FEDERAL COURT OF AUSTRALIA

Aulich v Scott [2026] FCAFC 139

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The appellants are to pay the respondent’s costs, to be taxed in default of agreement.

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

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

1    The appellants were directors of Aulich Civil Law Pty Ltd (in liquidation) (ACL) and Aulich Property Trading Pty Ltd (APT). The respondent, who was a member of ACL and APT, brought a shareholder’s oppression proceeding under ss 232 and 233 of the Corporations Act 2001 (Cth).

2    The primary judge found that the appellants had engaged in oppressive conduct by issuing shares in ACL and APT which had the effect of diluting the respondent’s shareholding in those companies: Scott v Aulich, in the matter of Aulich Civil Law Pty Ltd (in liq) [2025] FCA 1329 (primary judgment or PJ). In particular, his Honour found that the issues of shares in ACL and APT were principally done for the improper purpose of diluting the respondent’s shareholding in ACL and APT and that there was no commercial rationale for them. His Honour also found that the appropriate form of relief was for the appellants personally to pay compensation to the respondent.

3    The appellants sought to appeal the primary judge’s findings and orders. Having regard to the way the appeal was conducted, the appellants effectively raised two grounds of appeal:

(a)    First, the appellants contended that the primary judge erred in concluding that the issue of shares in ACL and APT was principally done for an improper purpose.

(b)    Secondly, the appellants contended that the primary judge erred in finding that the most appropriate form of relief was that the appellants, jointly and severally, pay compensation to the respondent quantified in accordance with the diminution in value of her shareholding at the time of the dilution of her shareholding in ACL and APT.

4    For the reasons that follow, the grounds of appeal are without merit and the appeal should be dismissed.

BACKGROUND

The relevant parties

5    At the relevant time, the first appellant, Mr Benjamin Aulich, was a solicitor and held shares in ACL and APT through a company named Gracie Gill Pty Ltd.

6    The second appellant, Mr Peter Woodhouse, was a solicitor and held shares in ACL and APT through a company named Angiesal Pty Ltd.

7    The respondent, Ms Joanna Scott, was a barrister’s clerk and was married to Mr John (Jack) Pappas, a barrister.

The Aulich entities

8    Mr Aulich and Mr Woodhouse were in legal practice together, along with Ms Erin Taylor. The legal practice was conducted through corporate entities associated with those individuals, namely, Gracie Gill, Angiesal and Ms Taylor’s company, Lily & Ruby Holdings Pty Ltd. Mr Aulich and Ms Taylor were also de facto partners. Although Ms Taylor was initially a party to the proceeding, the respondent’s claims against Ms Taylor were resolved and she was removed as a party.

9    ACL went into liquidation in October 2024. It was accepted that the demise of ACL was due to the cancellation of Mr Aulich’s practising certificate and had nothing to do with Ms Scott’s claim of oppression. APT ceased trading in late 2021. At the trial, the primary judge was told that APT was likely to be placed into external administration.

10    By the time of the trial, the active defendants were Mr Aulich, Mr Woodhouse, Gracie Gill and APT, with other defendants either in external administration or having had claims against them discontinued.

11    The legal practice conducted by Mr Aulich, Mr Woodhouse and Ms Taylor was principally carried on by three revenue generating entities, being ACL and APT and Aulich Criminal Law Pty Ltd, formerly Ben Aulich & Associates Pty Ltd (or BAP), which was an entity through which Mr Aulich and Mr Woodhouse had previously conducted a criminal law practice (Aulich entities). Those entities relied on shared services (such as office space, personnel etc) provided by other entities in the group and paid management fees for such services.

12    The Aulich entities in which Ms Scott had an interest were ACL and APT, which came about for the following reasons. Mr Aulich briefed Mr Pappas regularly and Mr Aulich, Mr Pappas and Ms Scott came to be friends. In late 2011 or early 2012, Mr Aulich and Mr Woodhouse were practising criminal law through the law firm known as Ben Aulich & Associates and began to discuss the possibility of establishing a civil law practice. They included Mr Pappas in those discussions, which culminated in the incorporation of ACL in 2012. Mr Pappas evidently wanted to avoid his interest in the company, through his wife’s shareholding, becoming public and it was agreed that Ms Scott’s shares would be held in trust for her by Mr Woodhouse’s company, Angiesal. Mr Aulich, Mr Woodhouse and Ms Scott each contributed $10,000 in capital and were issued one third of the shares in ACL, although Ms Scott’s shares were not registered in her name.

13    In mid-2014, a further company was established to conduct a conveyancing practice. In October 2018, APT was incorporated to acquire and conduct the conveyancing practice.

14    Although there were different shareholders and directors at different times, as at the beginning of 2020:

(a)    the directors of ACL and APT were Mr Aulich, Mr Woodhouse and Ms Taylor; and

(b)    the shareholders of ACL and APT were Gracie Gill (Mr Aulich’s company), Angiesal (Mr Woodhouse’s company), Lily & Ruby Holdings (Ms Taylor’s company) and Ms Scott, whose shares were held on trust for her by Angiesal.

15    Ms Scott was never an officer or employee of ACL or APT.

Relationships began to deteriorate

16    In 2018, the relationship between Mr Aulich and Mr Pappas began to deteriorate. The primary judge was not told why the relationship had begun to deteriorate.

17    On 12 March 2020, Mr Pappas sent an email to Mr Aulich saying the “best way forward” would be for Ms Scott to allow the other shareholders in ACL and APT to buy out her shares. He asked Mr Aulich to let him know how that proposed outcome might best be achieved and said that Ms Scott would be “completely flexible about the timing of any buy-out”.

18    Mr Aulich forwarded Mr Pappas’ email to Ms Taylor and Mr Woodhouse that same day. There followed a three-way email conversation between them. Ms Taylor commented that she supposed that what Mr Pappas had said “signals the start of the war”. Mr Aulich responded in agreement. Ms Taylor said that the “gloves are off” and “if that’s the start of the war then why bother holding back”. Ms Taylor also said that she thought that Mr Pappas knew that the other shareholders could not afford to buy out Ms Scott “at current values” and that Mr Pappas was “probably just setting up a starting position for an oppression argument as well as throwing in the towel on the friendship”. In relation to oppression, Mr Aulich said that they needed to be really careful and to get some advice. Mr Woodhouse also said that Mr Pappas knew that the other shareholders “don’t have any money” and that “[m]aybe Brides can buy him out”.

19    That evidently was a reference to Ms Bridie Harders, who was to become a salaried partner from 1 July 2020, buying out Ms Scott. A proposal for this to occur by way of a vendor financing arrangement was raised, whereby the dividends paid to Ms Harders as the new shareholder would be paid to Ms Scott in reduction of the purchase price over time. In that context it was reported that Ms Taylor had a short time previously bought her 25% share for $550,000. Mr Aulich said that it would be “[h]ard to argue” against a valuation of $500,000 to $550,000. Mr Woodhouse said that if Mr Pappas (ie Ms Scott) was prepared to accept that amount then he would be willing to borrow to pay that amount to avoid a fight about money. Mr Woodhouse preferred a non-confrontational parting of ways.

20    In March 2020, there was a growing appreciation in Australia of the impending COVID-19 pandemic. On 16 March 2020, the ACT Minister for Health declared a Public Health Emergency and, on 18 March 2020, the law firms conducted by the Aulich entities announced that employees who were able to work from home, where practicable, were instructed to do so for the foreseeable future. Client meetings and court hearings continued.

21    On 19 March 2020, Ms Jodie Hinton, the Aulich entities’ internal accountant, sent an email to Mr Aulich, Mr Woodhouse and Ms Taylor attaching cash flow projections for the businesses for the next three months.

22    The cash flow projections were discussed at a meeting late in the afternoon on 20 March 2020 at Mr Aulich and Ms Taylor’s home. Present were Mr Aulich, Mr Woodhouse, Ms Taylor, Ms Hinton, Ms Monica McGrath, the office manager, and Mr Michael Williams, the external accountant. Mr Williams and Mr Woodhouse gave evidence about what was discussed at the meeting and were cross-examined. Mr Aulich did not give evidence at the trial.

23    The following matters relevantly were discussed at the meeting:

(a)    There was a discussion about the Aulich businesses as a whole, without differentiation between each of the different companies. There was a discussion about the predicted cash flow shortfall and the need to put money into the businesses, but no specific mechanisms of how to do that were discussed. Mr Williams gave advice and the discussions about the financial effects on the businesses as a result of the COVID-19 pandemic were about the group as a whole and were not limited to ACL and APT. Mr Williams had concerns about the group as a whole, not merely ACL and APT.

(b)    There was a specific discussion about making an initial $100,000 capital contribution to ACL with each shareholder paying $25,000. The option of a shareholder loan, interest-free or otherwise, was rejected.

(c)    It was decided that all of the shareholders of ACL would be required to contribute funds to the company by way of a share issue. In his evidence, Mr Woodhouse accepted that the outcome of the meeting may have been discussed between him and Mr Aulich in advance of the meeting.

(d)    Mr Aulich, Mr Woodhouse and Ms Taylor said they were prepared to go into combined personal debt up to $1 million to keep the businesses trading. The requirement of $1 million was based in part on Ms Hinton’s spreadsheets which projected a cash shortage in the businesses as a whole of $1 million after three months on a “worst case scenario” but which was not expected to occur. Mr Aulich said that he would maintain a record of expenditure which he would subtract from the figure of $1 million “working backwards”. Such a “tally” was maintained.

The ACL share issue

24    On 24 March 2020, Mr Aulich sent an email to Mr Pappas and Ms Scott forwarding Ms Hinton’s email of 19 March 2020 with the cash flow projections attached. With reference to the projections, Mr Aulich said that it was inevitable that they would need to make a cash call on all shareholders to ensure that there was an ability to pay staff in the future. He said that it had to be assumed that the shareholders would need to make regular payments into ACL and APT for the next 6 to 12 months. He said that if Mr Pappas and Ms Scott could not meet the cash calls, or were not willing to, they should let him know as soon as possible. Mr Aulich did not deal with Mr Pappas’ request only 12 days before that Ms Scott be bought out by the other shareholders.

25    On 25 March 2020, Mr Aulich sent an email to Mr Woodhouse and Ms Taylor regarding the need to issue 24,975 more shares at $1.00 each so that “we” end up with 99,975 shares and “25 shares held by him”, being Mr Pappas. This email, which was central to the appeal, is set out in its entirety below, at paragraph [98].

26    On 27 March 2020, Mr Williams wrote to Mr Aulich, Mr Woodhouse and Ms Taylor setting out some information on the economic position and outlook, and in particular the stimulus measures available from the government. Mr Aulich then forwarded Mr Williams’ email to Mr Pappas and Ms Scott so that they would “be up to speed with what we are doing”. He said that he would need to understand their position as they would shortly be having to make “cash calls for all shareholders in equal proportions”. The reference to “cash calls” was understood by all to be a reference to a share issue. Once again, Mr Aulich asked that he be advised as soon as possible if they were able and willing to make payments into ACL and APT with the other shareholders.

