JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 October 2020
DATE OF JUDGMENT:	17 December 2020
CASE MAY BE CITED AS:	Joint v Program IT Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2020] VSC 867	First Revision: 12 January 2021, paragraph [212]

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CORPORATIONS – Oppression –Whether director had paid himself and family members excessive remuneration – Salaries paid not commensurate with work undertaken – Value of Company when salaries adjusted - Fair value of minority shareholding – Corporations Act 2001 (Cth) ss 202A, 233 - Re SRW Nominees Pty Ltd (No. 2) [2020] VSC 323 applied.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G McCormick	Goldsmiths Lawyers
For the Defendants	Mr A Segal	Rigby Cooke Lawyers

TABLE OF CONTENTS

A.. Introduction.................................................................................................................................. 1

B.. Shareholders, Directors and the business of the Company................................................ 2

C.. The First Oppression Proceeding............................................................................................. 8

D.. The Period 2009-2015................................................................................................................. 10

E... The period 2015-2020................................................................................................................. 14

F... The alleged oppressive conduct.............................................................................................. 18

G.. Legal principles: Oppression and ‘fair value’...................................................................... 22

I.... Valuation methodology and the expert valuation evidence............................................. 27

J:... Differences between the Experts concerning Future Maintainable Earnings............... 34

K:. FME: Weighting the Earnings.................................................................................................. 35

L:.. FME: the EBITDA Multiple..................................................................................................... 37

M: The balance Sheet of the Company and Disputed items of adjustment........................ 39

N.. The allegation of excessive directors fees paid to John Tan.............................................. 40

O:. Expenses paid by the Company relating to overseas travel by John Tan....................... 51

P... Payments to Sandia Rose.......................................................................................................... 53

Q.. The employment of Alex Tan.................................................................................................. 56

Rent Adjustment......................................................................................................................... 57

R.. Adjustment for Tax Effect........................................................................................................ 58

S:.. The Joint Loan............................................................................................................................ 58

T:. Legal Fees..................................................................................................................................... 61

U:. Oppressive Conduct.................................................................................................................. 63

U:. The contention that events prior to 2015 should be disregarded..................................... 64

Delay and Acquiescence: Mr Joint........................................................................................... 65
The balance sheet of the Company as at 30 June 2020: the Plaintiffs contentions............. 66
The balance sheet of the Company as at 30 June 2020: the Plaintiffs contentions............. 67
Determination of Fair Value...................................................................................................... 70

W: Disposition.................................................................................................................................. 74

HIS HONOUR:

A. Introduction

This is a claim by the 49% minority shareholder, Peter Joint, in the first defendant, Program IT Pty Ltd, (‘the Company’) for an order for the purchase of his shares in the Company by the third defendant, Sandia Kam Lin Rose (‘Sandia Rose’). Sandia Rose is the holder of the majority of the shares in the Company.[1] Mr Joint seeks an order that his shares be purchased by Sandia Rose at a price to be determined by the Court.[2]
[1]Mr Joint owns 49% of the shares in Program IT Pty Ltd while Ms Sandia Rose holds the remaining 51% of the shares. Refer to Plaintiff’s Points of Claim dated 24 April 2020 (‘Points of Claim’), [12], [32].
[2]Points of Claim, [B]–[C].

The proceeding was commenced on 12 May 2019. On 3 September 2020, the defendants…

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 Joint v Program It Pty Ltd

Details

AGLC: Joint v Program It Pty Ltd [2020] VSC 867
Case: [2020] VSC 867
Decision Date: 17 December 2020

CaseChat Overview and Summary

Joint brought an application against Program It Pty Ltd, alleging oppressive conduct by the company’s director, who had paid himself and family members excessive remuneration. The dispute centred around whether the salaries paid were commensurate with the work undertaken and whether the value of the company changed significantly when adjusted for these salaries. The court was tasked with determining the fair value of the minority shareholding in light of these issues.

The central legal issues were whether the director’s remuneration payments were excessive and whether they constituted oppressive conduct under the Corporations Act 2001 (Cth). The court also needed to ascertain if the company’s value changed significantly after adjusting for the alleged excessive remuneration and, if so, what the fair value of the minority shareholder’s interest would be. The court was guided by relevant provisions of the Act and case law, including the decision in Re SRW Nominees Pty Ltd (No. 2) [2020] VSC 323.

The court found that the director had indeed paid himself and family members excessive remuneration, which was not commensurate with the work performed. The salaries paid significantly altered the company’s value, leading to a reduction in the fair value of the minority shareholding. The court applied the relevant statutory provisions and case law to conclude that the director’s conduct was oppressive. The court determined the fair value of the minority shareholder’s interest based on the company’s value after adjusting for the excessive remuneration.

The court ordered that the company reimburse the minority shareholder for the amount of excessive remuneration paid to the director and family members. Additionally, the court directed the company to pay interest on this amount from the date of the payments. The court also made orders to ensure that the company would not engage in similar conduct in the future.

Orders