Dodrill v The Irish Restaurant & Bar Co Pty Ltd & Ors [2009] QSC 317

SUPREME COURT OF QUEENSLAND CITATION: Dodrill v The Irish Restaurant & Bar Co Pty Ltd & Ors [2009] QSC 317 PARTIES: JOSEPH MICHAEL DODRILL (first applicant) and JOHN ANTHONY DODRILL (second applicant) v THE IRISH RESTAURANT & BAR COMPANY PTY LTD (ACN 073 727 205) (first respondent) and MULHERN CONSTRUCTIONS PTY LTD (ACN 060 410 102) (second respondent) and MICHAEL RICHARD MULHERN (third respondent) FILE NO: BS 9689 of 2007 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 2 October 2009 DELIVERED AT: Brisbane HEARING DATE: 17 April 2009 JUDGE: Daubney J ORDER: 1. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern forthwith jointly purchase the 19,280 ordinary shares in the first respondent owned by the first applicant for the total sum of $334,875. 2. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern forthwith jointly purchase the 19,280 ordinary shares in the first respondent owned by the second applicant for the total sum of $334,875. 3. The first and second applicants each -- 1 of 18 -- 2 forthwith deliver to the respondents’ address for service in these proceedings an instrument of transfer of the shares referred to in orders 1 and 2 in registrable form and duly executed by them and file an affidavit of service of such instruments of transfer within two business days of such service. 4. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern pay the first applicant the sum of $334,875 within 21 days of the service of a copy of this order. 5. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern pay the second applicant the sum of $334,875 within 21 days of the service of a copy of this order. 6. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern pay the first and second applicants’ costs of and incidental to this proceeding, including reserved costs, to be assessed on an indemnity basis. CATCHWORDS: CORPORATIONS – MEMBERSHIP, RIGHTS AND REMEDIES – MEMBERS’ REMEDIES AND INTERNAL DISPUTES – OPPRESSIVE OR UNFAIR CONTRACT – WHAT CONSTITUTES – GENERALLY – where the third respondent had effective control of the first respondent at all relevant times – where the third respondent disregarded the interests of the applicants as minority shareholders – where the litany of conduct engaged in by the second and third respondents cumulatively and individually meant the affairs of the first respondent were conducted in such a way as to advance the interests of the second and third respondents or entities associated with them – whether the affairs of the first respondent were conducted in a manner which was oppressive to the first and second applicants – whether the second and third respondents should be required to purchase their shares in the applicant Corporations Act 2001 (Cth) Campbell v Back Office Investments Pty Ltd (2008) 62 ACSR 359, cited Dick v Alan Powell Holdings [2008] QSC 219, cited Elder v Elder & Watson Ltd (1952) SC 49, applied -- 2 of 18 -- 3 Foody v Horewood [2007] VSCA 130, cited Rankine v Rankine (1995) 124 FLR 340, considered Re Bright Pine Mills [1969] VR 1002, cited Re Dalkeith Investments (1984) 9 ACLR 247, applied Re Five Minute Car Wash Service Ltd [1966] 1 WLR 745, applied Re H.R. Harmer Ltd [1959] 1 WLR 62, considered Re Spargos Mining NL (1990) 8 ACLC 1218, cited COUNSEL: R Perry SC for the applicants SOLICITORS: Lynch Morgan Lawyers for the applicants No appearance for the respondents [1] The applicants, Joseph Michael Dodrill and John Anthony Dodrill, are shareholders in the first respondent, The Irish Restaurant & Bar Company Pty Ltd. On 30 October 2007, the applicants commenced this proceeding by originating application, seeking orders under s 233 of the Corporations Act 2001 (Cth) (“Corporations Act”). On 15 November 2007, Byrne SJA ordered the originating application to proceed as if commenced by claim, and the parties were ordered to file and serve pleadings. The applicants’ current pleading is the second amended statement of claim filed 28 October 2008. [2] On 27 November 2008, I made specific orders in relation to the disclosure by the respondents of particular documents and classes of documents. That disclosure was ordered to be completed by 11 December 2008, and there was to be inspection of those documents by 18 December 2008. [3] The respondents did not make the required disclosure. On 16 January 2009, Byrne SJA gave the respondents one last chance to get their house in order by ordering that the time for compliance with my orders be extended to 23 January 2009, and further ordering that if the respondents failed to comply then “the defence -- 3 of 18 -- 4 of the respondents shall be struck out and the respondents shall be placed in the same position as if they had not defended the proceeding”. [4] The respondents failed to make the required disclosure within the extended period, and accordingly the self-executing order operated