27    On 31 March 2020, Mr Pappas replied to Mr Aulich’s email of 27 March 2020. He reiterated, with reference to his email of 12 March 2020, that Ms Scott had made the decision to depart the companies. He said that he and Ms Scott had been expecting to hear something about the proposed purchase of her shares but understood that that had probably taken a “back seat” because of the COVID-19-related crisis. He asked that there be some agreement reached concerning the value of Ms Scott's shares as at 12 March 2020, although Ms Scott would not require any payment until the crisis had passed and the firm was back firmly on its feet and in the black. He said that neither he nor Ms Scott had thought it necessary to give formal notice under the shareholders’ agreement but that Mr Aulich should let him know if he took a different view. He said that he had not copied the other “partners” as he expected that Mr Aulich would keep them informed.

28    Mr Pappas also offered to lend ACL money on an interest-free basis until the crisis had passed. However, he said that if he was going to do that, he would first need to be happy and assured that Ms Scott's shares would be redeemed fairly which required an agreement on a figure and “a rough mechanism for payment down the track”. He said that neither he nor Ms Scott had been privy to the finances of the firm for some time, but that the figure at which Ms Taylor had bought in would be some guide as to Ms Scott's share value.

29    As an aside, the Court was told that shareholders’ agreements existed for ACL and APT, but the Court was not taken to them and was told that they were not relevant because Ms Scott, whose shares were held for her on trust, was not a party to the shareholders’ agreements.

30    Mr Aulich promptly forwarded Mr Pappas’ email to Mr Woodhouse, Ms Taylor and Ms Harders. He said that Mr Pappas had “gone stark raving mad” and disparaged Mr Pappas’ suggestion that Ms Scott’s shares be bought for $500,000 and that Mr Pappas lend them money. That was notwithstanding that only three weeks earlier he had said that it would be hard to argue against $500,000 (see above at paragraph [19]). Mr Woodhouse responded by asking whether Mr Pappas’ offer to lend would prevent or inhibit them in making a cash call on shareholders. Mr Woodhouse was concerned that Mr Pappas’ offer of a loan with no interest might mean that ACL could not justify an equity raise. Mr Aulich replied that he could not see how the offer to lend would have that effect and that he would draft a response to Mr Pappas.

31    A few hours later, Mr Aulich replied to Mr Pappas’ email, including to Ms Scott, relevantly making the following points:

(a)    With reference to some history including the assertion that Mr Pappas and Ms Scott had only put in a small amount of money to start ACL and APT, had contributed little and had continued to be paid profit distributions, Mr Aulich said that their position was “unconscionable” and was not “fair or moral”.

(b)    The companies did not need a loan but needed capital to keep them alive and that they were “worth negative” at that moment.

(c)    “All new shares issued shortly for ACL and [APT] will be offered to you and Jo to purchase in equal proportion to the shares you already hold. There is no money in the companies at the moment and we are in dire times. You are either with us or not. You can choose to buy them and bunker down with us or not. Your choice.”

(d)    Mr Aulich was not prepared to let any shareholder hold shares on behalf of any other shareholder anymore, and documents for ASIC would be drafted so that Ms Scott would be on the record as the shareholder. He said that he would lodge documents with ASIC later that day.

32    Fifteen minutes later (still on 31 March), Mr Aulich wrote to Ms McGrath, the office manager, copying Mr Woodhouse, Ms Taylor and Mr Williams. His email said that “[w]e have a directors meeting today to issue more shares in ACL”. This was understood by the primary judge to mean that Mr Aulich intended it to be recorded that there was to be a meeting of directors in which a resolution would be adopted by circular, which in fact occurred the next day. Mr Aulich attached to the email a rough manuscript draft of an offer to be made to each of the shareholders, ie Ms Scott, Gracie Gill, Angiesal and Lily & Ruby Holdings, of an allotment of new shares in ACL so that each shareholder would hold a total of 25,000 shares each. He asked Ms McGrath to attend to the details after checking the ASIC register. He also asked Ms McGrath to complete the ASIC documentation to show that the 25 shares held on trust by Angiesal would now be held directly by Ms Scott.

33    On 1 April 2020, Mr Aulich, Mr Woodhouse and Ms Taylor passed a circulating resolution of the directors of ACL to issue an additional 99,900 shares at a cost of $1.00 per share and offering the new shares to the shareholders in proportion to their current shareholding in the company.

34    Also on 1 April 2020, Mr Aulich wrote to Ms Scott attaching a notice of an offer to her (in her name) to purchase 24,975 shares in ACL at $1.00 per share, pursuant to cl 16.2(b) of the ACL Constitution. The offer was stated to be open for acceptance for 21 days. Neither the email nor the offer contained any additional information such as whether other shares were also being issued and, if so, to whom.

35    A few minutes later, Mr Aulich forwarded the email that he had sent to Ms Scott to Ms Taylor and Mr Woodhouse. He outlined four “plays” that he saw being available to Mr Pappas/Ms Scott: (1) pay for the new shares and stay in the company; (2) seek an injunction against ACL issuing further shares on “some oppression type argument”; (3) apologise; or (4) not pay and have their shareholding diluted. He concluded by saying that threatening to register the shares in Ms Scott's name directly “forces his hand and we know what he [sic] going to do”. That is to say, Mr Aulich regarded the threat to register the shares in Ms Scott's name as giving him leverage against Mr Pappas as it would embarrass Mr Pappas with other firms of solicitors.

36    On 2 April 2020, Mr Pappas replied to Mr Aulich. He expressed some dismay at Mr Aulich's “various hurtful and inaccurate claims and comments” but declined to respond to them. He sought to reassure Mr Aulich that Ms Scott would take no action to jeopardise the Aulich businesses during the COVID-19 crisis but also that he would not stand by and see her bullied out of her share in the businesses or allow the economic circumstances to be used to water down the value of her shareholding. He asked that Ms Scott be provided with the full description of each shareholder in ACL and APT, the number of shares held as at 12 March 2020 and the correct address of each shareholder.

37    Also on 2 April 2020, Mr Aulich replied to Mr Pappas. He said that ACL was “worth nothing – in fact negative”. He said that he was trying to generate capital to pay staff and not to water down the shares. He said that Ms Scott was free to purchase shares like all other shareholders and that if she thought that her shareholding was valued at what Ms Taylor had paid then she was free to make an offer to all the other shareholders to buy them out at that price.

38    Ms Scott did not accept the ACL share offer. Although Ms Scott purported to give three reasons for not accepting the offer, the primary judge found that Ms Scott did not accept the share offer because she was not in a position to assess the financial position of ACL, and therefore what the offer was worth, and she wanted the other shareholders to buy her out.

39    On 22 April 2020, the 25 shares held by Angiesal as trustee for Ms Scott were registered with ASIC as being held by Ms Scott directly. That was achieved by Ms McGrath following the instructions of Mr Aulich.

40    Also on 22 April 2020, Mr Aulich wrote to Mr Woodhouse, Ms Taylor and Mr Williams, copying Ms Hinton and Ms McGrath, saying that Mr Pappas and Ms Scott had not accepted the offer to purchase more shares in ACL. He then put in train the process of offering her allotment to the other shareholders.

41    On 24 April 2020, there was a meeting of the directors of ACL. A resolution was passed offering Ms Scott's allotment of 24,975 ordinary shares to the other shareholders in equal shares proportionate to their shareholding. Each of the other shareholders accepted the offer. The ASIC register was altered that day to reflect the issue of an additional 99,900 shares in ACL bringing the total number of issued shares to 100,000 so that Ms Scott held 25 shares and Gracie Gill, Angiesal and Lily & Ruby Holdings each held 33,325 shares.

The APT share issue

42    The allotment of shares in APT was not progressed until 2021.

43    On 5 March 2021, Mr Aulich sent an email to Ms Scott, Ms Taylor and Mr Woodhouse which attached a profit and loss statement for APT from July 2020 to 22 February 2021 and a balance sheet as at February 2021. The profit and loss statement showed a loss over that period of $38,350 notwithstanding revenue of nearly $311,000. The principal expense was some $316,000 paid in management fees, presumably to Aulich Pty Ltd (the services entity) (APL). The balance sheet showed total equity of $406,000 including assets in the form of related party loans to Lily & Ruby Holdings ($45,408), Aulich Leasing Pty Ltd ($19,500) and Aulich Property Investments Pty Ltd ($242,046).

44    In the email, Mr Aulich proposed that a general meeting of the company be held pursuant to cl 5.2 of the APT Constitution to discuss the financial reports with a view to allotting further shares to shareholders in equal proportions pursuant to cl 29.1(a) of the Constitution. He proposed that the meeting be held at the Aulich offices at 11.00am on Tuesday, 30 March 2021.

45    Also on 5 March 2021, a draft of minutes of a meeting of the directors of APT was prepared, ie the same date as Mr Aulich's email proposing a general meeting of members of APT. Although the minutes are unsigned, Mr Woodhouse gave evidence before the primary judge that a meeting occurred on that date. The draft minutes recorded that the issue of 10,000 ordinary shares offered to Ms Scott at $1.00 per share had not been taken up, even though Ms Scott had yet to reply to that effect and there were a further 21 days before the offer expiry date.

46    The existence of this minute indicated that it was anticipated in advance that, as with ACL, Ms Scott would not accept the share offer.

47    On 30 March 2021, a minute of the general meeting of the shareholders of APT was signed by Mr Aulich, Mr Woodhouse and Ms Taylor. The minute records a resolution that the shareholders were in favour of the allotment of an additional 40,000 shares at a cost of $1.00 per share with the new shares to be offered to the shareholders in proportion to each shareholder’s current holding of shares in the company. It also records Ms Scott’s absence from the meeting. There is also a manuscript file note of the meeting of shareholders on that day at 11.15am with Ms Scott being marked as absent.

48    Also on 30 March 2021, Mr Aulich sent an email to Ms Scott attaching the minute of the meeting of the shareholders of APT held that day and an offer to acquire 10,000 ordinary shares in APT at a cost of $1.00 per share. The email explained that although a declaration of trust dated 6 October 2014 stated that Angiesal held the shares on trust for Ms Scott, at that time the ASIC register reflected that Ms Scott held the shares herself. Mr Aulich invited Ms Scott to let him know if the ASIC register was not correct so that he could seek to have the register amended.

49    Ms Scott did not accept the APT share offer. The offers to the other shareholders of APT were accepted by each of them on 30 March 2021.

50    On 21 April 2021, Mr Aulich wrote to Mr Woodhouse and Ms Taylor saying that Mr Pappas/Ms Scott had not exercised the option to purchase shares in APT. He asked Ms McGrath to draft the resolution to offer the shares to the other shareholders in equal proportions as had been done for ACL.

51    That presumably was done because an ASIC form lodged on 6 May 2021 records that there were 40,100 issued shares in APT that were held as follows:

(a)    Gracie Gill - 13,358

(b)    Angiesal - 13,359

(c)    Lily & Ruby Holdings - 13,358

(d)    Ms Scott - 25

52    Clause 29.1(a) of the APT Constitution provided for the members to consolidate and divide all or any of the company’s share capital into shares of a larger amount than its existing shares, but the power to allot shares remained with the directors under cl 23. The primary judge accepted that it must be understood that the directors of APT acted under cl 23.9 of the Constitution in making the new share issue and offering it in equal proportions to the existing members of the company. As a result, the APT shareholders’ resolution can be put to one side.

