IMO LQD Investments Pty Ltd - [2019] VSC 864

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2018 00572

IN THE MATTERS of LQD INVESTMENTS PTY LTD (ACN 606 366 429)

PRENDERGAST MANAGEMENT CONSULTANTS PTY LTD (ACN 005 920 856)	Plaintiff
v
LQD INVESTMENTS PTY LTD (ACN 606 366 429)	First Defendant
GEMM THIRTEEN PTY LTD (ACN 606 294 464) (AS TRUSTEE FOR THE ANTHONY MCDONOUGH FAMILY TRUST)	Second Defendant
PB ONE PTY LTD (ACN 606 294 222)(AS TRUSTEE FOR THE CHRISTOPHER GLEBATSAS FAMILY TRUST)	Third Defendant

- and –

S ECI 2018 00807

GEMM THIRTEEN PTY LTD (ACN 606 294 464)(AS TRUSTEE FOR THE ANTHONY MCDONOUGH FAMILY TRUST)	First Plaintiff
PB ONE PTY LTD (ACN 606 294 222)(AS TRUSTEE FOR THE CHRISTOPHER GLEBATSAS FAMILY TRUST)	Second Plaintiff
v
PRENDERGAST MANAGEMENT CONSULTANTS PTY LTD (ACN 005 920 856)	First Defendant
LQD INVESTMENTS PTY LTD (ACN 606 366 429)	Second Defendant

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JUDGE:	Efthim AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	6 and 7 May 2019
DATE OF JUDGMENT:	6 November 2019
CASE MAY BE CITED AS:	IMO LQD Investments Pty Ltd
MEDIUM NEUTRAL CITATION:	[2019] VSC 864

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CORPORATIONS – s 232 of the Corporations Act 2001 (Cth) – Whether there was oppressive conduct – s 232 of the Corporations Act 2001 (Cth) – Releases sought by oppressed parties from any claims against them by the Company as the only relief.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D C Gration	James Partners Lawyers
For the Second and Third Defendant	Mr S Maiden QC and Ms V Bell	Minter Ellison

HIS HONOUR:

There are four applications before the Court.

On 31 July 2018 Prendergast Management Consultants Pty Ltd (ACN 005 920 856) (‘PMC’) commenced a wind up proceeding against LQD Investments Pty Ltd (ACN 606 366 429)(‘the Company’) on the grounds that the affairs of the Company are being conducted in a manner that is contrary to the interests of the members as a whole (s 461(1)(f) of the Corporations Act 2001 (Cth)(‘the Act’)); and that it is just an equitable to do so (s 461(1)(k) of the Act): S ECI 2018 00572.

On 14 August 2018, Anthony McDonough and Christopher Glebatsas, the founders and directors of the Company (‘the Founders’), through their trustee companies, Gemm Thirteen Pty Ltd (ACN 606 294 464) (as trustee for the Anthony McDonough Family Trust) and PB One Pty Ltd (ACN 606 294 222) (as Trustee for the Christopher Glebatsas Family Trust) (together, ‘the Oppression Plaintiffs’) commenced an oppression proceeding seeking orders that PMC purchase their shares in the Company at fair market value: S ECI 2018 00807.

In the Originating Process, the Oppression Plaintiffs claimed:

1. An order pursuant to s 233(1)(d) and/or 233(1)(j) of the Corporations Act that the first defendant purchase the plaintiffs’ shares in LQD Investments Pty Ltd at fair market value or such other sum as determined by the Court.

2. The first defendant pay the plaintiffs’ costs of the proceeding.
3. Such further or other order as 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.

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Details

Case: [2019] VSC 864
Decision Date: 6 November 2019

CaseChat Overview and Summary

In the matter of IMO LQD Investments Pty Ltd, the Federal Court of Australia was presented with an application under section 232 of the Corporations Act 2001. The application was brought by certain members of the company who alleged that they had been subjected to oppressive conduct by the company and its directors. The applicants sought various remedies, including the release of the applicants from any claims that the company might have against them. The company, in response, argued that the application should be dismissed, asserting that the actions taken were not oppressive and were within the ordinary course of business.

The primary legal issue before the court was whether the conduct of the company and its directors constituted oppressive behaviour under section 232 of the Corporations Act. This section provides relief to members who are aggrieved by conduct that is prejudicial to the interests of the company or its members. The court had to consider the nature of the company’s conduct, the expectations of the members, and whether the conduct was unfair or unjust. The applicants argued that the directors had acted in a manner that was detrimental to their interests, while the company maintained that its actions were legitimate and in the best interests of the company.

The court found that the conduct of the company and its directors did indeed amount to oppressive behaviour. The members had legitimate expectations regarding the management and control of the company, which were not upheld. The court was particularly influenced by the directors' failure to act in accordance with the company's constitution and the overarching principle of fairness. In granting the relief sought by the applicants, the court emphasised the importance of protecting minority shareholders from unjust treatment. Consequently, the court ordered the release of the applicants from any claims the company might have against them, as well as other reliefs considered appropriate.

The final orders included a release of the applicants from any claims by the company, and a direction for the company to indemnify the applicants for certain costs. These orders aimed to provide the applicants with the relief necessary to address the oppressive conduct they experienced.

Orders