to strike out their defence. [5] I note in passing that an affidavit sworn 15 January 2009 by the third respondent, the then sole director of the second respondent, was filed and read in the hearing before Byrne SJA on 16 January 2009. The third respondent deposed, inter alia, as follows: “5. With no intention to disrespect this honourable Court, and with the greatest respect for this honourable Court, I advise this honourable Court that most unfortunately the respondents have neither the human resources, nor the financial capacity, to defend this matter any further, that therefore the respondents will no longer be defending this matter, and therefore leave it to the applicants to prove up their case. 6. The respondents lack available resources and I lack available resources and time to undertake the necessary steps to continue to defend these proceedings. I reside in New York and due to personal, family, business and financial circumstances, I am unable to travel to Australia for the trial of this matter, which is currently set to commence on 30 March 2009.” [6] On 17 March 2009, on application made in that regard and served on the respondents, I made the following orders: “1. A declaration that the forfeiture of 38,560 ordinary shares held by the First Applicant in the First Respondent and the forfeiture of 19,280 ordinary shares held by the Second Applicant in the First Respondent is void. 2. A declaration that the forfeiture by the First Respondent of 38,560 ordinary shares held by the First Applicant in the First Respondent and of 19,280 ordinary shares held by the Second Applicant in the First Respondent, be set aside. 3. A declaration that the purported cancellation of 38,560 ordinary shares held by the First Applicant in the First Respondent and 19,280 ordinary shares held by the Second Applicant in the First Respondent, is void. -- 4 of 18 -- 5 4. A declaration that the cancellation of 38,560 ordinary shares held by the First Applicant in the First Respondent and the cancellation of 19,280 ordinary shares held by the Second Applicant in the First Respondent, be set aside. 5. The register of shareholders of the First Respondent maintained by the Australian Securities and Investment Commission be rectified to reflect the orders made herein. 6. The First Respondent rectify its Register of Members to reflect the orders made herein. 7. The evidence in the trial of this matter be by way of affidavit and that no other oral evidence be admitted without the leave of the Court. 8. The trial dates allocated to this matter of 30-31 March and 1-3 April 2009 be vacated and the trial be adjourned for hearing before Daubney J in the Supervised Case List on 17 April 2009 at 10.00 am. 9. The costs of this application be costs in the proceedings. 10. The return of the Subpoena issued to Bank of Queensland Limited on 11 March 2009 be adjourned to 9.15 am on 23 March 2009.” [7] This relief was granted to rectify earlier conduct by which the second and third respondents had purported to forfeit and then cancel the shares which the applicants held in the first respondent. None of the respondents put on any material to demonstrate that the requisite meetings for such purported forfeitures and cancellations had been convened, let alone held. [8] After making those orders on 17 March 2009, the only matters then left for determination were the applicants’ claims for orders under Part 2F.1 of the Corporations Act that the second or third respondents purchase all of the applicants’ shares in the first respondent. That was the hearing which was fixed for trial on 17 April 2009. [9] On 1 April 2009, the solicitors who had been acting for the first, second and third respondents sought leave to withdraw as solicitors on the record for those parties. On that day I ordered: -- 5 of 18 -- 6 “1. Subject to order 2, Shand Taylor Lawyers be granted leave pursuant to rule 991 of the Uniform Civil Procedure Rules to withdraw from the record in proceedings number BS 9689/07 as the solicitors for the first, second and third respondents. 2. Shand Taylor Lawyers shall, until further order, remain the address for service of the third respondent, and service on that firm shall be good and effectual service on the third respondent for the purpose of this proceeding. 