PRIMARY JUDGMENT

53    The primary judge’s ultimate findings were that the requirements of s 232(e) were established, in respect of both the ACL and APT share allotments, and that the power to order relief under s 233 was enlivened.

54    The primary judge found that the ACL and APT share offers were oppressive, for the purpose of s 232(e), in broadly two steps. First, the primary judge reached the conclusion that the share offer in ACL was “principally done for the improper purpose of diluting Ms Scott’s shareholding in order to minimise her interest in the company (and through this, that of Mr Pappas)”: PJ [102]. Further, his Honour found that there was no commercial reason for the ACL and APT share issue. In the absence of a genuine commercial rationale for the ACL and APT share issue, his Honour concluded that the share issues were oppressive: PJ [112] – [113].

55    The primary judge’s reasons for finding that the ACL share offer was principally done for the improper purpose of diluting Ms Scott’s shareholding, set out at PJ [103] – [111], were broadly as follows.

56    First, Mr Aulich was the lead player amongst the other shareholding interests.

57    Secondly, Mr Aulich and Mr Pappas had developed a toxic relationship, about which Mr Aulich felt very strongly.

58    Thirdly, whilst Mr Aulich, Ms Taylor and Mr Woodhouse held a genuine concern about the outlook for the Aulich companies in view of the developing COVID-19 pandemic (especially in light of Ms Hinton’s “worst case scenario” cash flow projections that they relied on), and they did not have available to them the after-the-fact financial information which showed that the companies got through that period relatively well (and certainly not in accordance with the worst case projections), there was “no reasonable justification for the defendants’ decision to raise capital in ACL and not in any of the other companies”.

59    Fourthly, “when the capital was raised in ACL it was not introduced into the group”. Rather, “the capital in question was in fact taken from other companies in the group and did not improve the cash flow of the group. Thus, the raising of capital in ACL only recirculated existing funds within the group as a whole. In this way, the transaction did not align with the stated objective of responding to the additional capital requirements brought on by the COVID-19-related crisis”.

60    Fifthly, between the time when Ms Hinton’s spreadsheets were first circulated (on 19 March 2020) and considered and the directors’ resolution on 1 April 2020, no revision of the financial position was undertaken with reference to various government support measures that had been announced in the interim. This was despite the fact that Mr Williams in his email of 27 March 2020 had put the directors on notice of those stimulus measures.

61    Sixthly, Mr Pappas made clear to Mr Aulich as early as 12 March 2020 that Ms Scott wished to be bought out; she had no interest in continuing to have any shareholding in any companies in the group. Forcing Ms Scott to the choice between making a further contribution of capital to the company or having her shareholding devastatingly diluted was not in any way responsive to her legitimate wishes; it was antithetical to them.

62    Seventhly, the prejudicial scheme and intent behind the ACL share allotment was apparent from Mr Aulich’s email to the other shareholding interests on 25 March 2020, the subsequent email exchanges between the shareholding interests, including Mr Aulich’s statement that he would “throw [Mr Pappas] out” and the fact that alternative funding options such as shareholder loans were rejected out of hand in the lead-up to the ACL share issue.

63    Eighthly, the ACL share issue, at a nominal value of $1.00 per share, was at a significant undervalue.

64    Finally, in relation to the purpose of the share issue, Mr Aulich did not give evidence. Instead, the defendants relied on the evidence of Mr Woodhouse even though Mr Aulich was the main player driving what occurred. The primary judge drew the inference from Mr Aulich’s absence that his evidence would not have assisted the defendants’ case: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8. That is, that Mr Aulich would not have been able to provide a reasonable commercial rationale for the ACL share issue.

65    Turning to the oppressive effect of the ACL share issue, the primary judge found, at PJ [112], that the share issue “diluted Ms Scott’s interest in a devastating way”, and that “the purpose of the capital raisings was not to raise capital but to inflict prejudice on a minority shareholder, and that purpose was achieved”.

66    Having regard to his earlier finding that the shares were issued for an ulterior purpose, the primary judge found, at PJ [113], that “there was no commercial reason for the share issue in ACL rather than in other companies in the group” and that “[n]o reasonable director considering the matter would think such an outcome, in the absence of genuine commercial rationale, a fair one”. Then, at PJ [114], his Honour said that many of the same considerations could also be said of the APT share issue. In relation to the APT share issue, his Honour said that “in light of the intent and lack of commercial rationale demonstrated for the ACL issue in the preceding year, the better inference ... is that the dominant purpose behind the APT issue was to facilitate a like scheme to dilute Ms Scott’s interest”: PJ [115].

67    Having considered matters raised by the appellants concerning Ms Scott’s conduct, ie not attending the shareholders’ meeting for APT and not otherwise engaging further with the share issues, the primary judge considered that such matters did not detract from the “objective unfairness” of the conduct in causing the dilution of her shareholding in ACL and APT, which arose “from the absence of genuine commercial reasons actuating the share issues”. Thus, his Honour concluded, at PJ [120] – [121], as follows:

120    However, in the context of the particular facts before me, Ms Scott’s conduct does not detract from the objective unfairness of the conduct causing the dilution of her shareholding in ACL and APT. That objective unfairness arises from the absence of genuine commercial reasons actuating the share issues. Mr Aulich, Ms Taylor and Mr Woodhouse were otherwise aware of Ms Scott’s opposition to the prospect of an increase in her capital contribution to ACL or APT by way of Mr Pappas’s email of 12 March 2020, well before the offers were made to Ms Scott. It is doubtful that further signalling of her opposition to the share issues, including attendance at the general meeting for APT, would have led to a different outcome when the directors had the exclusive power to allot shares and had already developed a firm intention to dilute her interest and thereby exclude Mr Pappas from the Aulich ventures. When Ms Scott/Mr Pappas was notified of an impending “cash call” for ACL, Mr Pappas wrote back on Ms Scott’s behalf to make clear that there was no intention of taking up any share offer. As already discussed, the directors would have been aware of this when transmitting the subsequent offer for APT. It was not the case that there was mute acquiescence from Ms Scott.

121    For those reasons, I am satisfied that the circumstances in s 232(e) are established in respect of both the ACL and APT share allotments and that the power to order relief under s 233 is enlivened. It remains to consider what relief, if any, should be granted.

68    Turning to the question of relief, the primary judge noted that Ms Scott had initially sought a conventional buyout order, but by the amended originating process, she subsequently sought compensation as the principal form of relief from Mr Aulich and Mr Woodhouse for the diminution in value of her shares in ACL and APT or, alternatively, the ACL dividends foregone by her: PJ [122].

69    Having acknowledged that compensation directly from the directors to a shareholder under s 233 of the Corporations Act is a novel remedy, the primary judge noted that the defendants accepted that such a remedy was within power: PJ [123].

70    The primary judge rejected the proposition that the demise of the companies represented an intervening event which had “ended” the oppression such that no remedy should be granted. While he accepted that there was no ongoing oppressive conduct, his Honour found that the oppression remained unremedied and had prevented Ms Scott from obtaining the buyout of her shares at fair value when she wanted to exit the companies and when the oppressive conduct occurred: PJ [126] – [128]. His Honour therefore considered that Mr Aulich and Mr Woodhouse should jointly and severally pay compensation quantified in accordance with the diminution in value which occurred at the time of each dilution, less the benefits Ms Scott received in dividends subsequent to those times: PJ [127], [132].

STANDARD OF REVIEW

71    The appellants submitted that the appropriate standard for appellate review of a finding that the conduct of a company was oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member is the standard in House v The King (1936) 55 CLR 499 at 504 – 505.

72    In Wilmar Sugar Australia Ltd v Mackay Sugar Ltd (2017) 345 ALR 174; [2017] FCAFC 40 (Dowsett, Jagot and White JJ), the Full Court held that the House v The King standard applies to appellate review of a finding that conduct of a company was (or was not) oppressive under s 232(e) of the Corporations Act. The Full Court said (at [45] – [46]):

45.    Deciding whether the conduct of a company is oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member involves an objective evaluation (from the posited perspective of a hypothetical reasonable by-stander) of the effect of the conduct in all of the relevant circumstances. As such, appellate review of the decision is confined by the principles in House v The King (1936) 55 CLR 499 at 504–505 in respect of discretionary decisions, which withstands repetition:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

46.    Although, strictly speaking, deciding whether conduct is oppressive does not involve the exercise of discretion, it is the character of the decision, involving as it does the weighing of potentially competing considerations and an overall contextual evaluation of the effect of the conduct, which requires the same approach to appeals as in House v R (see, by analogy, Ghosh v NineMSN Pty Ltd [2015] NSWCA 334; (2015) 90 NSWLR 595 at [37]).

73    The reasoning in Wilmar Sugar was subsequently approved in Decon Australia Pty Ltd v TFM Epping Land Pty Ltd [2022] FCAFC 54 at [146] (Yates, O’Callaghan and Halley JJ) and Sino Group International Ltd v Toddler Kindy Gymbaroo Pty Ltd (subject to deed of company arrangement) (2023) 168 ACSR 311; [2023] FCAFC 110 at [87] (Farrell, Cheeseman and Feutrill JJ), although in the context of an appeal from a decision under a different provision of the Corporations Act.

74    The correctness of Wilmar Sugar, insofar as it held that the standard of appellate review in oppression proceedings is governed by the principles in House v The King rather than the “correctness” standard, was raised in Flageul v WeDrive Pty Ltd (2021) 285 FCR 255; [2021] FCAFC 102 at [68] – [73] (Murphy and O’Callaghan JJ). Ultimately, the Full Court in that case declined to determine whether Wilmar Sugar had been correctly decided, although the observations made by the majority, at [68] – [73], might suggest that the majority preferred the view, as expressed in Wilmar Sugar, that although “notionally there may appear to be one answer”, the character of a decision that conduct is oppressive under s 232(e) was one which, in reality, involved competing considerations and an overall contextual evaluation of the effect of the conduct which requires the same approach to appeals as in House v The King.

75    The appellants proceeded on the basis that the House v The King standard applied to the review of the primary judge’s findings in this appeal, which unsurprisingly the respondent did not dispute. As a result, and in light of the above authorities, we will proceed on the basis that appellate review of the primary judge’s findings is confined by the principles in House v The King. That is, for there to be appealable error it must be established that the primary judge acted upon a wrong principle, allowed extraneous or irrelevant matters to affect the decision, mistook the facts, failed to take account of a material consideration, or reached a result which is unreasonable or plainly unjust. Where a specific error is identified, it must have caused or materially contributed to the result: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; [2016] FCAFC 181 at [53] (Jagot, Yates and Bromwich JJ).

RELEVANT PRINCIPLES

76    Sections 232 and 233 of the Corporations Act relevantly provide:

232 Grounds for Court order

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.

...

