This is the latest in a series of posts I have written concerning the long-running dispute between the McLaughlins and those controlling the (previously) company-title home-unit building Dungowan Manly.
The background to the dispute is set out in my first post on this topic, and the bulk of the litigation in my second. A subsidiary dispute, in which the McLaughlins were largely unsuccessful, was the subject of my third post.
To cut a long story short, the dispute involved plans to redevelop a home unit block in Manly (Dungowan Manly) which were opposed by the McLaughlins but which were pushed through by the majority, led by one Mr Garratt QC, a Melbourne barrister, who at all times rather forcefully maintained that the redevelopment did not require the McLaughlins’ consent. This proved to be wrong – subject, that is, to any further appeal – which in the circumstances cannot be ruled out.
I have only alluded to it indirectly in my first post, but there is also something rather odd about how Mr Garratt became the owner of multiple units in the building (or rather, the shares representing the right to occupy those units) without the true beneficial ownership of those shares being disclosed.
Whilst the McLaughlins’ opposition might seem to have been obstinate and pig-headed, the approach adopted by the company towards them was likewise so, conditioned by Mr Garratt’s view which was adopted by the majority. And the McLaughlins’ obstinacy should be viewed in the light of their offer to sell their shares which, because of Mr Garratt’s view, was not taken up, even though the company had obtained finance which would have enabled it to do so.
In the main dispute, Justice Ward awarded the McLaughlins relatively modest damages of $200,000 for breach of the statutory contract under section 140 of the Corporations Act and about $14,000 for oppression, and ordered that the company pay the McLaughlins’ costs. The damages were relatively modest because her honour discounted them by “about two thirds” because she said the buy-back of their shares at $950,000 which was mooted at the beginning of the distpute might not have occurred and that the McLaughlins had seemed not to have mitigated their damages by agreeing to sell their shares to the company at a price determined by an independent valuer. As far as I can work out, this meant that they should have given in to the majority, because the value an independent valuer would have ascribed to the shares would presumably have been the value of the shares following the course of conduct (in breach of their contract with the company) that the company had adopted. This seems a bit rich.
The company appealed both orders and the McLaughlins cross-appealed the amount of damages for breach of the statutory contract.
The appeal was originally set down for early 2011 but ultimately was not heard until April-May 2012. This was partly owing to the unsuccessful stratagem adopted by the McLaughlins to attempt to prevent the company proceeding with the appeal which was the subject of the intervening round of proceedings before Pembroke J in 2011.
Yesterday the Court of Appeal handed down judgment which was unanimously in the McLaughlins’ favour: the appeal was dismissed and the cross-appeal upheld by increasing the damages under the statutory contract from $200,000 to $513,129.45 as at March 2010, plus interest.
It’s not clear to me right now how the McLaughlins will extract this money, given that the building has in the meantime been converted to strata title, but I think there was something in the fine print of that conversion which protected the McLaughlins in relation to that.
