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BBHF Pty Ltd v Sleeping Duck Pty Ltd

BBHF Pty Ltd v Sleeping Duck Pty Ltd

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Case Copied 14 June 2024 72 min read

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2021 04359

BBHF PTY LTD	Plaintiff
v
SLEEPING DUCK PTY LTD & ORS (according to the Schedule)	Defendants

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JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	16-19 October 2023, 23-27 October 2023, 30 October-1 November 2023 and 30 November 2023
DATE OF JUDGMENT:	14 June 2024
CASE MAY BE CITED AS:	BBHF Pty Ltd v Sleeping Duck Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2024] VSC 320

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CORPORATIONS – Oppression proceeding – Turns on its facts – Allegations agreements and understandings made and not honoured – Legitimate expectations not fulfilled – Exclusion from management – Commercial unfairness to be assessed objectively and in context – Allegations not made out – Proceeding dismissed – Corporations Act 2001 (Cth) ss 232, 233 – Re SRW Nominees Pty Ltd [2019] VSC 547 applied; Skytraders Pty Ltd [2022] VSC 416 P/C – Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310 [171], Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, 683 [59], Re AJ Roberts Removals & Storage Pty Ltd [2017] NSWSC 1054 referred to.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Borsky KC with Mr C Moller SC and Mr D Porteous	Corrs Chambers Westgarth
For the Second and Third Defendant	Mr J Peters KC with Mr N Walter	Clayton Utz
For the Fourth Defendant	Mr G Mukherji	Strongman & Crouch

TABLE OF CONTENTS

A.. Overview........................................................................................................................................ 1

B.. Oppression: the legislation and the principles.................................................................... 14

C.. The trial, the pleadings and the list of issues....................................................................... 20

D.. The witnesses.............................................................................................................................. 25

Dr Shiffman........................................................................................................................ 27
Mr Curry............................................................................................................................. 28
Mr Paluch............................................................................................................................ 28
Mr Sinnappan..................................................................................................................... 29
Mr Wijeyeratne.................................................................................................................. 31
Mr Bandopadhayay........................................................................................................... 32

E... The chronology........................................................................................................................... 33

E1.... The first issue: Initial negotiations (October 2017 to January 2018)........................... 33
E1.1.... The pleadings......................................................................................................... 33
E1.2.... The evidence and findings................................................................................... 33

E2.... Issues 2 and 3(a)-(b): the common understanding reached on 1 February 2018...... 40
E2.1.... The pleadings......................................................................................................... 40
E2.2.... The evidence and findings................................................................................... 42

E3.... Issue 3(c): the role of Dr Shiffman between 1 February 2018 – 19 June 2019............ 46
E3.1.... The pleadings......................................................................................................... 46
E3.2.... The evidence and findings: 1 February 2018 — 30 June 2018......................... 47
E3.3.... The evidence and findings: 30 June 2018 – February 2019.............................. 52
E3.4.... February/ March 2019 agreement for Mr Bandopadhayay to receive 10% of Sleeping Duck......................................................................................................................... 57
E3.5.... March 2019 meeting Dr Shiffman and the Founders....................................... 59
E3.6.... March – 18 June 2019............................................................................................. 62
E3.7.... The alleged 19 June 2019 meeting....................................................................... 66
E3.8.... 21 June 2019 – 30 June 2019.................................................................................. 67

E4.... Issues 4 and 5: the June/July 2019 common understanding....................................... 68
E4.1.... Pleadings................................................................................................................. 68
E4.2.... The evidence and findings................................................................................... 71

E5.... Issues 6 and 7: the early 2020 common understanding............................................... 75
E5.1.... The pleadings and the submissions.................................................................... 75
E5.2.... The evidence and findings................................................................................... 76

E6.... Issues 8-13: The issuing of share options to…

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.

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Details

Case: [2024] VSC 320
Decision Date: 14 June 2024

CaseChat Overview and Summary

BBHF Pty Ltd brought an action against Sleeping Duck Pty Ltd in the Supreme Court of Victoria, alleging oppression under the Corporations Act 2001. BBHF claimed that it had been treated unfairly and that its legitimate expectations had not been met in relation to agreements and understandings concerning the management of the company. The dispute centred on allegations that BBHF had been excluded from the management of the company and that the actions of the majority shareholders were commercially unfair.

The court was required to determine whether BBHF's allegations were substantiated. It needed to assess the nature and extent of any agreements and understandings between the parties and whether they were intended to be legally binding. The court also had to consider whether BBHF's exclusion from management was oppressive and whether the actions of the majority shareholders were commercially unfair. The assessment of commercial unfairness was to be conducted objectively and in the context of the particular circumstances of the case.

In its judgment, the court found that the allegations of oppression were not substantiated. It concluded that there were no binding agreements or understandings that had been breached and that BBHF's exclusion from management was not oppressive. The court further found that the actions of the majority shareholders were not commercially unfair when considered in the context of the company's overall operations. Consequently, the proceeding was dismissed. The court applied principles from various cases including Re SRW Nominees Pty Ltd [2019] VSC 547 and Skytraders Pty Ltd [2022] VSC 416 P/C, and referred to Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310, Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672, and Re AJ Roberts Removals & Storage Pty Ltd [2017] NSWSC 1054 in reaching its decision.

Orders