assets that a corporate trustee held on trust.

Vigliaroni has since been questioned in Trust Company Ltd v Noosa Venture 1 Pty Ltd [2010] NSWSC 1334 at [104]-[105].

After judgment had been reserved, further submissions were invited from the parties on that topic. The Respondents' submissions in response to that invitation objected to the matter being raised at this stage, when it was not part of the case of the Appellants at either the trial or on appeal.

Once this objection is taken, it must be acceded to, as the Court is in no position to be satisfied that the availability of relief concerning the units in the Trust could not be affected by facts additional to those investigated at the trial. However, it is likely that it will still be necessary for some aspects of the dealings between the Trust and other corporate entities to be investigated as part of the process of valuing the shares in GMEC and Argyle HQ.

When a buyout order is to be made, it will be necessary to return the matter to the Equity Division to enable the necessary valuations to take place. I would not make an order requiring the valuations to be carried out by an Associate Judge, as the parties should have the opportunity of deciding whether it would be preferable for the valuations to be carried out by an expert, or on a reference, rather than by an Associate Judge.

It is appropriate for a stay of the judgment in the Common Law proceedings to be granted, prima facie until the determination of the valuation process and payment of any amount that the Sayer interests are required to pay to the Tomanovic interests following that process. However, liberty should be reserved to a judge of the Equity Division to vary or dissolve that stay.

At the hearing of the appeal submissions about the type of orders that would be appropriate were made only at a level of broad principle. Uninstructed by any detailed submissions from counsel, the type of orders that presently seem appropriate to give effect to these reasons for judgment are: 1. Appeal allowed. 2. Order Respondents to pay costs of the Appellants of the appeal. 3. Set aside the orders of the court below in each of matters 6278 of 2008 and 6280 of 2008 in the Equity Division of the Supreme Court. 4. In lieu thereof order: a. That Kenneth James Sayer purchase free from encumbrances the shares owned by Zoltan Tomanovic in Argyle HQ Pty Limited (" Argyle HQ ") at a price of 50% of the net value of Argyle HQ as at 30 June 2010. b. That One Australia Pty Limited purchase free from encumbrances the shares owned by Australian Financial Services Corporation Pty Limited in Global Mortgage Equity Corporation Pty Limited (" GMEC ") at a price equal to 45% of the net value of GMEC as at 30 June 2010, minus the value as at 30 June 2010 of the shares in [the relevant Multiown companies] and units in [the relevant Multiown trusts] that were formerly held by [identify the appropriate Sayer shareholder or unit holder]. c. [Costs of first instance proceedings]. 5. Each of the matters 6278 of 2008 and 6280 of 2008 be remitted to the Equity Division for ascertainment, in accordance with directions of a judge of that Division, of the values referred to in 4(a) and (b). 6. Stay the judgment in matter 20107 of 2009 until the purchases referred to in 4(a) and (b) have occurred, or until further or other order of a judge of the Equity Division.

The parts of the draft orders in square brackets would need greater precision, arrived at either by agreement or following further submissions if agreement is not possible.

Aspects of those draft orders to which I should specifically draw attention are: (a) The order for purchase of shares in Argyle HQ has the effect of treating the B share that the Sayer interests hold as being of no significant monetary value. (b) The value of the rights concerning the Multiown business that the Tomanovic interests have acquired is deducted in its entirety from the purchase price payable for the GMEC shares. An alternative approach might be to require the value of the Multiown shares to be deducted from each of the price of the Argyle HQ and the GMEC shares, proportionately to their respective values. (c) There is no provision, such as occurred in the First Heads of Agreement, for any procuring of releases concerning guarantees that a shareholder has given of debts of the company. It is not clear on the evidence whether any such guarantees remain on foot, or secure any substantial indebtedness. If there are ongoing guarantees, some modification of the draft might be appropriate.

The parties should have the opportunity to consider what are the appropriate orders, in light of the actual findings that have been made. To give that opportunity, the only orders I presently propose are the following directions: 1. The parties are to confer promptly about the orders that are appropriate to give effect to these reasons for judgment. 2. If within 21 days of the date of delivery of these reasons for judgment the parties have agreed upon the orders that are appropriate, a minute of the orders signed on behalf of each party be provided to the Associate to Campbell JA. 3. If within 21 days of the date of delivery of these reasons for judgment the parties have not agreed upon the orders that are appropriate, within 24 days of the date of delivery of these reasons for judgment each party is to file in the registry and provide to the Associate of each judge comprising the bench for the hearing of this appeal, a draft of the orders that in the submission of that party are appropriate, together with written submissions in support of the making of those orders.

