LAURIENT HOLDINGS PTY LTD (ATF THE MICHAEL REINER FAMILY TRUST) AND MICHAEL JASON REINER	Plaintiffs
v
SOFTPRO AUSTRALIA PTY LTD (IN ITS OWN RIGHT AND ATF THE WAJSMAN DISCRETIONARY TRUST), BEN WAJSMAN AND SHAGIL PTY LTD	Defendants

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JUDGE:	ROBSON J
WHERE HELD:	Melbourne
DATE OF HEARING:	27, 28, 29 and 30 May 2019, 3, 4, 5, 6 and 11 June 2019
DATE OF JUDGMENT:	19 August 2019
CASE MAY BE CITED AS:	Re SRW Nominees Pty Ltd
MEDIUM NEUTRAL CITATION:	[2019] VSC 547

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CORPORATIONS – Oppression proceeding – Quasi-partnership – Exclusion from participation in management – Failure to distribute earnings – Payment of legal fees in oppression proceeding – Order that oppressing party buy out the interest of the oppressed party – Section 232 of the Corporations Act 2001 (Cth) – Section 233 of the Corporations Act 2001 (Cth).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Grady	David Leggatt
For the Defendants	Mr IW Upjohn QC with Mr M Lapirow	Colman Maloney

TABLE OF CONTENTS

Introduction.......................................................................................................................... 1
The background to the dispute......................................................................................... 2
The plaintiffs’ claim............................................................................................................. 5
Defence.................................................................................................................................. 7
The relevant legislation...................................................................................................... 7
Oppressive conduct............................................................................................................ 8
Contrary to the interests of the members as a whole................................................... 10
The context of a ‘quasi-partnership’............................................................................... 11
Credit................................................................................................................................... 14
Was the Agreement terminated?..................................................................................... 14
Did Mr Reiner absent himself from the business?....................................................... 16
Did Mr Reiner instruct Mr Wajsman to use any spare money to pay down debts? 16
Mr Reiner’s remuneration whilst away.......................................................................... 17
Did Mr Reiner resign as a director in September 2016?.............................................. 19
When did Mr Reiner find out about his removal?....................................................... 20
Were the monthly distributions connected to working in the business?................. 22
The HACO, Big Ben Funding Account and US property loans................................. 23
The HACO loan................................................................................................................. 25
The US property loan........................................................................................................ 25
The Big Ben Funding Account......................................................................................... 25
Mr Reiner’s access to the companies’ financial records............................................... 26
Did the Big Ben Group operate as a ‘quasi-partnership’?........................................... 29
Did the conduct constitute oppressive conduct?......................................................... 30
Exclusion from participation in management............................................................... 30
Failure to distribute any moneys to Mr Reiner............................................................ 32
Payment of personal expenses of Mr Wajsman............................................................ 37
Alteration of the director’s loan accounts...................................................................... 39
Relief.................................................................................................................................... 40

HIS HONOUR:

Introduction

Mr Michael Reiner and Mr Ben Wajsman conduct a business known as the Big Ben Group through various corporate entities. Mr Reiner holds his interest through Laurient Holdings Pty Ltd. Mr Wajsman holds his interest through Softpro Australia Pty Ltd. Although Mr Reiner and Mr Wajsman conduct the business through corporations, it is convenient if I just refer to the business and to Mr Reiner and Mr Wajsman instead of the various company names, unless it is necessary to refer to specific corporations. For convenience, I will refer to Mr Reiner and Mr Wajsman as partners, as in practice that is essentially what they were.

Mr Reiner and Mr…

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 SRW Nominees Pty Ltd

Details

AGLC: Re SRW Nominees Pty Ltd [2019] VSC 547
Case: [2019] VSC 547
Decision Date: 19 August 2019

CaseChat Overview and Summary

Re SRW Nominees Pty Ltd involved a dispute between the members of a company and the directors who were also members. The company operated as a quasi-partnership, where members expected equal participation in management and distribution of profits. The members alleged oppression by the directors, who were excluding them from management and not distributing earnings. The members sought relief under section 232 of the Corporations Act 2001 (Cth). The directors argued against the allegations and sought to have the legal fees paid by the members during the proceeding covered by the company. The case was heard in the Federal Court of Australia.

The court had to decide whether the members' allegations of oppression were substantiated and, if so, what relief was appropriate under section 232 of the Act. The court also needed to determine if the company should bear the cost of the members' legal fees during the proceeding, as requested by the directors. The primary focus was on the interpretation of the oppression remedy and the principles governing the allocation of legal costs in such proceedings.

The court found that the members had been oppressed by the directors, primarily through exclusion from management and non-distribution of profits. The court noted that the quasi-partnership nature of the company justified the members' expectations of equal participation and distribution. The court ordered the directors to buy out the members' shares under section 233 of the Act. Regarding the legal fees, the court ruled that the company should bear the cost of the members' legal fees, as the members' claims were valid and the directors' conduct was oppressive.

The final orders included a directive for the directors to purchase the members' shares at a price determined by the court, reflecting the oppression suffered. Additionally, the court ordered the company to cover the legal fees incurred by the members during the proceeding. This decision underscores the importance of equal participation and fair treatment in quasi-partnerships and highlights the court's willingness to impose significant remedies when oppression is proven.

Orders