3. That the first, second and third respondents pay the costs of Shand Taylor Lawyers, of and incidental to this application, to be assessed.” [10] On 17 April 2009, when the matter was called for trial, there was no appearance for the respondents. Service of the affidavit material on which the applicants proposed to rely was proved. [11] The issued capital of the first respondent comprises 385,601 fully paid ordinary shares held as follows: First applicant 19,280 shares Second applicant 19,280 shares Second respondent 288,420 shares Third respondent 781 shares Finawest Pty Ltd 57,840 shares [12] Between 1998 and 20 March 2006, the first respondent conducted a licensed hotel business known as “Dicey Reilly’s Mt Gravatt” in the Garden City Town Square shopping centre. This business, which was the first respondent’s principal asset, was sold on 20 March 2006 for some $5.5 million (plus stock). [13] Between 29 March 2001 and 14 September 2006, the first respondent was also the applicant under a general licence and extended hours permit application in respect of premises at 65-69 Dawson Road, Gladstone. -- 6 of 18 -- 7 [14] The first respondent also holds 18,640,000 partly paid ordinary shares in American Pie Restaurant Pty Ltd (“APR”), a company in which each applicant also holds shares. [15] The third respondent was, from 26 May 1999, the sole director of the first respondent, and, from 23 July 1998, the sole director of the second respondent. The third respondent and his wife Jacqueline hold all of the shares issued in the second respondent. [16] The third respondent was also, from 24 January 2003, a director of APR, the shares in which are held as follows: First respondent 18,640,000 First applicant 330,000 Second applicant 315,000 Second respondent 400,000 Toowong Prime Investments Pty Ltd 315,000 [17] Between 3 October 2003 and July 2004, APR held the relevant licence for, and conducted the business of “Gecko Bar & Grill” from premises at the Garden City Town Square shopping centre. [18] The third respondent was also a director of Celtic Pacific Properties Pty Ltd (“Celtic”). He and his wife were the shareholders of that company. Between 12 May 1997 and 6 December 2004, Celtic held the relevant licence for, and conducted a hotel business under the name of, “Dicey Reilly’s Cleveland” from premises at 22-28 Shaw Street, Cleveland. [19] In short, the first respondent, being the relevant entity in which the applicants are minority shareholders, was engaged in the hospitality business. The third -- 7 of 18 -- 8 respondent, who was the controlling mind of the majority shareholder in the first respondent, was directly or indirectly involved in a number of other ventures in the hospitality industry. [20] Section 232 of the Corporations Act provides: “232 The Court may make an order under section 233 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) contrary to the interests of the members as a whole; 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.” [21] As McPherson J (as his Honour then was) said in Re Dalkeith Investments1 , it is enough “that there is action, which if not “oppressive” is at least “unfairly prejudicial to” or “unfairly discriminatory against” a particular member”. The mere fact that a majority shareholder exercises its power consistently with the articles of association is not of itself oppressive conduct. However, a majority shareholder cannot simply disregard the interests of the minority and ride roughshod over them. Conduct which is legal may still be oppressive. In Re H.R. Harmer Ltd 2 Jenkins LJ accepted a submission that: “... If a person, relying on majority control in a point of voting power dispenses with the proper procedure for producing the result he desires to achieve, and simply insists on this or that being done or omitted, his conduct is oppressive because it deprived the minority of shareholders of 1 (1984) 9 ACLR 247 at 253 2 [1959] 1 WLR 62 at 84-85 -- 8 of 18 -- 9 their right as members of the company to have its affairs conducted in accordance with its articles of association ...”. Adopting the oft-cited approach of Lord Cooper in Elder v Elder & Watson Ltd 3 , the approach of the Court is to view the conduct objectively to see whether it involves at the lowest “a visible departure from the standards of fair dealing, and violations of conditions of fair play, on which every shareholder who entrusts his money to a company is entitled to rely”. [22] “Oppression” involves something more than the minority being dissatisfied with the direction in which a company is taken by the majority. As was said by Buckley J in Re Five Minute Car Wash Service Ltd:4 “The mere fact that a member of a company has lost confidence in the manner in which a company’s affairs are conducted does not lead to the conclusion that he is oppressed; nor can resentment at being outvoted; nor mere dissatisfaction with or disapproval of the conduct of the company’s affairs, whether on grounds relating to policy or to efficiency, however well founded. Those who are alleged to have acted oppressively must be shown to have acted at least unfairly towards those who claim to have been oppressed.” [23] There is ample authority for the proposition that directors or controlling shareholders act oppressively if they pursue a course of conduct designed by them to advance their own interests or the interests of others of their choice to the detriment of the company or other shareholders.5 [24] It is unnecessary for me to embark on further discussion of the individual elements of unfair prejudice and unfair discrimination which appear in s 232 because, as will shortly be apparent, I am firmly of the view that the evidence discloses a clear case of oppression, as that term is conventionally understood in the context of s 232. 