FEDERAL COURT OF AUSTRALIA

Concrete Mining Structures Pty Ltd v Cellcrete Australia Pty Ltd (No 3) [2017] FCA 1483

ORDERS

THE COURT ORDERS THAT:

1.    The Cross-Claim brought by the Second Cross-Claimant dated 7 December 2015 be dismissed with the Second Cross-Claimant to pay the Cross-Respondents’ costs, including the costs of the Cross-Respondents’ interlocutory application dated 9 October 2017.

2.    The Applicant’s proceedings against the Second Respondent be dismissed, with the Applicant to pay the costs of the Second Respondent.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BURLEY J:

1.    Introduction

1    Concrete Mining Structures Pty Ltd (CMS) commenced proceedings against Cellcrete Australia Pty Ltd (Cellcrete) and its director, David Reiniger, in July 2015. The proceedings involved a claim by CMS against Cellcrete for unjust enrichment and under both limbs of Barnes v Addy (1874) LR 9 Ch App 244 and claims against Mr Reiniger including for breach of fiduciary duties, breach of confidence and infringement of copyright.

2    In December 2015, Cellcrete and Mr Reiniger brought a Cross-Claim against CMS and two of its directors, Mr Holt and Mr Pallas. In broad terms, Cellcrete and Mr Reiniger allege that Mr Holt and Mr Pallas conducted the affairs of CMS in an oppressive manner and that Mr Holt and Mr Pallas caused CMS to refuse to pay nearly $500,000 in invoices to Cellcrete. Cellcrete and Mr Reiniger also allege that CMS, caused by Mr Holt or Mr Pallas, converted equipment which Cellcrete delivered to CMS.

3    On 8 March 2017 Cellcrete was placed into liquidation. On 2 August 2017 a meeting was held passing a resolution that CMS be voluntarily wound-up and that a liquidator be appointed. On 9 October 2017 CMS was placed in liquidation. Predictably enough, these events had a significant effect on the litigation. On 8 September 2017 I made orders by consent that the claim brought by CMS against Cellcrete (then in liquidation) be dismissed and that the Cross-Claim brought by Cellcrete against CMS also be dismissed. The liquidator of CMS has now indicated that he does not wish to pursue its claim against Mr Reiniger and consents to the dismissal of that claim. He contends that I should order that the claim should be dismissed with no order as to costs, but I see no reason why the normal order should not be made, namely that the claim be dismissed with costs.

4    As a consequence, the residue of the proceedings on foot is the Cross-Claim brought by Mr Reiniger against CMS, Mr Holt and Mr Pallas.

5    On 9 October 2017 CMS filed an interlocutory application seeking orders pursuant to r 26.01(1)(a) of the Federal Court Rules 2011 (Cth) for the summary disposal of the residue of the Cross-Claim. At the hearing of the application Mr Wood, who appeared with Mr Avery-Williams for Mr Holt and Mr Pallas, indicated that his clients join in the application. Prior to the hearing, the parties provided written submissions and filed affidavits upon which they relied. Mr Reiniger represented himself at the hearing, however, he is not resident in Australia and did not attend the hearing in person but rather made submissions by telephone from Mexico. Mr Metlej appeared for the liquidator of CMS.

2.    The Cross-Claim

6    The orders sought in the Notice of Cross-Claim are in two parts. In the first part Cellcrete claims an order that CMS pay it the sum of $496,583.79 in payment of unpaid invoices, an order that CMS return to Cellcrete some equipment or alternatively damages for conversion of that equipment, and interest. In the second part, Mr Reiniger claims, pursuant to s 233(1) of the Corporations Act 2001 (Cth) (Act) a declaration that CMS has conducted its affairs in a manner that is oppressive to, unfairly prejudicial to or unfairly discriminatory against Mr Reiniger or contrary to the interests of the members of CMS as a whole, and an order that CMS, Mr Holt or Mr Pallas purchase Mr Reiniger’s shares in CMS at a price to be determined by the Court. Alternatively, he claims an order that CMS be wound-up or alternatively an order regulating the conduct of the affairs of CMS in the future that the Court considers appropriate. Costs are also sought.