233 Orders the Court can make

(1)    The Court can make any order under this section that it considers appropriate in relation to the company, including an order:

(a)    that the company be wound up;

(b)    that the company’s existing constitution be modified or repealed;

(c)    regulating the conduct of the company’s affairs in the future;

(d)    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;

(e)    for the purchase of shares with an appropriate reduction of the company’s share capital;

(f)    for the company to institute, prosecute, defend or discontinue specified proceedings;

(g)    authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;

(h)    appointing a receiver or a receiver and manager of any or all of the company’s property;

(i)    restraining a person from engaging in specified conduct or from doing a specified act;

(j)    requiring a person to do a specified act.

77    The application of ss 232 and 233 of the Corporations Act may be conceptualised in two broad stages. The first stage is satisfaction of one of the criteria in s 232(a), (b), (c) and either of the criteria in s 232(d) and (e). The second stage, following on from the satisfaction of the first stage, then provides the Court with the power to grant an appropriate remedy to the aggrieved party to address the consequences of such conduct.

78    It was not in issue that the impugned conduct fell within s 232(a). The issue before the primary judge was whether the conduct fell within s 232(e), being conduct that was oppressive to, unfairly prejudicial to, or unfairly discriminatory against a member of the companies, being Ms Scott who held a minority interest: PJ [95].

79    The parties did not dispute the primary judge’s statement of the relevant principles in relation to the test of unfairness for the purpose of s 232(e). The relevant principles established by previous authorities may be summarised in the following terms:

(a)    The test of unfairness requires an objective assessment of the conduct in question with regard to the particular context in which the conduct occurs. The question is whether objectively in the eyes of the commercial bystander there has been unfairness, namely conduct that is so unfair that reasonable directors who consider the matter would not have thought the conduct or decision fair. As the test is objective, whether or not the conduct is oppressive will not depend upon the motives for what was done. It is the effect of the acts that is material: Catalano v Managing Australia Destinations Pty Ltd (2014) 314 ALR 62; [2014] FCAFC 55 at [9] (Siopis, Rares and Davies JJ), citing Wayde v NSW Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68 at 472 – 473 (Brennan J) and Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (Backoffice Investments (HC)) at [176] (Gummow, Hayne, Heydon and Kiefel JJ).

(b)    While the test is objective, in the sense that the purpose or motive of a director cannot be determinative, subjective purpose or motive may nonetheless be relevant to a court’s analysis of whether there has ultimately been unfairness considered objectively. “For example, if the decision-maker was motivated to make a decision to achieve some particular unfairness against a member, that fact might enable it to be concluded more readily that the effect of the decision is as the decision-maker intended (namely, unfair)”: Wilmar Sugar at [73] (Dowsett, Jagot and White JJ).

(c)    Conduct which confers a benefit on a company may nonetheless still be unfair in the circumstances: Soulos v Pagones (2023) 416 ALR 181; [2023] NSWCA 243 at [177] (Ward P, with Meagher and Mitchelmore JJA agreeing at [688]).

(d)    The task of determining whether there has been commercial unfairness is to be undertaken in the particular context in which the conduct occurs, and the assessment of commercial unfairness will commonly involve a balancing exercise between competing considerations which may include an examination of the conduct of the applicant: Catalano at [9]; Mackay Sugar Ltd v Wilmar Sugar Australia Ltd (2016) 338 ALR 374; [2016] FCAFC 133 at [14] (Gilmour, Jagot and White JJ) and Wilmar Sugar at [13] and [66].

80    In the context of a capital raising through the issue of shares, it is necessary to bear in mind that the power to allot shares is fiduciary in nature: Chief Disruption Officer Pty Ltd v Michel (No 3) (2022) 164 ACSR 476; [2022] FCA 1302 (Chief Disruption Officer (No 3)) at [34] (Goodman J). Where directors act in breach of a fiduciary duty, that fact will be relevant to determine whether there has been unfairness in the context of oppression: Jenkins v Enterprise Gold Mines NL (1992) 6 ACSR 539 at 552 (Malcolm CJ, Rowland and Franklyn JJ).

81    In breach of fiduciary duty cases concerning a director’s power to issue shares, the Court will examine the substantial purpose for which the power was exercised: see, eg Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21; [2002] NSWCA 395 at [289] – [295] (Young CJ in Eq) and [122] – [133] (Giles JA, with Meagher JA agreeing at [2]). Similarly, the asserted purpose of the issue of the shares often arises for the Court’s consideration in oppression proceedings involving share allotments. Often, that will be because the allegation of oppression involves or overlaps with allegations of breach of fiduciary duties, but not always: see, eg Strategic Management Australia AFL Pty Ltd v Precision Sports & Entertainment Group Pty Ltd (2016) 114 ACSR 1; [2016] VSC 303 at [148] – [152] (Sifris J). The Court’s examination of the directors’ purpose may also be the result of forensic choices, recognising that unfairness may be inferred where there is a lack of reasonable commercial justification for the impugned conduct: Jenkins v Enterprise Gold Mines at 560. As Sifris J observed in Strategic Management at [149], the main purpose of the share issue may be obvious and at other times it may be contrived and not as obvious. Much will depend on the circumstances and the Court’s evaluation of the evidence, including the drawing of necessary inferences.

GROUND ONE

82    Ground one concerned the primary judge’s finding that the ACL and APT share issues were oppressive in the requisite sense under s 232(e). The appellants submitted that in reaching that conclusion, the primary judge erred in concluding, at PJ [102] and [115], that the issue of shares in ACL, on or about 24 April 2020, and the issue of shares in APT, on or about 6 May 2021, was principally done for an improper purpose and that the allotments were objectively unfair or had no objective commercial purpose.

83    The appellants did not challenge the primary judge’s finding that the directors’ motivation was to dilute Ms Scott’s shareholding. They argued, however, that the primary judge erred in concluding the allotments were objectively unfair or had no objective commercial purpose.

84    The appellants initially raised six principal submissions in support of Ground one, although one of the submissions was abandoned at the start of the hearing.

85    As a result, the appellants’ five principal contentions in support of Ground one were as follows:

86    First, the primary judge placed undue emphasis on the purpose or motive of Mr Aulich in making the ACL share offer and the APT share offer as opposed to an objective assessment of whether the ACL share offer and the APT share offer were commercially unfair.

87    Secondly, the primary judge’s finding that there was no commercial rationale for the ACL share offer was premised on the findings that:

(a)    there was “no reasonable justification for the defendants’ decision to raise capital in ACL and not in any of the other companies” (at PJ [105]);

(b)    when the capital was raised from the ACL share offer it was taken from other companies in the Aulich group (at PJ [106]); and

(c)    between the time when Ms Hinton prepared her cash flow projections on 19 March 2020 and the ACL share offer on 1 April 2020, no revision of the financial position was undertaken with reference to the various government support measures that had been announced in the interim (at PJ [107]),

which were not open, because the primary judge mistook certain evidence (in relation to PJ [105]), failed to take into account relevant considerations (in relation to PJ [105] and PJ [106]) or acted upon an irrelevant consideration (in relation to PJ [107]).

88    Thirdly, the primary judge’s discretion miscarried in taking into account that forcing Ms Scott to the choice between making a further contribution of capital to the company or having her shareholding diluted was antithetical to her legitimate wishes: PJ [108].

89    Fourthly, the primary judge’s discretion miscarried in taking into account that the ACL share issue was at a nominal value of $1.00: PJ [110].

90    Fifthly, with respect to the APT share offer, the primary judge’s discretion miscarried by taking into account that the directors were required to provide some further explanation to Ms Scott beyond the financial reports provided: at PJ [93].

91    We address each contention in turn.

First contention: The primary judge’s emphasis on Mr Aulich’s purpose or motive in making the ACL and APT share offers

92    The appellants submitted that the primary judge, at PJ [103], [104], [109], [111] and [114], placed undue emphasis on the purpose or motive of Mr Aulich in making the ACL share offer and the APT share offer, as opposed to an objective assessment of whether those offers were commercially unfair.

93    The appellants, in oral submissions, further submitted that the primary judge focussed almost exclusively on a subjective motivation or intention for making the ACL and APT share offers, particularly that of Mr Aulich, rather than on whether the share offers were objectively unfair. The appellants emphasised that, under ACL’s and APT’s Constitutions, the directors were authorised to allot shares at any time on any terms and at any price the directors saw fit. The appellants submitted, by reference to Ms Hinton’s cash flow projections as at 19 March 2020 which showed a worst-case scenario cash flow position of negative $1 million by the end of June 2020, that the Aulich group was in a dire financial position and in need of a cash injection which evidenced a commercial justification for the ACL share offer. Furthermore, the directors themselves were prepared to take on $1 million in debt, whereas Ms Scott was merely asked to contribute to the capital raising. The appellants did not, however, explain how placing “undue emphasis” on Mr Aulich’s purpose or motive in making the share offers is a House v The King error.

94    The appellants’ arguments were directed towards the primary judge’s finding, at PJ [102] and [115], that the ACL and APT share issue was principally done for an improper purpose. His Honour found that what transpired occurred against the backdrop of the toxic relationship that existed between Mr Aulich and Mr Pappas, about which Mr Aulich felt very strongly. Dealing with the ACL share issue first, the most telling evidence as to the directors’ purpose and motive behind the ACL share issue was the email communications between the directors leading up to the ACL share issue.

95    It will be recalled that the directors did not immediately respond to Mr Pappas’ email of 12 March 2020 stating Ms Scott wanted to be bought out and inviting them to try to reach a value as to Ms Scott’s shares. They did, however, circulate the email amongst themselves, commenting that Mr Pappas’ email “signals the start of the war” and the “gloves are off”. They floated a proposal for the incoming partner (Ms Harders) to buyout Ms Scott’s interest via vendor financing, which they all said they could accept or were not against. However, this was not discussed any further.

96    On 20 March 2020, the directors attended a meeting, along with Mr Williams (the external accountant), Ms Hinton (the internal accountant) and Ms McGrath (the office manager), to discuss Ms Hinton’s cash flow projections from the day before. The directors, the primary judge accepted, held a genuine concern about the financial position of the Aulich group of companies. There was a discussion about the Aulich group as a whole and the need to put money into the businesses. There was also a specific discussion about securing a capital injection into ACL of circa $100,000.

97    On 24 March 2020, Mr Aulich forwarded Ms Hinton’s email of 19 March 2020 with the cash flow projections to Mr Pappas and Ms Scott, saying “we will need to make a cash call on all shareholders” to ensure they would be able to pay staff and “shareholders will need to make regular payments into ACL and [APT]”. Mr Aulich asked them to let him know if they did not think they could meet the cash calls or were not willing to do so. Mr Aulich did not deal with Mr Pappas’ request only 12 days prior for a buy-out of Ms Scott’s shares.

98    The following day, on 25 March 2020, Mr Aulich sent an email to Mr Woodhouse and Ms Taylor effectively saying that they needed to issue 24,975 more shares at $1.00 each, which Mr Pappas would either pay for, in which case they would “get” $24,975 and then “do it again”, ie allot more shares, or which Mr Pappas would not pay for, in which case the three directors would “end up with 99,975 shares”, such that for every $100,000 in distributions, Mr Pappas would get only $25. Mr Aulich thought that was “kinda cool”. The email, which bears setting out in full, said:

We need to issue 24,975 more shares at $1. He either pays and we get $24,975. If he doesn’t pay in 21 days we free to then distribute shares to rest of us.