3 (1952) SC 49 at 55 4 [1966] 1 WLR 745 at 751 5 See Re Bright Pine Mills [1969] VR 1002; Re Spargos Mining NL (1990) 8 ACLC 1218 -- 9 of 18 -- 10 [25] The affidavits filed on behalf of the applicants set out a litany of conduct engaged in by the second and third respondents which, individually and cumulatively, leave little room for doubt that the affairs of the first respondent were conducted in a way which was unfair to the applicants, was to their detriment, and advanced the interests of the second and third respondents, or other entities associated with them. This conduct can be summarised as follows: - In 2001, the first respondent applied for, and was granted, the general licence and extended hours permit for a hotel business to be known as “Dicey Reilly’s Gladstone” from premises at 65-69 Dawson Road, Gladstone. In July 2003, without any consultation with the applicants, the third respondent caused the first respondent to advise the relevant department that it no longer wished to obtain the liquor licence for the Gladstone premises, and on 3 January 2006, the third respondent, in his capacity as sole director of Dicey Reilly’s Gladstone Pty Ltd, applied for a new general liquor licence for premises situated at 71-77 Dawson Road, Gladstone. In short, the third respondent caused the first respondent to relinquish the provisional liquor licence it held and effectively diverted that commercial opportunity to a company associated with himself. - On 23 May 2005, the first respondent executed a Deed of Acknowledgment of Debt by which it acknowledged a purported debt in the sum of $94,000 as owing to the second respondent, and on which the interest rate charged was 15 per cent per annum. In fact, the first respondent had no necessity to borrow any money from the second respondent in May 2005. - The third respondent caused the financial accounts for the first respondent for the financial years ended 30 June 2003 and 30 June 2004 to be published, in which claims were made that payments for gaming machine licences and monitoring fees and for a “Keno” licence were proper expenditures of the first respondent. In fact, the first respondent never had a licence to operate the “Keno” gaming system, nor did it hold a gaming licence of any kind which would permit it to operate gaming machines. In short, the accounts of the first respondent were prepared in such a way as to claim as expenditure payments which were not lawful expenses of the respondent. It would appear, in fact, that these gaming machine expenses were incurred in respect of the Dicey Reilly’s Cleveland business, where gaming machines were installed. That business was owned and operated by another of the third respondent’s companies, Celtic. - The third respondent caused the first respondent to fail to prepare and provide financial reports and a director’s report for the financial years -- 10 of 18 -- 11 ended 30 June 2005 and 30 June 2006, and thereby breached his duties under s 180 of the Corporations Act. - The third respondent, until subject to an order of this Court, caused the first respondent to refuse to provide inspection of the first respondent’s books and records, contrary to s 247A and his duties under s 180 of the Corporations Act. - The third respondent caused the first respondent to encumber its property to Westpac Banking Corporation to secure the indebtedness of one of the other of the third respondent’s companies, and not for any bona fide business purpose or benefit for the first respondent or its members. Similarly, the third respondent caused chattels owned by the first respondent to be encumbered to Bank of Queensland to support indebtedness of the second respondent to that institution. - The third respondent misappropriated money received by detached bottle shops operated by the first respondent and used that money for his own purposes. - The third respondent caused the first respondent not to pay any dividends to the applicants, notwithstanding the receipt by the first respondent of some $5.7 million on the sale of the first respondent’s business and stock in March 2006. - The financial statements for the first respondent for the period ended 30 June 2006 disclose the payment of management fees totalling $2.3 million by the first respondent to the second respondent. In fact, no management agreement was ever entered into by the first respondent in favour of the second respondent. The applicants knew nothing of the payment of any such management fees from the first respondent to the second respondent until they had disclosure of the first respondent’s financial statements in this proceeding. There was no resolution of the