7    In the Statement of Cross-Claim, Mr Reiniger alleges he is the sole director and shareholder of Cellcrete and was a director of CMS from about 2 April 2013 to about 29 April 2015, and that since December 2012 Mr Holt and Mr Pallas have been directors of CMS also. He alleges that he became the holder of 150 shares in CMS in October 2013 at which time 80 shares were held by an entity controlled by Mr Pallas, 20 shares were held by C&S Investments (CS) No 2 Pty Limited and 150 shares were held by Strata Linings Pty Limited, a company controlled by Mr Holt. Mr Reiniger’s claim against Mr Holt and Mr Pallas is expressed in terms of the manner in which they conducted the affairs of CMS from April 2013 onwards, which the Cross-Claim pleads was “contrary to the interests of the members of CMS as a whole” and “oppressive to, unfairly prejudicial and unfairly discriminatory against [him]”.

8    In summary, the matters alleged to give rise to this claim are that:

(a)    Between 2 April 2013 and 29 April 2015 Mr Holt and Mr Pallas held no meetings of the directors of CMS or alternatively if they did, did not invite Mr Reiniger to attend such meetings and instead controlled the management of the business of CMS to the exclusion of Mr Reiniger and did so in a manner contrary to its interests and denied Mr Reiniger reasonable access to the business records of CMS.

(b)    Since 2 April 2013 Mr Holt and Mr Pallas have held no meeting of the CMS shareholders or alternatively if they did, did not invite Mr Reiniger to attend any meeting which was held.

(c)    In early 2015 Mr Reiniger offered to sell his shares in CMS to certain third parties but was denied the opportunity to complete any sale by Mr Holt and Mr Pallas because they refused to meet with or assist in any sale and threatened legal proceedings against the third parties to whom the offer was made;

(d)    In November 2014 and October 2015 Mr Holt and Mr Pallas caused CMS to file applications for certain patents, naming Mr Reiniger as a co-inventor without his knowledge or approval, and “contrary to the interests of Mr Reiniger and Cellcrete”;

(e)    In July 2015 Mr Holt and Mr Pallas caused CMS to commence the present proceedings against Cellcrete and Mr Reiniger and in August 2015 caused CMS to seek interim injunctions against Cellcrete and Mr Reiniger which, had they been granted, would have had the effect of restraining them from conducting their business;

(f)    Between 2012 and 2015 Mr Holt and Mr Pallas caused CMS to refuse to pay invoices issued by Cellcrete to the value of $496,583.79;

(g)    Mr Holt and Mr Pallas caused CMS to convert a continuous mixer known as a CM1000 and a specialised valve bank that was owned by Cellcrete to its own use.

9    Mr Reiniger and Cellcrete were legally represented at the time that the Notice of Cross-Claim and Statement of Cross-Claim were filed.

3.    The Arguments

10    The cross-respondents submit that a claim for relief will be summarily dismissed as disclosing no reasonable cause of action only where it is so obviously untenable that it cannot possibly succeed. See generally; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 135.

11    They focus upon the relief sought by Mr Reiniger in contending that the residue of the cross-claim should be dismissed.

12    First, they submit that there is no practical utility in the proceedings continuing, that the litigation has exhausted the financial resources of both corporate parties and that the orders sought in the Cross-Claim would have no prospect of being made, citing Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 (Campbell) at [179]. They submit that the evidence contained in the liquidator’s Initial Notice to Creditors dated 13 October 2017 and tendered in the application indicates that there is likely to be a nil return to shareholders after the liquidation is complete, with the consequence that the shares in the company have no value.

13    Secondly, they submit that were the proceedings to continue, they must be constituted properly. At present Mr Reiniger seeks relief in the form of a declaration and orders concerning the conduct of the affairs of CMS and the compulsory purchase of his shares in CMS. However, it is necessary for Mr Reiniger to obtain leave of the Court to continue the action against CMS in liquidation, pursuant to s 471B of the Act. CMS is a proper party to the proceedings, but no application has been made seeking leave, and leave would not be granted in the present circumstances; citing O D Transport (Australia) Pty Ltd (In liquidation) & Ors v O D Transport Pty Ltd & Ors (1997) 80 FCR 290 (O D Transport) at 293 and 294.