We need $100,000. Use tax money as we will need to pump that in somewhere anyway.

$24,975 x 3 = $75k to buy all of our shares

$24,975 to buy his.

Then we end up with 99,975 shares held by us and 25 shares held by him. So for every $100k we distribute we have to give him $25. That’s kinda cool.

If he pays $24,975 then we use it and do it again.

You might also need to tell him you are no longer prepared to hold shares on trust for Joanna Heath Scott and say that you hereby cancel your holding the shares in trust and you will file ASIC documents accordingly.

Don’t do this yet but this is how we deal with it.

Wait to see what he does.

BJA

99    Mr Woodhouse acknowledged the email and said that Mr Pappas “will have a fit”. That was because Mr Pappas wanted Ms Scott’s shareholding to be bought out and to sever ties with the group; she did not want to have more shares or shares in her own name.

100    Mr Aulich replied, this time only to Mr Woodhouse (dropping Ms Taylor off the email):

Yeah – I say we wait a week. He might just ignore. Then we issue the offer to buy 24975 shares at $1 and you advise you wont hold Joanna's on trust any further. Sorry you have to do that and he will think it is personal from you too I suppose. If you’d rather hold them that's ok too but fuck that – I would throw him out and make her be on ASIC for everyone to see.

101    Mr Woodhouse replied, saying that he did not want to hold Ms Scott’s shares anymore and had not for a long time, and that Ms Scott could nominate someone else to hold them if she wanted to.

102    Mr Aulich replied:

Nah – just get rid of them and they can work that shit out. As far as we concerned we will let ASIC know and they can sort it out after that.

I know you haven’t. just thought about it today and thought – don’t anymore. There’s no requirement making you do it. Fuck him and fuck her.

103    Consistently with the relevant principles, the primary judge was mindful that the test of unfairness requires an objective assessment of the conduct in question with regard to the particular context in which the conduct occurs. However, his Honour was presented with evidence as to Mr Aulich’s purpose or motive in making the ACL share offer, which was stark and telling. Mr Aulich chose not to give evidence. As a consequence, the primary judge drew the inference that Mr Aulich would not have been able to provide a reasonable commercial rationale for the ACL share issue. It was entirely orthodox for his Honour to consider the directors’ purpose or motive and, as already mentioned, the appellants did not challenge the finding that the directors’ motivation was to dilute Ms Scott’s shareholding. As the Full Court said in Wilmar Sugar, proof of the existence of an improper purpose or ulterior motive means a conclusion of commercial unfairness may be more readily reached, which is precisely the approach which his Honour took.

104    In relation to the APT share offer, the primary judge found, at PJ [114], that the directors put in train the same process to dilute Ms Scott’s interest in APT, around a year after the same occurred for ACL, and that in doing so, they were following through on what, on 31 March 2020, Mr Aulich had told Mr Pappas would be done. At PJ [115], his Honour addressed the commercial rationale for the APT share offer and questioned whether APT required further funding in April 2021 by way of an external capital injection. The appellants submitted that there was a commercial rationale for the share offer due to the loss of approximately $40,000 shown in APT’s profit and loss statement. However, that submission ignores his Honour’s findings that, although the profit and loss statement showed a loss of $38,350 over the preceding period, the balance sheet nevertheless recorded that APT had receivable loan balances exceeding $306,000. While some of these were from other entities in the Aulich group which may have been unable to repay the loan amounts in the near term, $45,408 was owing from Lily & Ruby Holdings, controlled by Ms Taylor. It was open to his Honour to conclude as he did that, without any explanation otherwise, the dominant objective purpose of the APT share issue was to facilitate the dilution of Ms Scott’s interest as a continuation of the conduct demonstrated in the ACL share issue.

105    In our view, the appellants failed to establish that the primary judge placed “undue emphasis” on the purpose or motive of Mr Aulich in making the ACL share offer and the APT share offer. Furthermore, as demonstrated above, consideration of whether there was a commercial justification for the capital raising via the share allotment was a principal part of his Honour’s overall assessment as to whether the ACL and APT share offers were objectively unfair and therefore oppressive. As a result, it is unnecessary for us to consider whether placing “undue emphasis” on Mr Aulich’s purpose or motive in making the share offers is a House v The King error.

Second contention: the primary judge’s finding that there was no commercial rationale for the ACL share offer

106    As explained above, in reaching the conclusion that the ACL and APT share offers were oppressive, the primary judge found that the ACL share offer was principally done for the improper purpose of diluting Ms Scott’s shareholding (at PJ [102]) and that there was no commercial rationale for the ACL and APT share offers (at PJ [113] – [115] and [120]).

107    The primary judge’s finding regarding the absence of a commercial rationale for the ACL share issue was premised on certain findings which his Honour made, at PJ [105], [106] and [107], which the appellants sought to challenge.

108    We consider the appellants’ submissions on those three aspects of the primary judge’s findings in turn below.

PJ [105] – the primary judge’s finding that there was “no reasonable justification for the defendants’ decision to raise capital in ACL and not in any of the other companies”

109    The appellants sought to challenge the primary judge’s finding, at PJ [105], that “there [was] no reasonable justification for the defendants’ decision to raise capital in ACL and not in any of the other companies”.

110    The primary judge’s findings at PJ [105] concerned the directors’ consideration of the outlook for the Aulich entities between March 2020 and April 2020. The Aulich entities were all part of one group, in which all of the revenue was generated by three entities that otherwise relied on other entities to provide shared services, for which they paid a management fee. His Honour accepted that there was a genuine concern amongst the directors about the outlook for the Aulich businesses in view of the developing COVID-19 pandemic. His Honour also noted Mr Williams’ evidence that the concerns at the meeting on 20 March 2020 were about the group as a whole, and not about ACL or APT in particular.

111    The primary judge evidently considered the comparative position of the Aulich entities, and specifically the position of ACL compared to the other companies. The crisis that had arisen was one that affected the group as a whole. However, rather than a capital raising and share issue across the group, the directors had proposed a share issue in ACL alone. It was in that context that his Honour made the finding that there was “no reasonable justification for the defendants’ decision to raise capital in ACL and not in any of the other companies”.

112    The appellants submitted that, in reaching that finding, the primary judge made three significant errors.

113    First, the appellants submitted that the primary judge mistakenly found that Ms Hinton’s projections “showed ACL to be in the best position of all of the companies in the Aulich group”, when the cash flow projections did not show that, and it was not in “the best position”. The appellants submitted that ACL was already in debt, as opposed to, for example, BAP, and it was going to have to go substantially further into debt, including more than BAP whose overdraft limit was $100,000. Although ACL had a larger overdraft facility than BAP, it was submitted, the mere availability of greater borrowing capacity did not mean that ACL was in a better financial position.

114    Ms Hinton’s cash flow projections were a series of spreadsheets and relevantly included: one for APL (the services entity), one each for the revenue generating entities (ACL, BAP and APT), and a consolidated spreadsheet. ACL and BAP had an overdraft facility with a limit of $200,000 and $100,000 respectively. Although BAP had a lower overdraft limit, it was forecast to exceed the overdraft limit by 13 April 2020, whereas ACL was not forecast to exceed its overdraft limit until after 25 May 2020. Furthermore, by the end of the (roughly) three month forecast period (ie 29 June 2020), the cash flow projections estimated that BAP’s debts would be circa $390,000, whereas ACL’s debts would be circa $291,000.

115    Therefore, as the respondent submitted, BAP was forecast to be the entity most significantly in debt at the end of the forecast period, and ACL was going to be able to last the longest without exhausting its funds. Having regard to the cash flow projections, the appellants failed to establish any error in the primary judge’s finding that Ms Hinton’s projections “showed ACL to be in the best position of all the companies in the group”.

116    Secondly, the appellants submitted that the primary judge failed to take into account that, at the meeting on 20 March 2020, Mr Aulich, Mr Woodhouse and Ms Taylor had agreed to go into combined personal debt of up to $1 million to keep the Aulich businesses trading. On the other hand, no such commitment was sought from Ms Scott or given by her and she was merely being asked to contribute to the share raising, which it was submitted showed that the share issue was not unfair.

117    As the primary judge found, at PJ [48], the directors were prepared to go into combined personal debt up to $1 million to keep the Aulich businesses trading. However, the option of a shareholders’ loan was rejected at the meeting on 20 March 2020. Mr Williams told the directors not to loan money, as it would only increase the group’s net liabilities, and rather recommended a capital contribution by the shareholders, suggesting that they each contribute $25,000 as a start.

118    His Honour also found, at PJ [48], that a “tally” was maintained, being a record of the group’s expenditure subtracted from the $1 million loan which the directors were prepared to make. However, they were never called upon to do so. For those reasons, we are not satisfied that the directors’ preparedness to go into a combined debt of up to $1 million was a matter which the primary judge should have taken into consideration.

119    Thirdly, the appellants submitted that the primary judge’s finding that “ACL had cash reserves of over $2 million in April 2020 and did not require funding” was based on a balance sheet for ACL as at 1 April 2020. The appellants submitted that the balance sheet showing cash reserves of over $2 million was not before the directors at the time they made the decision to make the ACL share offer and, as a result, in reaching the conclusion that ACL did not require funding his Honour took into account an irrelevant consideration. The appellants further submitted that his Honour failed to take into account that the directors’ decision was based on Ms Hinton’s cash flow projections and covering email which identified the funds available for operating expenses and said that the projections deliberately excluded cash held in certain bank accounts, which were not factored in for use in meeting expenses.

120    The primary judge was required to make an objective assessment of the conduct in question with regard to the particular context in which the conduct occurred.

121    The appellants submitted that the question of commercial unfairness is to be judged having regard to the facts known to the directors at the time, and not by reference to what subsequently transpires or facts which subsequently become known, referring to Australian Institute of Fitness Pty Limited v Australian Institute of Fitness (Vic/Tas) Pty Limited (No 3) (2015) 109 ACSR 369; [2015] NSWSC 1639 at [98] (Sackar J), referring to Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1 at 26 (Cohen J) and Joint v Stephens (2008) 26 ACLC 1467; [2008] VSCA 210 at [138] (Nettle, Ashley and Neave JJA). So much may be accepted.

122    There was no dispute that ACL held cash of approximately $2 million in a “CBA” bank account as at 1 April 2020. There was no evidence that the directors knew about the $2 million in the CBA bank account, although Ms Hinton’s email of 19 March 2020 referred to “$1M in the CBA tax savings a/c”.

123    The primary judge’s finding, at PJ [105], that there was “no reasonable justification for the defendants’ decision to raise capital in ACL and not in any of the other companies” was made in the context where his Honour made a number of findings. First, his Honour found that Ms Hinton’s cash flow projections “showed ACL to be in the best position of all the companies in the group” and “there was less reason to raise capital in ACL than in any of the other companies”. His Honour also found that Mr Williams had confirmed that the concern at the meeting on 20 March 2020 was about the group as a whole, and not about ACL or APT in particular. Having reached those findings, his Honour went on to state that this was “all in addition to the fact that ACL had cash reserves of over $2 million in April 2020 and did not require funding”. The reference to ACL’s cash reserves was, as the language suggests, an additional matter in support of the initial finding. To the extent there may have been any error in referring to ACL’s cash reserves of over $2 million, it was not material to the result: Reckitt Benckiser at [53] (Jagot, Yates and Bromwich JJ).