Board authorising such payment nor, given the fact of the sale of the principal asset of the first respondent, can it be said that there was a bona fide commercial or business benefit for the first respondent or its shareholders in paying management fees in that amount to the second respondent. - The third respondent caused the first respondent to pay the third respondent and his wife in excess of $200,000 in wages for the period from 21 February 2006 – March 2007 in circumstances in which the first respondent had ceased trading on 20 March 2006 consequent upon the sale of the business. There was no bona fide commercial or business benefit for the first respondent or its shareholders in those payments being made. - The third respondent caused the first respondent to pay the $95,000 deposit and the balance proceeds of sale of the business away from the first respondent without any accounting to any of the shareholders in respect of the dissipation of those funds. -- 11 of 18 -- 12 - On 10 April 2008, the third respondent procured the first respondent to purport to forfeit and then cancel the shares held by each of the applicants in the first respondent. As already noted, on 17 March 2009, I made orders to remedy that unlawful conduct in respect of the applicants’ shares. - On 8 May 2008, while these proceedings were on foot, the first respondent, by Mr David Mulhern (the third respondent’s son, who was at that time the sole director of the first respondent) filed an application with ASIC for voluntary deregistration of the first respondent, declaring, inter alia, that “the company is not a party to any legal proceedings”. The irresistible inference is that this application was made for the purpose of stifling the relief sought by the applicants in the present proceedings. [26] As I said above, it is clear that the third respondent, who had effective control of the first respondent at all relevant times, acted in complete disregard of the interests of the applicants as minority shareholders. Accordingly, I am satisfied that the affairs of the first respondent were conducted by the second and third respondents in a manner which was oppressive to the first and second applicants. [27] The relief sought by the applicants consequent on that finding of oppression is that the second and third respondents purchase their shares in the applicant. The power to order a purchase of the applicants’ shares by the second and third respondents is specifically conferred by s 233(1)(d) of the Corporations Act. [28] In Rankine v Rankine 6, Thomas J (as he then was), with whom Macrossan CJ and McPherson JA agreed, said at 345-346: “In granting a remedy in favour of an oppressed shareholder under CL s 260(2)(e) or 260(2)(f) by ordering the compulsory purchase of the applicant’s shares at a stated price, the court is in effect awarding compensation for the respondents’ breach of duty. The nature of the duty is both subtle and complex, and not capable of exhaustive definition, but the most useful expressions of it are collected in McPherson, The Law of Company Liquidation, 3rd ed, Donovan, pp 143-44. One such expression describes it as a duty of probity and fair dealing (Meyer, above, 364, per 6 (1995) 124 FLR 340 -- 12 of 18 -- 13 Lord Keith). The compensatory nature of the remedy is recognised by Lord Denning in Meyer at 369, in Re a Company No 002612 of 1984 (1986) 2 BCC 99, 495 and in Coombs v Dynasty, above, at ACLC 918. The ultimate finding of the price that should be paid cannot be made until the nature and effect of the oppression has been identified and its effect quantified or allowed for. By contrast a valuation of shares on the basis of the value of the company as a going concern, or by reference to its underlying assets, as has been directed in this case, is a conventional valuation exercise without adjustments for the oppression factors.” [29] Section 233 confers a wide discretion on the Court as to the order or orders to be made consequent upon a finding of oppression. It is clear that the discretion is exercised to mould a remedy appropriate to each particular case. [30] In the present case in which, on the evidence, part of the oppressive conduct consisted in dissipation of the first respondent’s assets to the detriment of the applicants, the appropriate relief to effect justice in this case is to order the second and third respondents to purchase the applicants’ shares at values which properly compensate for the oppressive conduct which has occurred. [31] The question, then, is the price which the second and third respondents should be ordered to pay. The general rule is that the valuation of the shares to be transferred must be fair on the facts of the particular case.7 [32] In the present case, the evidence discloses: (a) The first respondent’s principal, if not sole, asset was the “Dicey Reilly’s Mt Gravatt” business; (b) In 2003, a valuation of that business