14    Thirdly, the cross-respondents point to the fact that Mr Reiniger is not in fact a shareholder of CMS and accordingly has no standing to bring oppression proceedings pursuant to s 233(1) of the Act in any event. This, they submit, is because on 7 June 2016, CMS held a meeting at which a resolution was passed to call on Mr Reiniger’s unpaid shares. Mr Reiniger was notified of the resolution but failed to pay the amount the subject of the call. A further meeting was conducted on 16 August 2016 and the shareholders resolved that Mr Reiniger’s shares were forfeited. A further meeting held on 21 August 2016 resolved that the forfeited shares were cancelled. As a consequence, the cross-respondent’s contend that Mr Reiniger now has no shares in the company and accordingly has no standing to bring the present proceedings. It should be noted that Mr Reiniger, in his evidence in opposition to the interlocutory application, contested the factual basis upon which this argument was put forward and contends that he remains a shareholder. In oral argument, Mr Wood accepted that this evidence gives rise to a factual dispute between the parties which cannot be resolved in the present interlocutory application. However, he submits that as a matter of fact, the share register does not reflect the ownership of any shares by Mr Reiniger. It is necessary for Mr Reiniger to bring separate proceedings against the company to restore his shares to it, a step that is anterior to the resumption of the present proceedings. The cross-respondents submit that Mr Reiniger would need leave to bring such proceedings against the company.

15    In support of their arguments, the cross-respondents rely on an affidavit filed by the second cross-respondent, Mr Holt, who deposes to matters relevant to the asserted forfeiture and cancellation of Mr Reiniger’s shares. They also rely on an affidavit sworn on 9 October 2017 by David Kyle Sutherland, solicitor for CMS, deposing to the circumstances of the appointment of the liquidator, Mr Porter. They also tendered an ASIC search of CMS created on 12 October 2017 and an Initial Notice to Creditors supplied by Mr Porter dated 13 October 2013 and extracted from the ASIC database on 14 November 2017.

16    Mr Reiniger contests the interlocutory application and has filed several affidavits in answer to it. The affidavits that he read in the application were dated 2 October 2017, 4 October 2017 and 23 October 2017. It might be noted that each of these affidavits was poor in form and did not appear to have been signed and witnessed. Each took the form of a two page coversheet which indicates that Mr Reiniger either swore or affirmed that coversheet at a place called Monterrey in Nuevo Leon, which is apparently in Mexico. Each annexes a document entitled ‘Affidavit/ Submission’ that provides a composite of submissions addressing a wide variety of issues, some relating to the application, some relating to the Cross-Claim and some relating to completely separate proceedings such as NSD50/2017, which are described by Mr Reiniger as “False Liquidation Proceedings against Cellcrete”. For the purpose of the interlocutory application I received each of these affidavits but I note that the submissions themselves do not amount to evidence.

17    In his submissions, Mr Reiniger accepts that CMS is a company without assets. He does not wish to pursue the company, which he submits is a mere shell. His substantive complaint is against the directors of the company, who, he submits, caused CMS to be in its current predicament. In his written submissions Mr Reiniger contends that he and Cellcrete have lost over $10 million in sales and that because of the conduct of the directors of CMS they have “destroyed” the investment of its shareholders. Mr Reiniger provides detailed submissions as to the alleged misconduct of Mr Holt and Mr Pallas, many of which traverse matters well beyond the scope of the case set out in the Statement of Cross-Claim.

18    In the annexure to his 4 October 2017 affidavit Mr Reiniger states (emphasis in original):

We have over 40 Affidavits already filed that support our above statements to fully negate any possible defence that Mr Holt and Mr Pallas may try and come up with. Their previous Sworn Affidavits easily confirm that they they [sic] were Reckless, Defaming, Oppressive Intentionally started this matter to Interfere with the business of Cellcrete and Reiniger. They have no defence available to them at all.

19    This statement follows a submission addressing matters raised in the Cross-Claim, matters raised in the claim by CMS and a chronology of events of alleged oppressive behaviour by Mr Holt and Mr Pallas.

