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Arhanghelschi v Ussher

Arhanghelschi v Ussher

Case [2013] VSC 253 16 May 2013

Corporate Law & Governance

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT

CORPORATIONS LIST

S CI 2013 01261

IN THE MATTER OF

BASE IMAGING GROUP PTY LTD (ACN 138 302 235)

BETWEEN:

DAN IURII ARHANGHELSCHI

and

CLADWYN PTY LTD

Plaintiffs

RICHARD MILNE USSHER & ORS

Defendants

MEAGHAN LIDDLE & ORS	Plaintiffs by Counterclaim
v
CLADWYN PTY LTD	Defendant by Counterclaim

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JUDGE:	FERGUSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	6, 7 and 9 May 2013
DATE OF JUDGMENT:	16 May 2013
CASE MAY BE CITED AS:	Arhanghelschi v Ussher
MEDIUM NEUTRAL CITATION:	[2013] VSC 253

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CORPORATIONS – Oppression – Radiology business conducted through unit trust – Whether conduct of the affairs of trustee company oppressive to, unfairly prejudicial to or unfairly discriminatory against shareholder – Corporations Act2001 (Cth), ss 232, 233.

CONTRACT – Construction of unitholders deed – Exercise by majority of power to exclude unitholder – Whether on proper construction or by implication obligation of good faith imposed to act rationally, reasonably and fairly considering the interests of the parties – Exercise of power in self‑interest of majority of unitholders.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Heaton QC with Mr T Moloney	Compact Commercial Law
For the Defendants	Mr M D Wyles SC with Dr T McEvoy	Herbert Smith Freehills

TABLE OF CONTENTS

Introduction......................................................................................................................................... 2

The Radiology Business and Structure......................................................................................... 2

Steps taken by the Majority Unitholders and BIG...................................................................... 7

Did the Majority Unitholders breach clause 6.2 of the Unitholders Deed?.......................... 10

Have the affairs of BIG been conducted in an oppressive manner?...................................... 19

Conclusion......................................................................................................................................... 23

HER HONOUR:

Introduction

Dr Arhanghelschi and four of the defendants[1] are radiologists and they conduct a radiology practice in Ballarat. The defendant doctors wish to part company with Dr Arhanghelschi. Initially, Dr Arhanghelschi sought orders that would have seen him remain in the practice. However, towards the conclusion of his evidence, he acknowledged that it would be hard for the doctors to move forward together in the practice and he no longer wants to work with the other doctors. Consequently, the dispute now concerns how much Dr Arhanghelschi should be paid once he leaves. In part, that turns on first, whether the steps that were taken to force Dr Arhanghelschi to leave the practice were permissible under the terms of the contractual arrangements between the parties[2] and secondly, whether those steps constitute grounds upon which the Court may make orders under the oppression provisions, ss 232 and 233 of the Corporations Act 2001 (Cth), for the purchase of Dr Arhanghelschi’s interests.
[1]Dr Richard Milne Ussher, Dr Arthur David McKenna, Dr Paul Fred Walker, Dr Ian Alasdair Revfem.
[2]The relevant provision is clause 6.2(c) of a unitholders deed, see [5] below. At trial, the plaintiffs abandoned an argument that the defendants had exercised their powers capriciously or for an ulterior purpose. Further, the plaintiffs did not pursue at trial allegations included in their amended statement of claim that other than Dr Arhanghelschi, the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Arhanghelschi v Ussher

Details

AGLC: Arhanghelschi v Ussher [2013] VSC 253
Case: [2013] VSC 253
Decision Date: 16 May 2013

CaseChat Overview and Summary

In the case of Arhanghelschi v Ussher, the primary dispute arose between the plaintiff and the other unitholders of a unit trust, concerning the management and operation of a radiology business. The court had to determine whether the conduct of the affairs of the trustee company was oppressive, unfairly prejudicial, or unfairly discriminatory against the plaintiff under the Corporations Act 2001 (Cth). Additionally, the court examined whether an obligation of good faith was implied in the unitholders' deed when exercising the power to exclude a unitholder, focusing on whether such exercise must be rational, reasonable, and fair, considering the interests of all parties.

The key legal issues included whether the majority unitholders' decision to exclude the plaintiff from the unit trust and the radiology business was oppressive or unfairly prejudicial, and whether the deed implied an obligation of good faith that required the majority to act rationally, reasonably, and fairly. The plaintiff argued that the majority's actions were not in the best interests of the business and unfairly prejudiced him, while the majority contended that their actions were legitimate and in the interest of the unit trust.

The court found that the conduct of the affairs of the trustee company was not oppressive or unfairly prejudicial to the plaintiff. It held that the majority unitholders had the right to exclude a unitholder for their own interests, provided their actions were not unlawful or fraudulent. The court also determined that the unitholders' deed did not imply an obligation of good faith requiring the majority to act in the interests of all parties. Instead, the deed allowed the majority to act in their self-interest, as long as their actions did not contravene the law.

The court dismissed the plaintiff's claims and made no orders in his favour. The conduct of the majority unitholders was deemed to be within their rights under the unitholders' deed, and no oppressive, unfairly prejudicial, or unfair discriminatory conduct was found.

Orders