124    For those reasons, the appellants failed to establish an error of the requisite kind in relation to the primary judge’s findings at PJ [105].

PJ [106] – the primary judge’s finding that the capital raised in ACL was taken from other companies in the Aulich group and findings regarding the refusal of the interest-free loan

125    The appellants sought to challenge the primary judge’s finding, at PJ [106], that “when the capital was raised in ACL” it was “in fact taken from other companies in the group”, and “was not introduced into the group”. As a result, his Honour found, “the raising of capital in ACL only recirculated existing funds within the group as a whole” and “did not align with the stated objective of responding to the additional capital requirements brought on by the COVID-19-related crisis”.

126    The appellants did not challenge the primary judge’s finding, at PJ [71], that the ACL shares were paid for by drawing from savings in the criminal law practice, paying that to Gracie Gill and Angiesal and then paying that to ACL, with Gracie Gill paying for both Mr Aulich and Ms Taylor’s shares.

127    The Court was taken to an email which Mr Aulich sent to Ms Hinton, on 22 April 2020, which stated:

Jodie please distribute 66K each from BAP tax saving to Peter and my shareholding companies.

Peter to then transfer $24,975 into ACL to pay for shares.

I will transfer 2 x $24,975 for Erin and my shares in two cheques so it is nice an [sic] clean.

128    The appellants referred to $66,000 having been transferred from the “BAP tax saving” account to enable the three shareholding entities to acquire the initial allotments. However, the respondent took the Court to the BAP general ledger which showed that the amount distributed was in fact $132,000, comprising two distributions of $66,000, of which approximately $99,000 was paid into ACL for the shares. There was no dispute that the money that was used to pay for the ACL share issue was, using the description in Ms Hinton’s email of 19 March 2020, “tax savings money” (which the email said included $147,000 for BAP). Ms Hinton’s email also said that the “tax savings money” had not been factored in to her cash flow projections. The appellants submitted that using the moneys set aside for tax improved the group’s cash flow position, because it had been excluded from Ms Hinton’s cash flow projections.

129    Whether or not the “tax savings money” had been excluded from Ms Hinton’s cash flow projections estimating the group’s cash flow position in three months’ time was not to the point. The “tax savings money” actually existed, albeit it had been earmarked to pay future tax liabilities. Using that money to pay for the ACL share issue instead meant that the capital raised was not introduced into the group. As the primary judge found, the capital raised was merely “taken from other companies in the group” and “only recirculated existing funds within the group as a whole”.

130    The appellants also challenged the primary judge’s finding, at PJ [106], that “[n]either did the refusal of Mr Aulich and his partners to accept Mr Pappas’ offer of an interest-free loan conform comfortably with the previous representations of needing an immediate working capital injection to tide the Aulich group over the crisis”. The appellants submitted that the primary judge failed to take into account that, at the meeting on 20 March 2020, Mr Williams advised against a loan, because a loan would decrease net assets while a capital contribution would increase net assets. This submission should be rejected. While Mr Williams counselled generally against a loan and borrowing from the banks, Mr Williams accepted in cross-examination that an interest-free loan, unlike a bank loan, would not decrease net assets. As his Honour stated, the directors’ refusal to accept Mr Pappas’ offer of an interest-free loan did not sit comfortably with their assertion to Ms Scott of the urgent need for working capital.

131    For those reasons, the appellants failed to establish any errors in relation to the primary judge’s findings at PJ [106].

PJ [107] – absence of revised financial position before the share offer on 1 April 2020

132    The primary judge, at PJ [107], was critical of the fact that between the time when Ms Hinton’s spreadsheets were first circulated (on 19 March 2020) and considered and the directors’ resolution on 1 April 2020, no revision of the financial position was undertaken with reference to various government support measures that had been announced in the interim. That was despite the fact that Mr Williams had put the directors on notice of those stimulus measures on 27 March 2020.

133    The appellants submitted that this was an extraneous or irrelevant matter which the primary judge took into account. The appellants submitted that there was no evidence as to what impact the additional measures would have had and it was not the role of the Court to question the commercial wisdom of the directors’ decision by reference to an unknown hypothetical.

134    The appellants’ submission is misconceived. The absence of any revision to the financial position was relevant to the conclusion which followed at PJ [107], namely that “the evidence does not show that there was serious, ongoing consideration of the appropriateness of the amount being requested from shareholders as part of the capital call since the initial projections”. Contrary to the appellants’ submission, the Court was not evaluating the commercial wisdom of the decision to make the ACL share offer.

135    For those reasons, the appellants failed to establish any error in relation to the primary judge’s findings at PJ [107].

Third contention: alleged miscarriage of primary judge’s discretion in taking into account that the dilution of shares was antithetical to Ms Scott’s wishes

136    The appellants submitted that the primary judge’s discretion miscarried in taking into account that forcing Ms Scott to the choice between making a further contribution of capital or having her shareholding diluted was antithetical to her legitimate wishes: PJ [108].

137    The appellants submitted that the fact that Ms Scott may have wished to sell her shares in ACL did not prevent the directors from exercising their powers to allot shares in ACL. Further, as the primary judge accepted, this was not a situation where Ms Scott was deprived of an opportunity to participate in the ACL share offer. Ms Scott was given ample warning of the ACL share offer and there was no evidence that Ms Scott was not able to participate in it if she wanted to do so.

138    It was not in dispute that cl 16.1(b) of ACL’s Constitution permitted the directors to allot shares to any persons, at any times, on any terms and at any issue price as the directors saw fit. Clause 16.2 of ACL’s Constitution provided that the directors were to offer the shares to existing shareholders in proportion to the number of shares held by the member and could issue any shares not taken up under the offer as they saw fit.

139    Constitutional authority to allot shares does not answer the oppression question. The power to allot shares is fiduciary in nature and is conferred primarily to enable capital to be raised. Even if the constitution permitted the directors to issue shares at any price, the separate question remained whether exercising that power in this manner was objectively unfair: Chief Disruption Officer (No 3) at [34] – [35] (Goodman J); Re Anna Bay Resort Pty Ltd [2022] NSWSC 331 at [192] – [193] (Rees J).

140    The primary judge found that the purpose of the share offer was to dilute Ms Scott’s shareholding. That conclusion was based in part on the unchallenged findings with respect to the directors’ motivation. Mr Pappas made clear to Mr Aulich as early as 12 March 2020 that Ms Scott wished to be bought out and Ms Scott had no interest in continuing to have any shareholding in any companies in the group. The directors ignored that request and embarked on a scheme to dilute Ms Scott’s shareholding. As a result, it was unremarkable that his Honour found that “[f]orcing Ms Scott to the choice between making a further contribution of capital to the company or having her shareholding devastatingly diluted was not in any way responsive to her legitimate wishes; it was antithetical to them”.

Fourth contention: alleged miscarriage of the primary judge’s discretion in taking into account that the ACL share issue was at a nominal value of $1.00

141    The primary judge found, at PJ [110], that the issue of ACL shares occurred at a nominal value of $1.00 each, whereas the company had a net asset value of close to $2 million at the time (on the lowest valuation proposed by Ms Scott), such that each share would have been worth $20,000 on a net asset value basis. As a result, his Honour found, “each $1.00 share was issued at a significant undervalue”.

142    The appellants submitted that the primary judge’s discretion miscarried in taking into account that the ACL share issue was at a nominal value of $1.00 because the directors were authorised under ACL’s Constitution to allot shares at any times, on any terms and at any price as the directors saw fit. Furthermore, the fact that the shares were subsequently valued by an expert in the proceeding at a higher amount was an irrelevant matter because it was not known to the appellants at the time. The appellants submitted that commercial fairness had to be assessed by reference to what was known by the directors at the time, rather than by reference to a later, expert valuation.

143    As mentioned above at paragraph [139], constitutional authority to allot shares, on any terms and at any price, does not answer the oppression question. The question remains as to whether the exercise of the power was objectively unfair. The appellants’ submissions entirely overlooked how the issue price of $1.00 per share came about. As already mentioned, Mr Williams had recommended a capital raising of $100,000 and suggested that the shareholders contribute $25,000 each. There was, however, no explanation for the directors’ decision to issue 99,900 shares, rather than a less dilutive structure. Further, there was no evidence as to any consideration given to the appropriate share value to arrive at a capital raising of $25,000 per shareholder. Rather, Mr Aulich sent the email of 25 March 2020, which simply asserted that the directors needed “to issue 24,975 more shares at $1” each, in the context where he also said that this would result in Mr Pappas (ie Ms Scott) merely receiving $25 for every $100,000 in distributions.

144    The appellants’ submissions also overlooked the point that the directors had some understanding of the value of Ms Scott’s interest. In correspondence between the directors, Mr Aulich wrote that it was “[h]ard to argue” against a valuation of approximately $500,000 to $550,000 for Ms Scott’s shares, and Mr Woodhouse indicated that he was willing to borrow to fund a purchase at that level.

Fifth contention: alleged miscarriage of the primary judge’s discretion in taking into account that the directors were required to provide some further explanation to Ms Scott beyond the financial reports provided

145    The appellants submitted, with respect to the APT share offer, that the primary judge’s discretion miscarried by taking into account that the directors were required to provide some further explanation to Ms Scott beyond the financial reports provided.

146    As mentioned above at paragraphs [44] – [45], on 5 March 2021 the directors of APT convened a meeting to allot shares in APT. The email referred to a “general meeting” to be held with a view to allotting further shares under cl 29.1 of APT’s Constitution, but the primary judge accepted that it was understood that the directors were acting under cl 23 of APT’s Constitution, which gave the directors power to allot shares. Attached to the email was a profit and loss statement and balance sheet for APT.

147    The primary judge’s findings in relation to the APT share allotment, at PJ [114] – [115], were as follows:

114    Many of the considerations going to an absence of commercial rationale for the ACL share issue can also be said of the APT share issue. Mr Aulich together with the other shareholding interests put in train the same process to dilute Ms Scott’s interest in APT, around a year after that occurred for ACL. That was following through on what, on 31 March 2020, he had told Mr Pappas would be done (see [60] above). Mr Aulich continued to play a leading role in coordinating with Mr Woodhouse and Ms Taylor. In the absence of evidence to the contrary, least of all that provided by Mr Aulich himself, there is no reason to think Mr Aulich did not continue to harbour the same animus against Mr Pappas between the ACL share issue and the commencement of preparations for the APT share issue. Indeed, the opposite is suggested by the unilateral amendment of the ASIC register for APT to have Ms Scott directly hold the shares previously held on trust by Angiesal, as had been done for ACL the year before. To similar effect, it can be inferred that Ms Scott continued to have no desire to maintain her interest in APT because of the falling out and that Mr Aulich continued to have a desire to dilute Ms Scott’s interest to adversely affect Mr Pappas. The share issue which eventuated was also done at nominal value.