20    In the annexure to his affidavit of 23 October 2017, Mr Reiniger states (emphasis in original):

We are seeking more than $10,000,000.00 to recover Lost Sales Revenue since Mid 2014 thru to current date; when they intentionally caused our business to completely STOP when they started refusing to pay our Invoices and Filed NSD775/2015.

We also seek $5,000,000.00 in Direct, and/or Consequential and/or Incidental Damages caused by Mr. Holt and Mr. Pallas, CMS and other Shareholder Dunshea for: Financial Hardship, Pain and Suffering to my family and myself for this period. We provide further support to The Court in these matters and cover more of the issues in our Sworn Affidavit 418406 dated 11/02/2017.

We have now provided The Court with sufficient and very convincing evidence, found within their own Sworn Affidavits and Submissions; and that Mr Holt and Mr. Pallas have absolutely no possible means of defence in this matter, as it is impossible for them to remedy their own self inflicted damages; CMS/Holt/Pallas and Dunshea are now regretting ever starting this, and they should reflect on their own behaviour, particularly as the record already shows, that I did attempt to broker an outcome with them which we could all live with back in May 2015. They flatly refused to even engage with me at that time; and therefore, a Summary Judgement made by His Honour is indeed applicable in this matter at hand.

We also request that Mr. Holt, Pallas and Dunshea (CMS) send out a retraction letter to Industry, Approved by Myself, explaining their Deceit and Wrongful Intentions to damage the business of Cellcrete and Reiniger; and all Patent Applications concerning Cellcrete/Reinigers Equipment and Processes that CMS/Valcrest/Peter Holt et al any others have attempted, be halted, ceased and never put forward again by anyone.

4.    Consideration

21    It is apparent from Mr Reiniger’s submissions that the focus of his attention is upon pecuniary relief against Mr Holt and Mr Pallas. However, the interlocutory application draws attention to the relief that Mr Reiniger actually seeks in his Cross-Claim, and it is to that relief and the basis upon which it is sought, as set out in the Statement of Cross-Claim, that I must have regard in considering the question of summary dismissal. The relief that Mr Reiniger seeks in his Notice of a Cross-Claim is limited and specific. It is as follows:

On the grounds stated in the Statement of Cross-Claim the first Cross-Claimant (“Cellcrete”) claims:

1.    An order that the First Cross-Respondent (“CMS”) pay Cellcrete the sum of $496,583.79 in payment of the unpaid invoices referred to in paragraph 22 of the Statement of Cross-Claim.

2.    An order that CMS return to Cellcrete the CM1000 and the valve bank referred to in paragraph 25 of the Statement of Cross-Claim, or alternatively, damages for conversion.

3.    Interest.

On the grounds stated in the Statement of Cross-Claim, the Second Cross-Claimant (“Mr Reiniger”) claims, pursuant to section 233(1) of the Corporations Act 2001:

4.    A declaration that the CMS [sic] has conducted its affairs in a manner that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against Mr Reiniger, or contrary to the interests of the members of CMS as a whole

5.    An order that the CMS [sic], Mr Holt or Mr Pallas purchase Mr Reiniger’s shares in CMS at a price to be determined by the court.

6.    Alternatively to order 5, an order that CMS be wound-up.

7.    Alternatively, any order regulating the conduct of the affairs of CMS in the future that the court considers appropriate.

22    I have noted above that on 8 September 2017 the application for the relief sought in [1], [2], and [3] of the Notice of Cross-Claim was dismissed by consent. I have also noted that since 8 March 2017 Cellcrete has been in liquidation. Accordingly, the alternative relief sought in [6] and [7] has, in effect, been achieved and is accordingly now redundant and should be struck out. This leaves for consideration the relief sought in [4] and [5].

23    In considering these paragraphs I have had regard to the power of the Court pursuant to the Federal Court Rules 2011 (Cth) and the overarching purpose of justly resolving disputes according to law, as quickly, inexpensively and efficiently as possible pursuant to s 37M of the Federal Court of Australia Act 1976 (Cth).

