In the matter of Scientific Management Associates Pty Ltd

In the matter of Scientific Management Associates Pty Ltd, the plaintiffs sought relief against the defendant company due to oppressive conduct. The plaintiffs were the beneficiaries of a trust fund established by their father, who had business partnerships with the defendant. The dispute centred around the management and control of several American and Australian companies, with the Australian shareholdings divided approximately equally between the parties. Following the father's death, a series of agreements, including a Heads of Agreement and a Shareholders Agreement, were intended to govern the future management of the Australian companies. However, the defendant engaged in a long course of non-communication and irregular transactions, prompting the plaintiffs to seek relief from the court.

The primary legal issues before the court were whether the defendant's conduct amounted to oppression under the relevant provisions of the Corporations Act and, if so, what remedies were appropriate. The plaintiffs argued that the defendant's failure to provide information, appoint the plaintiffs as directors, and pay dividends declared to them in breach of the Shareholders Agreement constituted oppressive conduct. Additionally, the plaintiffs contended that the defendant's use of company funds for private ventures, large loans to the defendant, and sale of company property at undervalue to related parties were further examples of oppressive behaviour. The defendant raised several defences, including estoppel by convention, delay, acquiescence, and laches, but the court found that these defences were not established.

The court found that the defendant's conduct was oppressive, particularly in light of the breaches of the Shareholders Agreement and the failure to communicate with the plaintiffs. The court rejected the defendant's construction arguments and held that the defendant's conduct did not amount to an estoppel by convention or any other valid defence. In terms of remedies, the court considered the plaintiffs' request for a buyout order. Given the nature of the companies involved, the court determined that the value of the property holding companies should be based on the assets held, while the trading company should be valued as a going concern. The court also addressed the recoverability of loans and the appropriate method of determining EBITDA. Ultimately, the court made a buyout order, determining the fair value of the companies' property and investments based on the evidence presented.

The court also addressed the issue of pre-judgment interest, finding that the appropriate method was to calculate interest on the balance from time to time from the date when the debt first arose, rather than treating the account as a "running account" under Clayton's Case. The court noted that the plaintiffs had not consented to the treatment of dividends in this manner and that the evidence did not support the application of Clayton's Case. Finally, the court considered the relevance of the business record in question, holding that it was not necessary to put the inaccuracy of the record to the witness as a matter of fairness, given that the author of the document had given oral evidence.