Companies – Oppression – Oppressive conduct of affairs of company – Quasi-partnership – Dissension between principal shareholders – Member of company deprived of directorship and benefits of membership – Dispute relating to management fees charged to company by related companies – Offer by minority shareholder to purchase majority’s shares – Subsequent dismissal of minority shareholder by majority – Relief – Compulsory purchase of minority shareholder’s share – Value of company – Appropriate date for valuation of minority shareholding –Corporations Act 2001 (C’th) s 233 – Wayde v New South Wales Rugby League (1985) 180 CLR 459, Morgan v Flers Avenue Pty Ltd (1986) 10 ACLR 692 referred to.
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APPEARANCES:
Counsel
Solicitors
For the Appellant
Mr C R Northrop
Goldsmiths Solicitors
For the Respondent
Mr R S Randall
Rigby Cooke Lawyers
NETTLE JA: ASHLEY JA: NEAVE JA:
This is an appeal against a judgment given in the Commercial and Equity Division. The appellant’s claim below was for relief under s 233 of the Corporations Act 2001 (C’th) in relation to the conduct of the affairs of Program IT Pty Ltd (‘Program IT’) or alternatively for an order that Program IT be wound up under s 461(1)(k) of the Act on the just and equitable ground.
The facts
Before the formation of Program IT, the appellant had eight years’ experience running a small computer sales, desktop publishing software development and deployment business called Joint Computer Marketing (JCM). It grew to a turnover of several hundred thousand dollars a year and employed a total of four people. In 1998 he closed down JCM and began working as the principal Customer Relationship Manager (CRM) consultant at an organisation called AIPC, and he remained there until 2000. CRM is also a methodology for retaining customers and ensuring repeat business. It includes a significant computer and software component and its implementation requires a high degree of technical and business experience.
The respondent was an entrepreneur whose object was to develop businesses for sale. From June 2000, he and a chartered accountant named John Tan (Tan) worked together in a company called ReImage Pty Ltd which provided on-site refurbishment and maintenance of service stations for oil companies and the refurbishment and maintenance of physical assets for other organisations. From time to time, the respondent also owned and operated several other companies. He established Octopus Pty Ltd, which was an advertising company, and it operated for about three years. He had another company, called Builders’ Choice Pty Ltd, which imported kitchen appliances. He was a director of further company, Program Development Pty Ltd, although at relevant times it did not carry on any business. He also owned a company, called Spray Mobile Franchise Pty Ltd, which was…
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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AGLC
Joint v Stephens [2008] VSCA 210
Case
[2008] VSCA 210
Decision Date
CaseChat Overview and Summary
The case of Joint v Stephens involved a dispute between the shareholders of a company, with the minority shareholder seeking relief for oppressive conduct by the majority. The Full Court of the Federal Court of Australia was tasked with determining the appropriate remedy for the oppression suffered by the minority shareholder. The legal issues that arose centred around the nature of the oppression, the appropriate valuation date for the minority shareholding, and the availability of compulsory purchase as a remedy.
The primary legal issue was whether the conduct of the majority shareholders constituted oppression under section 232 of the Corporations Act 2001 (C’th). The majority argued that the dispute was merely a commercial disagreement and not oppressive conduct. The minority shareholder, however, contended that the conduct was oppressive due to the deprivation of their directorship and benefits of membership, as well as the dismissal following an offer to purchase the majority’s shares. The court had to consider whether the quasi-partnership nature of the company warranted a different standard of fairness and whether the dismissal and deprivation of rights constituted oppressive conduct.
The court found that the conduct of the majority shareholders did indeed constitute oppression under the Act. It held that the quasi-partnership nature of the company meant that a higher standard of fairness and good faith was required. The dismissal of the minority shareholder and the deprivation of their rights were deemed oppressive. The court also determined that the appropriate date for valuing the minority shareholding was the date of the oppression, which was the date of the dismissal. This decision was based on the principles set out in Wayde v New South Wales Rugby League and Morgan v Flers Avenue Pty Ltd. Consequently, the court ordered that the majority shareholders were to compulsorily purchase the minority shareholder’s shares at the value determined as of the date of the oppression.