24    It is relevant to note that in C v Commonwealth of Australia [2015] FCAFC 113; (2015) 235 FCR 81 (Tracey, Buchanan and Katzmann JJ) said as follows:

56    Both the Federal Circuit Court and this Court have power, under s 17A of the FCCA Act and s 31A of the FCA Act respectively, to give judgment for a respondent if the Court is satisfied that the applicant “has no reasonable prospect of successfully prosecuting the proceeding …”. Complementary powers are also to be found in the Rules of both courts: see r 13.10(a) of the FCC Rules and r 26.01(1)(a) of the FCR.

57    In Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited (2008) 167 FCR 372, Gordon J noted (at 406) that s 31A was introduced in order to extend “the power of the court to deal with unmeritorious matters by broadening the grounds on which federal courts can summarily dispose of unsustainable cases”. Even so, the power is to be exercised cautiously: Spencer v The Commonwealth (2010) 241 CLR 118 at 141.

58    As both sections expressly provide, an applicant may have “no reasonable prospect of successfully prosecuting [a] proceeding” even if the application cannot be characterised as either hopeless or bound to fail. These provisions, as Lindgren J held in White Industries Australia Limited v Federal Commissioner of Taxation (2007) 160 FCR 298 at 310, were designed “to lower the bar for obtaining summary judgment” from the level that had been fixed by the High Court in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91-92 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-30. In determining whether the claim has “no reasonable prospect” of success weight must be given to the expression as a whole and expressions such as “untenable” or “groundless”, whether or not used in conjunction with “intensifying epithets” such as “clearly” or “manifestly” should not be adopted as substitutes for the statutory language: Spencer at 141.

59    The Court is required to apply its rules in a way that best promotes the overarching purpose of justly resolving disputes according to law as quickly, inexpensively and efficiently as possible: see s 37M of the FCA Act. In circumstances in which, as a matter of law, an applicant lacks the necessary status or standing to commence or prosecute a particular proceeding that person’s application for relief can have no reasonable prospect of success. That is the position here. The parties should not be forced to incur the costs of preparing for and conducting what is likely to be a lengthy trial.

25    In this regard I have already noted that pursuant to r 26.01(1)(a) of the Federal Court Rules 2011 (Cth), in order to succeed the cross-respondents must establish that Mr Reiniger has no reasonable prospect of securing the relief which he seeks. In determining whether there is a reasonable prospect, the Court must make a practical judgment as to whether or not Mr Reiniger has more than a “fanciful” prospect of success: see Polar Aviation Pty Ltd v Civil Aviation Safety Authority [2012] FCAFC 97; (2012) 203 FCR 325 at [47]; Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [25].

26    Further, as the Full Court observed in Danthanarayana v Commonwealth of Australia [2016] FCAFC 114 at [4] (in the context of summary dismissal):

4    … [T]o summarily dismiss a proceeding, and thereby preclude a person from having their case determined on its merits at a final hearing, is a serious step taken only with great care and if it is possible to conclude with confidence that there is no reasonable prospect of success; this is so despite the fact that under s 31A(2) of the Federal Court of Australia Act 1976 (Cth) ... the power to summarily dismiss a proceeding is not dependent on the case being “hopeless” or “bound to fail” for it to have no reasonable prospect of success.

27    Acknowledging that the present application is brought pursuant to r 26.01(1)(a), I now consider the relief sought in paragraphs [4] and [5] of the Notice of Cross-Claim, in respect of which the following points may be made.

28    First, the complaints that Mr Reiniger has articulated in his written submissions and repeated in his brief oral submissions amount to a claim for financial relief from Mr Holt and Mr Pallas in the form of compensation for what he alleges are breaches of various duties which he contends are owed to him personally, to Cellcrete and possibly also owed to members of his family. Most of those duties are not pleaded in the Statement of Cross-Claim and the relief that he apparently seeks, whether the payment of $10 million to recover lost sales revenue, the payment of $5 million for indirect or consequential loss, or the retraction letter to industry are not to be found in the relief sought in the Cross-Claim. Given that Cellcrete is in liquidation, is it not for Mr Reiniger now to seek relief on behalf of that company.