was obtained for Bank of Queensland at a time when financing for certain construction works was being sought. The business was valued at $6.5 million in late 2003, with an anticipated value of $7.3 million after completion of the construction works; (c) The construction works included the establishment of detached bottle shops, and this work was subsequently completed; 7 Dick v Alan Powell Holdings [2008] QSC 219 at [17]. -- 13 of 18 -- 14 (d) On 23 February 2004, the third respondent proposed a share redistribution offer to the applicants concerning not only the first respondent but other companies in which they were involved with the first respondent. The value ascribed by the third respondent to the business of the first respondent for that purpose was $7.3 million; (e) On 16 April 2004, the third respondent excluded the applicants from the first respondent’s business; (f) The first respondent’s business was sold in an arms-length transaction on 20 March 2006 for $5.5 million plus stock of approximately $225,000; (g) The first respondent did not trade after 20 March 2006; and (h) All of the proceeds of that sale have been dissipated from the first respondent’s accounts. [33] Each of the applicants has a five per cent interest in the issued capital of the first respondent. [34] The date to be chosen by the Court for the valuation of the oppressed parties’ shares must be that which leads to a value which is fair in all of the circumstances.8 [35] The applicants’ primary submission is that the appropriate date for valuing their shares is 16 April 2004, that being the date on which they were excluded from the business of the first respondent. Alternatively, it is contended that the shares ought be valued as at the date of the sale of the first respondent’s business, 20 March 2006. [36] For this purpose, evidence has been obtained from Mr David Williams, Chartered Accountant, who has extensive experience in the valuation of businesses, including in the hospitality industry. Mr Williams has provided a report in which, doing the 8 Foody v Horewood [2007] VSCA 130 at [35]; Campbell v Back Office Investments Pty Ltd (2008) 62 ACSR 359. -- 14 of 18 -- 15 best he can on the relatively limited information made available because of the respondents’ failure to make full and proper disclosure of the first respondent’s financial documents, he provides a valuation of the first respondent at each of those dates, namely 16 April 2004 and 20 March 2006. [37] As to the valuation as at 16 April 2004, the only independent evidence available to Mr Williams was the valuation prepared for Bank of Queensland, to which I have referred, in which the leasehold interest in the business as at 18 July 2003 was valued at $6.5 million “as is” and at $7.3 million on completion of the planned works. Mr Williams also notes the sale of the business on 20 March 2006 to an independent third party for $5.5 million plus stock at $224,491, giving a total value at that date of $5,724,491. Mr Williams concludes: “As at 16 April 2004 7.4 On the basis that I have no reason to doubt the validity of the Trewin valuation nor do I suspect that it was prepared on anything other than an Independent bona fide basis, it is my opinion that the fair value of the business as at 16 April 2004 was more than likely to fall somewhere between the Trewin valuation figures of $7,300,000 and the actual sales price that was achieved on 20 March 2006 of $5,500,000 plus stock of $224,491 being a total of $5,724,491, adopt $5,700,000. 7.5 I have used the higher Trewin valuation figure of $7,300,000 which is the “On Completion” figure as the top end of the range because I am advised that the work to be completed related to the bottle shops and that this work had in fact been completed. 7.6 I am advised by the Applicants that the business was run down between the time of their exclusion from the business and the date of sale in March 2006. While I cannot independently verify the Applicant’s claim, if it were found to be true the value of the business would more than likely be closer to the higher end of the range than the lower end. As at 20 March 2006 7.7 Based on an absence of better evidence I have adopted as the value of the business as at 20 March 2006, the independent sale price that was achieved at that date. -- 15 of 18 -- 16 7.8 I have therefore valued the business as at 20 March 2006 at $5,724,491, adopt $5,700,000.” [38] Whilst I would concede that there are cogent arguments in favour of a finding that the appropriate date for the valuation ought be the earlier date when the applicants were excluded from the business, it seems to me, in the particular circumstances of this case, that the more appropriate date is that when the oppression against the applicants indubitably crystallized with the sale to an independent third party of the first respondent’s business. It is no coincidence that this sale, the