Elhan v Saykan (No 3) - [2009] VSC 324

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 8291 of 2002

ADNAN (aka "ANTHONY") ELHAN and ELBEK INVESTMENTS PTY LTD	Plaintiffs
v
NEBAHAT SAYKAN & ORS	Defendants

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JUDGE:	HANSEN J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 July 2009
DATE OF JUDGMENT:	10 August 2009
CASE MAY BE CITED AS:	Elhan v Saykan (No 3)
MEDIUM NEUTRAL CITATION:	[2009] VSC 324

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COSTS – Oppression case - Defendants offered $220,000 before trial to purchase second plaintiff’s shares and settle (different) proceeding with no order for costs - Plaintiffs rejected offer - Interlocutory order pre-trial that second plaintiff sell shares to defendants for $220,000 but reserving question of fair value of shares – Plaintiffs contended shares worth significantly more - Plaintiffs successful in establishing oppression – Fair value of shares ultimately held to be $224,826 – Whether plaintiffs acted unreasonably in rejecting offer and pursuing litigation – Plaintiffs did not act unreasonably in the circumstances – Discretionary factors – Plaintiffs entitled to costs.

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APPEARANCES:	Counsel	Solicitors
The First Plaintiff in person and, by leave, for the Second Plaintiff
For the First and Second Defendants	Mr C R Northrop	Goldsmiths
No appearance by or on behalf of the Third and Fourth Defendants

HIS HONOUR:

Introduction

The issue now for determination is who should pay the costs of the proceeding. The issues of oppression (or liability) and the fair value of the second plaintiff Elbek’s shares have been the subject of earlier judgments[1].
[1]See [2004] VSC 83 and [2009] VSC 306.

In essence, the parties’ respective positions are as follows. The first plaintiff, who is known as and may conveniently be referred to as Anthony, submitted that the defendants should pay the plaintiffs’ costs, as the plaintiffs had established oppression by the defendants, and Anthony had been forced to sell his shares for less than what he believes they were worth. Counsel for the first and second defendants (who I also refer to as Nebahat and Selahattin where convenient) submitted that Anthony ought pay his clients’ costs, alternatively that there be no order for costs. Counsel relied on a Calderbank letter, dated 21 November 2002, sent to Anthony’s then solicitors one day before the plaintiffs commenced the subject proceeding[2], by which Nebahat and Selahattin offered to pay $220,000 to purchase Elbek’s shares and settle the proceeding which they (Nebahat and Selahattin) had already commenced[3], with each side to bear its own costs of that proceeding. Counsel submitted that the offer in the letter was reasonable, given that Anthony had ultimately recovered only $4,826 more than the amount of $220,000 his clients had offered (and had always been willing) to pay, and later had in fact paid, for Elbek’s shares. In effect, counsel submitted, Anthony had taken a chance, but failed, at establishing that the shares were worth much more than $220,000.
[2]Proceeding 8291 of 2002.
[3]Proceeding 8134 of 2002.

In order to assess the merits of the parties’ submissions, it is necessary 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: [2009] VSC 324
Decision Date: 10 August 2009

CaseChat Overview and Summary

The case of Elhan v Saykan (No 3) involved the plaintiffs, Elhan and another individual, contesting an oppression claim against the defendants. The plaintiffs alleged oppressive conduct by the defendants in their management of the company. The matter was heard in the Supreme Court of New South Wales. The primary dispute centred around the value of the second plaintiff's shares and whether the plaintiffs had acted unreasonably in rejecting a settlement offer from the defendants.

The court was required to determine whether the plaintiffs' decision to reject the defendants' offer of $220,000 to purchase the second plaintiff's shares and settle a related proceeding, without an order for costs, constituted unreasonable behaviour. Additionally, the court had to ascertain the fair value of the shares in question and whether the plaintiffs' pursuit of the litigation was justified, given their contention that the shares were worth significantly more than the offered amount.

In its reasoning, the court found that the plaintiffs had not acted unreasonably in rejecting the offer. The court noted that the plaintiffs had a legitimate basis for believing that the shares were worth more than the offered price, given their successful establishment of oppressive conduct by the defendants. The fair value of the shares was ultimately determined to be $224,826, which supported the plaintiffs' stance. Considering the discretionary factors involved, the court concluded that the plaintiffs were entitled to their costs.

The final orders of the court acknowledged the plaintiffs' successful establishment of oppression and their right to costs, while also recognising the fair value of the shares. The court did not find the plaintiffs' actions to be unreasonable, and thus upheld their entitlement to costs in the litigation.

Orders