Melrob Investments Pty Ltd v Blong Ume Nominees Pty Ltd

Melrob Investments Pty Ltd and Orfanos Nominees Pty Ltd (as trustee for the Orfanos Family Trust) were parties to a joint venture agreement (JVD) and a trust deed concerning an investment property. The dispute arose from disagreements regarding the management and potential sale of the property, leading to claims of oppression and a request for the removal of the trustee. The matter was heard on appeal in the Full Court of the Supreme Court of South Australia.

The Full Court was required to determine several legal issues. These included whether an implied term to negotiate in good faith was necessary to give business efficacy to the JVD, whether the facility for Orfanos Nominees to sell its interests under the JVD had been exhausted, and whether the conduct of the parties in managing the joint venture and the company Semweb constituted oppression or unfair prejudice. The court also considered whether there were grounds to exercise the discretion conferred by s 59C of the *Trustee Act 1936* (SA) for the removal of the trustee or other remedies.

The Full Court, in allowing the appeal and dismissing the cross-appeal, reasoned that the sole purpose of the joint venture was investment, and the JVD did not impose an obligation to negotiate in good faith for the ongoing conduct of the venture. It was held that the facility for Orfanos Nominees to sell its interests had not been exhausted and that the other parties had not unfairly imposed a minority discount. Regarding the claim of oppression, the court found that Mr. Orfanos had acquiesced in the management practices of Semweb, and his non-participation was not a unilateral exclusion. While the conduct of Messrs Michaels and Ouwens in undervaluing market rents was found to be oppressive, the court determined that it was not appropriate to exercise powers under s 233 or s 461(1) of the *Corporations Act 2001* (Cth) given that the underpayments had been corrected and Mr. Orfanos had not availed himself of available facilities to mitigate perceived risks.

Consequently, the appeal was allowed, the cross-appeal was dismissed, and the claims remitted to the primary judge for re-hearing were dismissed.