29    Secondly, the complaints that Mr Reiniger makes against Mr Holt and Mr Pallas concern the manner in which CMS behaved when it was under their control. To the extent that his Cross-Claim sought financial recompense against the company, that claim was articulated in [1], [2] and [3] of the Notice of Cross-Claim which was the claim brought by Cellcrete, not by Mr Reiniger personally. That claim has been dismissed with the consent of the liquidator of Cellcrete.

30    Thirdly, the relief sought in [4] and [5] of the Notice of Cross-Claim relies upon the provisions of Part 2F.1 of the Act and specifically s 233(1). Section 234 of that Act identifies who can apply for an order; s 233 describes the orders that a Court can make; and s 232 identifies the grounds for making an order under s 233.

31    Section 232 of the Act provides:

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.

32    Section 53 of the Act gives an expanded identification of the ‘affairs’ of a body corporate for a number of provisions of the Act, including s 232. In particular, the affairs of a body corporate include “the promotion, formation, membership, control, business, trading, transactions and dealings” of the body and “the internal management and proceedings of the body”.

33    If one or more of the grounds identified in s 232 of the Act is established, the Court is empowered by s 233(1) to “make any order under this section that it considers appropriate in relation to the company”. Ten types of orders are identified, ranging from an order for winding up to an order restraining a person from engaging in specified conduct, or requiring a person to do a specified act. One particular species of order that the Court may make is an order “for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law”; Campbell at [174].

34    In the present case the evidence reveals that on 2 August 2017 a meeting was held passing a resolution that CMS be wound up voluntarily and a liquidator be appointed. On 7 September 2017 Mr JJ Toohey indicated that he consented to act as a liquidator, but on 20 September 2017 he decided that he no longer wished to have the appointment. On 6 October 2017, Mr Jason Porter of SV Partners gave his consent to act as liquidator of CMS and on 9 October 2017 he was appointed liquidator by resolution of the company.

35    There is no dispute that CMS will shortly be without assets. It has ceased to trade. The director’s report as to affairs indicates that the total assets of the company are $73,949 and that unsecured creditors’ claims total $23,624. A list of creditors provided by the liquidator details that further unsecured creditors include Mr Reiniger, who is said to be owed $496,000 and Cellcrete as a contingent creditor in the amount of $15 million. Furthermore, Tradelink Pty Ltd is identified in a recent ASIC search as being a secured creditor of CMS, although the amount secured is not stated. Prior to payment of any creditors, available funds must first be used to pay the liquidator and pay out any employee claims. Taken together, these matters paint a clear picture, and I find, that after the liquidation is complete there is likely to be a very substantial shortfall in funds to pay creditors and no funds available to distribute to shareholders.

36    For the purpose of the present application, I assume that the claim articulated in the Statement of Cross-Claim is made out, and that Mr Holt and Mr Pallas conducted the affairs of CMS in a manner that is oppressive to Mr Reiniger or contrary to the interests of the members of CMS as a whole. The question then is whether Mr Reiniger has no reasonable prospect of successfully prosecuting the proceedings to achieve orders in the form of [4] and [5] of the Notice of Cross-Claim.

37    In Campbell the majority (Gummow, Hayne, Heydon and Keifel JJ) said (footnotes omitted):

179     By the time this matter came to trial, a liquidator had been appointed provisionally and the liquidator had sold the whole of the undertaking of Healthy Water. Both of those steps had been taken with the concurrence of both sides of the litigation. The amount recovered on sale of the undertaking of Healthy Water was applied in satisfaction of the costs and expenses of the provisional liquidation and some external creditors. Thus, when this matter came to trial, Healthy Water had no business and had no assets. Both shares in the company were then worthless. These considerations were of critical importance in deciding what order was to be made under Pt 2F.1 of the Corporations Act.

180     Upon appointment of a provisional liquidator, any conduct of Healthy Water's affairs that was "oppressive to, unfairly prejudicial to, or unfairly discriminatory against" Backoffice (whether in its capacity as a member or in some other capacity) was brought to an end. Mr Campbell no longer controlled the affairs of the company. At or soon after the appointment of the provisional liquidator, and at least by the time of the liquidator's sale of the company's undertaking, the only affairs of Healthy Water being conducted were those undertaken by the liquidator with a view to realising Healthy Water's assets. Once those assets had been sold and the proceeds disbursed in the manner indicated, the winding-up of the company was inevitable.