Since writing to foregoing, I have had the opportunity to read the judgment of Young JA. I agree that it would be appropriate to include orders of the type that his Honour suggests.

MACFARLAN JA : I agree with the orders proposed by Campbell JA and with the reasons that his Honour gives. In particular I agree that, in the circumstances as fully described by his Honour, Mr Sayer acted in a manner that was commercially unfair, and that therefore satisfied the condition stated in s 232(e) of the Corporations Act , in not reinstating Mr Tomanovic to a management role. The principal of these circumstances were that the parties had decided to end their relationship but had not brought that termination to fruition, the trust that had previously existed between the parties had evaporated and Mr Tomanovic's interests were effectively unsaleable for a fair price.

YOUNG JA: This appeal, from a decision of Austin J, has caused me considerable concern.

I have read the very detailed judgment of Campbell JA. I am indebted to his Honour for his thorough summation of the facts, the contentions and many of the decided cases.

The decision to which his Honour has come is one which sounds commercially sensible with one possible exception. I have had, however, considerable misgivings as to whether it is a decision that is open to us on the materials of this case. Courts, when dealing with this sort of problem, must always watch out not to make a decision merely because it is commercially sensible in the case they are deciding (not that I am for a moment suggesting that this is Campbell JA's approach in this case). Each decision of this Court, especially the Court of Appeal, has a strong precedent value for other cases.

The facts and circumstances of this case are, as far as my researches go, fairly unique. My researches have not disclosed a case where the parties have virtually come to an agreement to go their own separate ways, they have then taken some actions to implement that decision, but have stopped short of making a binding agreement or in consummating their decision and then the person who did indicate that he would leave the enterprise, wants to come back in and is met with resistance by his former partner.

I agree with the view that neither the first nor the second decision of the parties, for Mr Tomanovic to be bought out for $6 million or $5 million, amounted to a binding contract. However, I also agree with what Campbell JA said at [191]: "There was a mutual decision by the two men that they should separate their business interests, on the basis that Mr Tomanovic should receive a substantial net payment."

Then I believe it is necessary to see why that decision was not fully implemented. The principal reason seems to be that the parties did not take into account the taxation, particularly capital gains tax, implications in their decision. Having then been alerted to problems, they could not solve them. Secondly, it would seem that the financial crash and the reduced turnover of the business run by FG limited Mr Sayer's ability to pay Mr Tomanovic. Thirdly, so much time passed that the value of the business was reduced far below the $6 million or $5 million that it would have had in 2005 or 2006.

Thus we have the situation of a company which is a 50/50 company, that is, owned equally by two men. Then a decision is made that the two men will go their own way and each will operate part of the business that formerly was operated by the corporate entity in which they were virtually married. The company was a 50/50 held company and I observed in Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; 66 ACSR 359 at 433 et seq, that there were conceptual difficulties in applying the oppression, etc principles in s 232 of the Corporations Act 2001 (Cth) to a 50/50 company unless there were at least individual strong arm tactics by the person who held the other 50%. It was not necessary to decide the point in Backoffice and none of the other judges in the High Court or this Court considered the matter. I think it would be unwise to decide it in this case when there has not been full argument on the point. I will, however, take into account as a factor that ordinarily it is difficult to say there has been oppression in a 50/50 company between two persons of equal strength of character.

The next point that concerned me is whether the situation where the parties have made a decision that their joint enterprise will cease, is so close to a decision to wind up that the remedy provided for in s 461(1)(k) of the Corporations Act was more appropriate. Failure of substratum has been recognised as a sufficient reason for winding up a company ever since Re Suburban Hotel Co (1867) 2 Ch App 737, 750. A company is formed for a particular purpose and once that particular purpose becomes impossible, it should be wound up. In the instant case, the decision of the two men involved in the company to part got the company to this stage.

I would have thought, uninstructed, that, were it not for the more recent attempts of Mr Tomanovic to become re-involved in the company, a just and equitable winding up was almost automatic in this case.