115    Even more so than the share issue for ACL, which it can be accepted occurred at the peak of the COVID-19 crisis with reference to worst-case contingency planning, it may be questioned whether APT required further funding in April 2021 by way of an external capital injection. The profit and loss statement and balance sheet for APT provided to Ms Scott, Mr Woodhouse and Ms Taylor on 5 March 2021 indicates to the contrary. Although the profit and loss statement showed a loss of $38,350 over the preceding period, the balance sheet nevertheless recorded that APT had receivable loan balances exceeding $306,000. While some of these were from other Aulich entities which may have been unable to repay the loan amounts in the near term, $45,408 was owing from Lily & Ruby Holdings controlled by Ms Taylor. It is not outside the realm of possibility that there may have been a reasonable business case for the APT share issue at that time. However, no further explanation was provided to Ms Scott beyond these circumstantial figures. In light of the intent and lack of commercial rationale demonstrated for the ACL issue the year preceding, the better inference, which I draw, is that the dominant purpose behind the APT issue was to facilitate a like scheme to dilute Ms Scott’s interest.

148    As the reasons show, at PJ [114], the primary judge began by noting the directors’ undisputed motive of diluting Ms Scott’s shareholding in ACL, from which his Honour inferred that the same process was put in train to dilute Ms Scott’s shareholding in APT one year later. His Honour then considered the lack of commercial rationale for the APT share offer, questioning “whether APT required further funding in April 2021 by way of an external capital injection”. It will be recalled that the share allotment was for an additional 40,000 shares at an issue price of $1.00 each, resulting in a capital raising of $40,000. As his Honour noted, at PJ [80] and [115], while the profit and loss statement for APT showed a loss of $38,350, the balance sheet recorded a loan receivable balance in excess of $306,000 and, excluding the Aulich group, $45,408 owed by the company controlled by Ms Taylor. In that context, his Honour stated that “no further explanation was provided to Ms Scott beyond these circumstantial figures” and, in light of the intent and lack of commercial rationale demonstrated for the ACL issue in the preceding year, his Honour said the “better inference” was that “the dominant purpose behind the APT issue was to facilitate a like scheme to dilute Ms Scott’s interest”.

149    The appellants submitted that the lack of further explanation to Ms Scott beyond the figures in the profit and loss and balance sheet was an irrelevant consideration, because there was no obligation on the directors to provide any further explanation to Ms Scott about the share issue. The appellants also relied on the findings in relation to Ms Scott’s failure to attend the meeting, ask questions or seek information, at PJ [93], where his Honour stated that:

93    Although her reasons explain why she did not take up the share offer, they do not explain why she did not respond to Mr Aulich in these terms nor attend the meeting, or insist that Mr Woodhouse for Angiesal attend the meeting on her behalf, and ask pertinent questions or why she did not otherwise seek further information and explanation.

150    Contrary to the appellants’ submissions, the lack of explanation provided to Ms Scott, beyond the financial statements, was not the principal reason why the primary judge found the APT share issue was oppressive. His Honour’s reasons on this issue, made clear at PJ [120], were that Ms Scott’s conduct did not detract from the objective unfairness of the conduct causing the dilution of her shareholding in ACL and APT. That objective unfairness, his Honour said, arose “from the absence of genuine commercial reasons actuating the share issues”.

Conclusion on Ground one

151    For the foregoing reasons, Ground one of the appeal is without merit.

GROUND TWO

152    By Ground two, the appellants contended that the primary judge erred in finding that the most appropriate form of relief was that the appellants, jointly and severally, pay compensation to Ms Scott quantified in accordance with the diminution in value of her shareholding at the time of the dilution of her shareholding in ACL and APT.

153    When the proceeding was commenced, Ms Scott relevantly sought an order that the appellants, APT and ACL buy out her shares. At or shortly before the hearing commenced, Ms Scott abandoned her claim for a buyout order and sought an order that the appellants pay her compensation in a sum that compensates her for the diminution in the value of her shares in ACL and APT or, alternatively, foregone dividends in ACL.

154    As the appellants submitted, the payment of compensation directly by a director to a shareholder is a novel remedy for oppressive conduct, although the appellants accepted that the Court has power to make such an order under s 233 where the loss is distinct rather than a derivative loss suffered by the company. Furthermore, the research of counsel suggested that the award of compensation by the appellants to Ms Scott was the first occasion where such relief has been granted in Australia.

155    The appellants submitted that an order for compensation of the kind which Ms Scott sought against the appellants was a quasi-form of buyout order and the principles in relation to relief of that kind were relevant to the Court’s discretion to grant relief. In that regard, the appellants relied upon the well-established principle that the purpose of the oppression remedy is to end the effects of oppression: Crawley v Short (2009) 262 ALR 654; [2009] NSWCA 410 at [157] (Young JA, with whom Allsop P and Macfarlan JA agreed), referring to Campbell v Backoffice Investments Pty Ltd (2008) 66 ACSR 359; [2008] NSWCA 95 (Backoffice Investments (NSWCA)) (affirmed on appeal in Backoffice Investments (HC) at [182]).

156    The appellants submitted that the exercise of the Court’s discretion under s 233 is required to be carried out in effectively two stages. The first is for the Court to determine whether it is appropriate to grant relief at all and, at this stage, the Court is required to take into account whether the oppression has come to an end by reason of a winding up or external administration. Having determined that it is appropriate to grant relief, the Court is required to consider what type of relief to grant and to choose the remedy which is the least intrusive, relying on Zong v Lin [2022] NSWCA 136 at [79] (Gleeson JA, Leeming and Kirk JJA agreeing).

157    The appellants submitted that, consistent with the principle that the purpose of the relief is to end the effects of oppression, “relief will generally be inappropriate as a matter of discretion if there is no continuing oppression”, citing Backoffice Investments (NSWCA) at [120] – [123] (Giles JA) and Financialstrategy.com.au Pty Ltd (in liq) v Bailey Roberts Group Pty Limited (in liq) [2026] NSWCA 74 at [83] (Free JA, Payne and Stern JJA agreeing). The appellants also submitted that the fact that the company has gone into liquidation is an important consideration in the exercise of the discretion as to the appropriate remedy, including whether any relief ought to be granted, citing Backoffice Investments (HC) at [72] (French CJ) and [179] – [182] (Gummow, Hayne, Heydon and Kiefel JJ).

158    The appellants submitted that while there are instances where a court has granted relief even though the effects of the oppression were at an end, relief would not ordinarily be granted in the context of a company in liquidation unless the impugned conduct contributed to the liquidation, citing Re Bailey Roberts Group Pty Ltd (in liq) [2025] NSWSC 227 (where Black J refused to make a buyout order) and Re Mobius Distilling Pty Ltd (in liq) [2025] NSWSC 539 (where Black J found that the oppressive conduct had the effect of undermining the sale of the company’s business or assets, which was in liquidation by the time of the hearing, and a buyout order was made).

159    The appellants submitted that while the primary judge observed, at PJ [126], that Ms Scott bore no responsibility for what had happened to ACL and APT, his Honour erred in failing to take into account that the demise of ACL and APT did not arise from the oppressive conduct of the appellants either, as his Honour found at PJ [9]. However, his Honour proceeded, at PJ [125], on the basis that Ms Scott was entitled to some form of relief and that the appellants were obliged to pay compensation to Ms Scott because that appeared to be “the only form of relief that would meaningfully address Ms Scott’s loss”. In proceeding in this way, it was submitted, his Honour failed to consider whether it was appropriate to grant any relief at all and, if it was, what type of relief to grant. In particular, his Honour did not consider whether it was appropriate to grant relief at all in circumstances where the oppression had come to an end by reason of the winding up of ACL and pending external administration of APT, and therefore the discretion had miscarried.

160    The appellants also submitted that the primary judge effectively found that Ms Scott lost the opportunity to realise the value of her shares in ACL and APT because of the dilution of her shareholding. The appellants submitted that his Honour erred in that regard because Ms Scott could not compel the other shareholders of ACL and APT, or a third party, to acquire her shares in ACL or APT for the sums claimed by Ms Scott. Therefore, it was submitted, the order for compensation was made without Ms Scott having demonstrated or adduced any evidence of a loss of a valuable opportunity to sell her shares between the dilution of her shareholding and the demise of the companies. For those further reasons, it was submitted, the orders had the effect of punishing the appellants and the discretion miscarried.

Principles relevant to relief

161    If the prerequisites of s 232 are satisfied, s 233(1) empowers the Court to make any order under that section that it considers appropriate in relation to the company “including” relevantly an order for the purchase of any shares by any member: see s 233(1)(d). The provision is a broad one: Backoffice Investments (HC) at [72] (French CJ); [178] (Gummow, Hayne, Heydon and Kiefel JJ). The power given to the Court by s 233 is not subject to any limitations. As the introductory parts make clear, the relief that can be granted by the Court is not limited to the relief expressly referred to in s 233(1) and the Court can make “any order” that it considers appropriate “in relation to the company”. Appreciating the breadth of the provision and that the Court’s discretion is not subject to any limitations, the relief granted in individual authorities can be seen as turning on the particular facts of each case.

162    As already mentioned, it is well-established that the purpose of the oppression remedy is to end the effects of oppression (see above at paragraph [155]). For some time, there was a debate about whether the Court’s power to make orders under s 233 ceased if the oppressive conduct was at an end. In Backoffice Investments (NSWCA) at [132], Giles JA considered that the conduct complained of need not be continuing at the time the Court considered making an order. However, claimed relief founded on conduct which was no longer continuing might, but need not necessarily, be refused in the exercise of the discretion. French CJ adopted Giles JA’s views in Backoffice Investments (HC): [68] – [72]. The plurality observed that the Court may have power to make orders under s 233 even where there is no continuing oppression, but left the question open as the point did not need to be decided in the circumstances of the case: Backoffice Investments (HC) at [182] (Gummow, Hayne, Heydon and Kiefel JJ).

163    As already noted (see above at paragraph [157]), the appellants submitted that “relief will generally be inappropriate as a matter of discretion if there is no continuing oppression”, citing Backoffice Investments (NSWCA) at [120] – [123] (Giles JA) and Financialstrategy.com.au at [83] (Free JA).

164    It assists to provide further background at this point in relation to the two authorities cited by the appellants.

165    In Backoffice Investments (NSWCA), the oppressive conduct was Mr Campbell’s exclusion of Mr Weeks from participation in the management of the company despite a shareholders’ agreement that stated that they were to be joint managing directors. By the time of the trial, a provisional liquidator had been appointed and the business and assets of the company had been sold. Giles JA found that the appointment of a provisional liquidator was a mutually recognised necessity and the inability of the company to function was due to more than the conduct which was found to be oppressive. His Honour considered that the parties’ agreement to appoint a provisional liquidator and the sale of the business and assets made a buyout order unnecessary to bring the oppressive conduct to an end, and held that a buyout order was not appropriate: at [137]. His Honour further found, at [143] – [147], that the primary judge’s discretion had miscarried because she had failed to have regard to the appointment of the provisional liquidator and sale of the business and assets of the company as matters going to the discretion to grant relief, as opposed to the power to make the orders.