181     In those circumstances, no order should have been made on the application under Pt 2F.1 of the Corporations Act except an order for the winding-up of the company.

182     It is not necessary to decide whether that conclusion follows because there was no power to make such an order in those circumstances or because the discretion to make such an order could be exercised only by refusing to do so. Because 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, it may very well be that the fact that there was no continuing oppression when this case came to trial does not entail that the Court had no power to make any of the orders for which s 233 provides. But that is a point that need not be decided. Given that there was no continuing oppression, and given that Healthy Water had no business and no assets, and was but an empty shell, no order for compulsory purchase of Backoffice's share should have been made.

38    In the present case CMS has ceased to trade. It will shortly have no assets. There can be no continuing oppression since the date of the appointment of the liquidator. There is, in reality, no point in continuing the claim for relief sought by Mr Reiniger. Put another way, there is in my view no reasonable prospect that Mr Reiniger will obtain an order for the compulsory acquisition of his shares. The shares that he seeks to compel Mr Pallas and Mr Holt to buy have no value. He accepts that CMS effectively has no assets. Mr Reiniger’s claims, as expressed in his submissions, suggest that in his view, the basis upon which the value of his shares should be calculated is the value of the loss (asserted by him to be $10,000,000 or $5,000,000 or both) resulting from the alleged misconduct by Mr Holt and Mr Pallas. That is misconceived.

39    The claim for declaratory relief sought in [4] was plainly brought as an adjunct to the relief sought in [5]. I can see no independent utility in granting such relief and cannot see a basis upon which the Court would, in the absence of a maintainable claim for the relief in [5], exercise its discretion to make such a declaration. Mr Reiniger put forward no argument to suggest that the declaratory relief sought would serve any practical utility. It would simply be a waste of the resources of the court and the parties to permit the further conduct of expensive litigation, especially in circumstances where the oppression or misconduct about which the complaint has been made has plainly come to an end with the appointment of a liquidator.

40    Further, in order for the Cross-Claim to proceed it would be necessary for CMS to remain a party to the proceedings. In his oral submissions, Mr Reiniger stated that he sought no relief against the company and wished to pursue Mr Pallas and Mr Holt only. However, I agree with the submission of the cross-respondents that in the present proceedings plainly enough CMS is a proper party to the proceedings; John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1 at [131] . In order to proceed with the action involving CMS under liquidation Mr Reiniger requires the leave of the Court pursuant to 471B of the Act. In my view the continued involvement of CMS in litigation would only serve further to diminish the financial reserves of the company, which could otherwise be available to the creditors, for no good reason. No submission was advanced by Mr Reiniger that would dispose me in favour of granting such leave in the circumstances that I have set out above, and no such leave has been sought.

41    Finally, it is not necessary for me to address the argument going to the asserted lack of standing of Mr Reiniger as a shareholder to bring or maintain proceedings under ss 232 and 233 of the Act. I observe, however, that Mr Reiniger resists the proposition that there was a valid call for capital, that he was served with relevant notices or that the shares that he acquired in CMS were forfeited or cancelled. The circumstances of that factual dispute indicate that the argument advanced by the cross-respondents does not provide a sound basis upon which summary disposal should be granted.

42    Nevertheless, for the reasons stated above, in my view the cross-respondents have demonstrated that Mr Reiniger has no reasonable prospects of successfully prosecuting the proceeding in his Cross-Claim. As a result, the Cross-Claim should be dismissed with costs and the cross-respondents should have the costs of their interlocutory application. As I have noted above at [3], during the course of the hearing the legal representative for the liquidator indicated that he does not wish to pursue the claim against Mr Reiniger. In those circumstances, it is also appropriate that an order be made dismissing the applicant’s claim, with CMS to pay Mr Reiniger’s costs of the claim.

Associate:

Dated:    12 December 2017

SCHEDULE OF PARTIES