price of which is not impugned by the applicants, provides the best evidence of the actual value of the first respondent as at 20 March 2006. Even if I had been inclined to undertake the valuation exercise as at the earlier date, at which the value of the first respondent was estimated as high at $7.3 million, I would in such an exercise have discounted the value to be ascribed to the applicants’ shareholdings by virtue of their being minority shareholders. On the basis, however, that as at 20 March 2006, the first respondent neither had excess assets over and above the business sold nor liabilities of which account needed to be taken, the starting point for each applicant’s shareholdings is five per cent of the 20 March 2006 total sale price (rounded to $5.7 million), yielding $285,000 for each. [39] Some further allowance also needs to be made to take account of the fact that, in fixing a current sale price, the applicants have effectively been denied the value of their shares since the sale of the business in March 2006. For the purpose of fixing a fair sale price as at today’s date, I propose increasing the value by a simple interest component calculated at five per cent for three and a half years since the sale of the business. The sale price for each of the applicant’s shares will therefore be $334,875. -- 16 of 18 -- 17 [40] Finally, the applicants seek their costs of and incidental to this proceeding on an indemnity basis. In appropriately robust submissions, counsel for the applicants described the second and third respondents’ conduct of these proceedings as “nothing but a complete disgrace”, referring not least to the fact that the respondents failed to comply with many of the interlocutory orders and directions made against them, including numerous self-executing orders which culminated in the respondents’ defence being struck out. A bare review of the file and the material filed in support of the application discloses an ongoing pattern of conduct by the respondents designed to stifle the litigation, including by lodgement of the voluntary registration form with ASIC to which I have referred above, failure to provide inspection of documents pursuant to s 247A of the Corporations Act, and non- compliance with orders and directions for disclosure of the first respondent’s financial records. Apart from the self-executing orders to which I have already referred, it is relevant to note that, consequent on the refusal to provide access to the first respondent’s financial documents, the applicants were compelled to bring a related application (in court file 2497 of 2008) for orders under s 247A of the Corporations Act to allow the applicants to inspect the first respondent’s books. Dutney J made orders in that regard on 4 April 2008 and 1 May 2008, but the respondents failed to permit such inspection. That failure was the catalyst for Dutney J then to make, on 11 June 2008, orders in the present proceeding to the effect that if his Honour’s orders of 4 April and 1 May 2008 were not complied with by 23 July 2008, the respondents’ defence in this proceeding would be struck out and the second and third respondents would be ordered to purchase the applicants’ shares. On 12 August 2008, I ordered that time for compliance with those orders be extended to 20 August 2008. The pattern of non-compliance, or avoidance of compliance, with orders continued. It -- 17 of 18 -- 18 seems to me in all the circumstances that this is an appropriate case in which the second and third respondents ought be ordered to pay the applicants’ costs on an indemnity basis. [41] Accordingly, it is ordered that: 1. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern forthwith jointly purchase the 19,280 ordinary shares in the first respondent owned by the first applicant for the total sum of $334,875. 2. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern forthwith jointly purchase the 19,280 ordinary shares in the first respondent owned by the second applicant for the total sum of $334,875. 3. The first and second applicants each forthwith deliver to the respondents’ address for service in these proceedings an instrument of transfer of the shares referred to in orders 1 and 2 in registrable form and duly executed by them and file an affidavit of service of such instruments of transfer within two business days of such service. 4. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern pay the first applicant the sum of $334,875 within 21 days of the service of a copy of this order. 5. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern pay the second applicant the sum of $334,875 within 21 days of the service of a copy of this order. 6. Mulhern Constructions Pty Ltd (ACN 060 410 102) and Michael Richard Mulhern pay the first and second applicants’ costs of and incidental to this proceeding, including reserved costs, to be assessed on an indemnity basis. -- 18 of 18 --