166    As to the passages in Backoffice Investments (NSWCA) at [120] – [123] cited by the appellants, after referring to the history of ss 232 – 233, Giles JA stated that “there will ordinarily be no occasion for making a buy-out order under s 233(1)(d) if the oppression has otherwise been brought to an end, at least provided that the bringing to an end was not itself a consequence of the conduct complained of, such as by oppression ‘carried to the extent of destruction of the business of the company’”, citing Scottish Cooperative Wholesale Society Ltd v Meyer [1959] AC 324; [1958] 3 All ER 66 at 86 (Lord Keith).

167    The principle that “relief will generally be inappropriate as a matter of discretion if there is no continuing oppression” originates from the primary judgment in Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [39] (Austin J). In the appeal, Campbell JA observed that the parties did not challenge the primary judge’s statement of principles: Tomanovic v Global Mortgage Equity Corporation Pty Ltd (2011) 288 ALR 310; [2011] NSWCA 104 at [140], (Campbell JA, Macfarlan and Young JJA agreeing). The principle was referred to in Financialstrategy.com.au, at [83], although Free JA cited Tomanovic v Global Mortgage at [140], and did not refer to Tomanovic v Argyle HQ at [39] (Austin J).

168    The principle that “relief will generally be inappropriate as a matter of discretion if there is no continuing oppression” does not mean that the Court approaches the issue of relief from a particular starting position, that is to say, that relief ought not be granted if the oppressive conduct is no longer continuing. The Court must formulate an opinion about oppression or unfair prejudice as at the date of the institution of proceedings and the issue of relief under s 233 must be determined as at the date that the discretion falls to be exercised: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97 at [159] (Spigelman CJ). If the Court is satisfied that the prerequisites in s 232 exist, the Court must determine whether, in the circumstances of the particular case, an order under s 233 is appropriate and, if it is, the Court has a wide discretion as to the appropriate remedy. The significance of whether the oppressive conduct is at an end at the time the Court considers making an order will depend on the individual case.

169    The nature of the remedy chosen by the Court will be dependent upon the conclusion drawn as to the type of oppression with which the Court is dealing and the Court will choose the remedy which is least intrusive: Zong v Lin at [79] (Gleeson JA, Leeming and Kirk JJA agreeing); Tomanovic v Argyle HQ Pty Ltd at [44] (Austin J); Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 742 (Young J); Re Enterprise Gold Mines NL (1991) 3 ACSR 531 at 539 (Murray J). The fundamental principle, it has been said, is that the remedy under s 233 must be calculated to alleviate the consequences of the oppressive conduct and no more; that is, to place the oppressed party in a position equivalent to that in which it would have been but for the oppression, but not to improve its position over and above that which would have prevailed but for the oppression: Re North Coast Transit Pty Ltd [2013] NSWSC 1119 at [24] (Brereton J); Chief Disruption Officer Pty Ltd as Trustee for the McDonald Family Trust v Michel, in the matter of Laava ID Pty Ltd (No 4) [2023] FCA 25 (Goodman J) and the authorities referred to at [13]–[21].

170    It is unremarkable that relief will not usually be granted under s 233 where a company is being wound up or is in external administration. In many cases, particularly involving exclusion from management, the winding up of the company will likely have brought an end to the oppression. Furthermore, as Ball J (as his Honour then was) observed in Driver v Botanical Water Technologies Pty Ltd [2024] NSWSC 1409 at [191], it may be that the Court does not have power to make orders affecting the management of the company, or the distribution of its assets, when those matters are governed by the provisions of the Corporations Act that apply in insolvency. Similarly, a buyout order where the company is being wound up would confront the statutory prohibition against share transfers after a winding up commenced: Webb v Stanfield [1991] 1 Qd R 593 at 598 (McPherson J, Demack and Williams JJ agreeing); Driver at [191].

171    There are cases where the Court refused to make a buyout order because the relief claimed ceased to be appropriate once the company was being wound up: see, eg Webb v Stanfield at 600, Re Hailey Group Ltd [1993] BCLC 459 at 473 (Sykes QC); Re Bailey Roberts at [210] (Black J). There are also cases where buyout orders were made, despite the fact that the company was in liquidation. The relevant circumstances have included that the oppression was continuing, the oppressive conduct had the effect of undermining the sale of the company’s business or assets or the oppressive conduct had contributed to the company’s financial position and liquidation: see, eg Re Imperium Projects Pty Ltd [2017] NSWSC 141 at [29] – [31] (Black J); Re Mobius Distilling at [184] (Black J); Re Yamari Ochre Pty Ltd (in liq) [2025] NSWSC 1498 at [101] (Black J). Much will depend on the circumstances of the individual case.

172    In Financialstrategy.com.au, at [84], Free JA said in relation to a buyout order:

Although an order for the payment of compensation or damages is distinct from an order to buy out shares, there is a compensatory aspect to the latter form of relief. In Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324 at 369 Lord Denning observed that an order for the buying out of shares gives to an oppressed shareholder “what is in effect money compensation for the injury done to them”. His Lordship was satisfied that this was no objection to granting such relief where appropriate as the court’s discretion is “well exercised in making an oppressor make compensation to those who have suffered at his hands”. Likewise in Rankine v Rankine (1995) 124 FLR 340; (1995) 18 ACSR 725 at 730-731 Thomas J described a court in ordering the compulsory purchase of shares by an oppressor as “in effect awarding compensation for the respondents’ breach of duty”.

173    See also Smith Martis Cork & Rajan Pty Ltd v Benjamin Corporation Pty Ltd (2004) 207 ALR 136; [2004] FCAFC 153 at [70] – [78] (Wilcox, Marshall and Jacobson JJ).

Consideration

174    The primary judge considered the question of relief at PJ [122] – [131].

175    At PJ [125], the primary judge stated:

The oppression already having occurred in the share issues for ACL and APT, and Ms Scott having suffered loss for it not otherwise attributable to or derivative of loss to the companies, this is the rare case where the novel remedy of compensation from the directors to a shareholder is warranted. Such a remedy appears to be the only form of relief that would meaningfully address Ms Scott’s loss, now otherwise irremediable through the companies themselves as they are no longer (or will no longer be) going concerns.

176    The primary judge considered that, while the oppressive conduct was not ongoing, it had prevented Ms Scott from realising any value for her shares and the effects of the oppression remained unremedied. His Honour noted that Ms Scott’s intention at the time the oppressive conduct occurred was to sell her interest in the relevant Aulich entities and, had she been able to do so, then the diminution in value caused by the liquidation of ACL and impending administration of APT would be irrelevant to her. However, it was because of the appellants’ oppressive conduct that that had not occurred and she was in a worse position than if that conduct had not occurred: at PJ [126].

177    The primary judge considered that the most appropriate form of order was that Mr Aulich and Mr Woodhouse, jointly and severally, pay compensation quantified in accordance with the diminution in value which occurred at the time of the dilution for each of ACL and APT: PJ [127]. His Honour considered that this would have the effect of restoring Ms Scott to the position she would have been in but for the oppressive conduct.

178    Contrary to the appellants’ submission, the primary judge first considered whether it was appropriate to grant relief in the circumstances of the case. His Honour was alert to the circumstance that ACL was in liquidation and of the impending external administration of APT and that the oppressive conduct was not ongoing, as shown in PJ [124] – [126]. However, his Honour distinguished between ongoing oppression and the ongoing effects of the oppressive conduct: PJ [126]. His Honour noted that, although the oppressive conduct was not the cause of the liquidation, it was the cause of Ms Scott not being able to realise any value for her shares: PJ [128].

179    Having considered whether it was appropriate to grant relief, the primary judge considered the most appropriate form of order to be an order that the appellants pay compensation to Ms Scott, at PJ [127]. His Honour awarded compensation equivalent to the sum that would have been payable if a buyout was ordered at the time of the dilution of Ms Scott’s shareholdings.

180    The total sum was quantified (in part) by reference to the correspondence passing between the appellants shortly before the share issue in April 2020 in which they acknowledged that Ms Scott’s 25% interest in ACL was about $500,000 or $550,000 given what Ms Taylor had paid for her 25% interest: PJ [129] (his Honour’s reference to what Ms Harders had paid was clearly intended, by the cross-reference to PJ [35], to be a reference to what Ms Taylor had paid).

181    The appellants submitted that the primary judge erred by failing to take into account that the market value of the shares would be diminished because there existed no right in the ACL Constitution to compel a buyout of the minority holding and there otherwise existed no external market for the shares. Those matters were said to affect not only the market value of the shares but also the value of the lost opportunity to sell the shares at fair value.

182    The appellants’ submission is rejected for the following reasons. First, the primary judge was entitled to have regard to evidence of the proximate share purchase by Ms Taylor as informing the value of Ms Scott’s equivalent holding in ACL. Secondly, the primary judge had regard to unchallenged expert evidence of the value of Ms Scott’s holdings at the time of the oppressive conduct, estimating the value at $710,800. The appellants did not establish in this appeal that the expert valuation erroneously failed to factor in the matters now relied upon. As the primary judge correctly observed, the compensation could well have been quantified by reference to that amount, less dividends received by Ms Scott following the dilution of her holding, so placing her in a better position than the amount ultimately awarded. Thirdly, the grounds of appeal do not allege the specific error which was asserted in the course of oral submissions. Fourthly, for the most part the appellants’ submissions proceeded from an erroneous assumption that Ms Scott had advanced a claim for compensation based on the loss of a chance. The quantification of compensation did not turn on loss of chance theory. Rather, the primary judge quantified compensation on the premise that Ms Scott was entitled to a buyout order at or before the commencement of the proceeding. Expressed another way, the oppressive conduct gave rise to an entitlement to relief compelling the appellants to purchase the shareholding notwithstanding the absence of rights in the nature of a put option or the want of an external market. That course was plainly open given that the delay between the oppressive conduct and the award of compensation was principally explained by the appellants’ unmeritorious defence of the action.

183    We therefore reject the appellants’ submission that his Honour awarded compensation based on a loss of opportunity for Ms Scott to realise her shares or that it had the effect of “punishing” the appellants.

184    The parties, correctly, noted that the remedy granted by the primary judge is novel. However, as the appellants also acknowledged, the Court’s power under s 233 is broad and includes the power to remedy oppression by way of an order for compensation against the directors of the company. It may be accepted, as the previous authorities demonstrate, that it is rare for a court to grant relief for oppressive conduct under s 233 where a company is being wound up or is in external administration. However, his Honour was mindful of the liquidation of ACL and impending administration of APT. Having considered the circumstances of the case carefully, his Honour concluded that it was appropriate to grant relief and that an order that the appellants pay compensation to Ms Scott was the most appropriate form of order. The reasoning and approach of the primary judge disclose no error of the requisite kind.

185    For the foregoing reasons, Ground two is similarly without merit.

CONCLUSION

186    For the foregoing reasons, the appeal should be dismissed, with costs.

Associate:

Dated:    30 October 2026