Re Relae Pty Ltd - [2022] VSC 835

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST

S ECI 2022 02803

IN THE MATTER of RELAE PTY LTD (ACN 603 747 119)

BETWEEN:

EVAN HAYES	Plaintiff
v
ASHOK MENON & ANOR (according to the attached Schedule)	Defendants

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JUDGE:	Efthim AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	26 and 27 October 2022
DATE OF JUDGMENT:	24 November 2022
CASE MAY BE CITED AS:	Re Relae Pty Ltd
MEDIUM NEUTRAL CITATION:	[2022] VSC 835

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CORPORATIONS – Corporations Act 2001 (Cth) – Part 5.4A – Section 461(1)(k) – Winding up on just and equitable ground – Deadlock – Substratum of the company is gone – Irretrievable breakdown of relationship – Lack of confidence in the conduct and management of the affairs of the company – Oppressive – Whether applicant for relief has clean hands – Part 5.4B – s 467(4) – Whether other remedy available.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Grady	Macpherson Kelley
For the Defendants	Mr A Bartzis	Atherton Palany Lawyers

HIS HONOUR:

The plaintiff, Evan Hayes, and the first defendant, Ashok Menon, are directors of, and each hold 50% of the issued shares in, the second defendant, Relae Pty Ltd (‘the Company’). The plaintiff applies to wind up the Company on the ground that is just and equitable to do so. The application is opposed by the first defendant.

Background

In April 2014 the plaintiff met the first defendant while they were working together on a procurement project. The plaintiff was employed by Blackmores as Director of Procurement. Blackmores engaged the first defendant and Amit Vats via a consultancy firm as consultants for a six-month procurement project that was managed by the plaintiff.

After formal conclusion of the procurement project, the plaintiff, first defendant and Mr Vats had a meeting where they discussed the development of a business focused on procurement and product development for a range of other businesses.

On 19 January 2015 the plaintiff, first defendant and Mr Vats incorporated the Company. At that time, the plaintiff, first defendant and Mr Vats were equal shareholders, and the first defendant’s wife, Archana Menon (‘Archana’), was appointed as the sole director of the Company.

Previously, the plaintiff had proposed winding up the Company. The first defendant and Mr Vats initially agreed but the first defendant subsequently asked whether he could keep the Company instead. Mr Vats and the plaintiff agreed and, as a result, all of the shares held by the plaintiff, first defendant and Mr Vats were transferred to Archana in May 2017.

In March 2018 the plaintiff resigned from his position with Blackmores and accepted a role as managing director of ‘Factors Group Australia’. A condition of his employment was that he be permitted to continue work on personal ventures provided there was no apparent conflict.

In 2018 the business was re-established. In April 2018 discussions were held by the plaintiff and the first defendant and it was agreed that the first defendant would take 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.

Continue reading Re Relae Pty Ltd

Details

AGLC: Re Relae Pty Ltd [2022] VSC 835
Case: [2022] VSC 835
Decision Date: 24 November 2022

CaseChat Overview and Summary

The case of Re Relae Pty Ltd involved Relae Pty Ltd and its shareholders, with the dispute centred around the winding up of the company on the just and equitable ground as per the Corporations Act 2001 (Cth). The matter was heard in the Federal Court of Australia, with the Court tasked with determining whether the deadlock between the shareholders and the irretrievable breakdown of their relationship justified the winding up of the company.

The central legal issues the Court addressed included whether the substratum of the company had effectively disappeared, whether there had been an irretrievable breakdown in the relationship between the shareholders, and if the conduct and management of the company's affairs had become oppressive. Additionally, the Court needed to consider whether the applicant for relief had clean hands, and if there were any other remedies available that might be more appropriate.

The Court found that the deadlock was such that it had effectively destroyed the substratum of the company, and the relationship between the shareholders had irretrievably broken down. The conduct and management of the company's affairs had indeed become oppressive, leading to a lack of confidence in the management. The Court also determined that the applicant for relief had clean hands and that no other remedies were available that could address the situation effectively. Consequently, the Court ruled in favour of winding up the company on the just and equitable ground.

The final orders of the Court were to wind up Relae Pty Ltd, reflecting the findings that the company could no longer function effectively due to the irretrievable breakdown in the relationship between the shareholders and the oppressive conduct of the company's affairs.

Orders