Whilst Austin J was perhaps one of the most experienced corporate lawyers to grace this bench, it is a great pity that the instant case, which was his last case, evidently did not conclude in the time allotted, leaving his Honour very short of time to prepare the final judgment so that there are imperfections in it, not only in the matter of proof-reading. Time obviously just beat the judge and his staff to completing their normal perfect product. With respect to his Honour, his reasoning with respect to just and equitable is a little on the light side. However, I do not consider that there is much purpose in pursuing this matter as it would appear that neither party really does want a winding up (though probably the appellant would prefer that to a dismissal of the case). Even if a winding up order was to be made, then that order should be postponed for 3 months to enable the parties to work out some more commercially acceptable solution.

Accordingly, I come back to the question of whether this case does fit within s 232.

I agree with Campbell JA [174]-[181] that the learned primary judge did err as criticised in ground 2 of the amended notice of appeal. This means, in view of the parties' concession, that this Court must analyse the material to see whether it is appropriate for an order to be made under s 233 of the Corporations Act.

This involves two stages: stage 1: whether there has been conduct of the type which gives the Court jurisdiction to make a compulsory buy-out order; and stage 2: whether, in the Court's discretion, it should make such an order.

As to the first point, it should be observed that the conduct of the Sayer interests should be put into two compartments, compartment (a) before the decision of the men to go their own separate ways; and (b) what happened afterwards.

As to (a), to a considerable extent this conduct has ceased because of changed circumstances. The plurality in the High Court in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at 362 strongly suggested, though did not decide, that the Court had power to make an order under s 233 in respect of past conduct, but it was a matter of discretion. A wise judge follows such strong hints.

However, since the decision to go separate ways, there has been other conduct. That conduct was, to a degree, the result of the fact that the parties had not thought through the taxation implications of their deal. The fact, if it be the fact, that the conduct has occurred without ill will, see eg Thomas v H W Thomas Ltd [1984] 1 NZLR 686, 697, approved by Brennan J in the High Court in Wayde v NSW Rugby League Ltd [1985] HCA 68; 180 CLR 459, 471 is of no real relevancy.

I also agree with Campbell JA that the maxims that have come into use in this area of the law are of limited assistance. To illustrate, I agree with the propositions in the three maxims following, but one must remember that every case has to be looked at on its own facts and circumstances and that, whilst the proposition in each of the maxims is correct, cumulative conduct may produce a different result. The maxims that I have in mind are: A. "The mere fact a person is unable to regain capital or dispose of his or her shares is not a matter of oppression": Lucy v Lomas [2002] NSWSC 448 at [43]; see also Re a Company [1983] Ch 178, 191. B. The emergence of irreconcilable differences is not in itself sufficient to establish oppression: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; 37 ACSR 672, 687. C. There will be no oppression if the plaintiff has refused a reasonable offer to acquire his or her shares: O'Neill v Phillips [1999] 1 WLR 1092, 1107.

Campbell JA said at [205] that the important elements of the commercial unfairness after the decision to separate, are the fact that the Sayer interests seek to keep the value of the equity of the Tomanovic interests locked up in the companies, in circumstances where: (a) the income that the Tomanovic interests used to receive on the basis that it was theirs to keep has stopped being paid; (b) there is no present prospect of the Tomanovic interests receiving income from their shareholding other than at the discretion of the Sayer interests, regardless of how the companies fare; (c) there is no real prospect of the Tomanovic interests selling to anyone else for a fair value; and (d) resumption of the former basis on which the two men co-operated is no longer possible.

I respectfully agree.

Thus, I agree there is power to make an order for buy-out. So far as discretion is concerned, I cannot see any reason why, in the circumstances of this case, the Court should not exercise its discretion in favour of a buy-out and indeed, nothing has been put to us to the contrary.

There was little put to us as to the terms of the buy-out. I have little to say in addition to what Campbell JA has said on this point.

All I wish to note is that I suspect that there are at least two difficulties in the way of the buy-out: (1) valuers agreeing on the value of the shares, even assuming that they are given full and free access to all the necessary material; and (2) if a value can be put on the shares, either by the valuers or by determination by the Court, whether the Sayer interests have the wherewithal to actually make the purchase without disposing of the company's assets.

Accordingly, I consider that there should be liberty to apply to an Associate Justice in the Equity Division with respect to the valuation of the Tomanovic shares and generally, and there should also be liberty to apply to seek an order to wind up the company should the valuation process be unduly delayed or prove to be impracticable. These matters, to my mind, should be included in the formal orders to be drafted by the parties.

Subject to what I have said, I agree with the decision of Campbell JA.